PRECISION BIOSCIENCES INC 10-K

Item 1. Business. We are a life sciences company dedicated to improving life through the application of our pioneering, proprietary ARCUS genome editing platform. We leverage ARCUS in the development of our product candidates, which are designed to treat human diseases and create healthy and sustainable food and agricultural solutions. We are actively developing product candidates in three innovative areas: allogeneic CAR T cell immunotherapy, in vivo gene correction, and food. We are currently conducting a Phase 1/2a clinical trial of PBCAR0191 in adult patients with relapsed or refractory, or R/R, non-Hodgkin lymphoma, or NHL, or R/R B-cell precursor acute lymphoblastic leukemia, or B-ALL. PBCAR0191 is our first gene-edited allogeneic chimeric antigen receptor, or CAR, T cell therapy candidate targeting CD19 and is being developed in collaboration with Les Laboratoires Servier, or Servier, pursuant to a development and commercial license agreement, as amended (the “Servier Agreement”). We have received orphan drug designation, for PBCAR0191 from the U.S. Food and Drug Administration (“FDA”), for the treatment of acute lymphoblastic leukemia, or ALL. In August 2020, the FDA granted Fast Track Designation for PBCAR0191 for the treatment of B-ALL. The NHL cohort will include patients with mantle cell lymphoma (“MCL”), an aggressive subtype of NHL, for which we have received orphan drug designation from the FDA. Made from donor-derived T cells modified using our ARCUS genome editing technology, PBCAR0191 recognizes the well characterized tumor cell surface protein CD19, an important and validated target in several B-cell cancers, and is designed to avoid graft-versus-host disease, or GvHD, a significant complication associated with donor-derived, cell-based therapies. We believe that this trial, which is designed to assess the safety and tolerability of PBCAR0191 at increasing dose levels, as well as to evaluate anti-tumor activity, is the first U.S.-based clinical trial to evaluate an allogeneic CAR T therapy for R/R NHL. Furthermore, we believe that our proprietary, one-step engineering process for producing allogeneic CAR T cells with a potentially optimized cell phenotype, at large scale in a cost-effective manner, will enable us to overcome the fundamental clinical and manufacturing challenges that have limited the CAR T field to date. We expect to report updated interim data for the PBCAR0191 study in mid-year 2021. In April 2020, we commenced patient dosing in a Phase 1/2a clinical trial with our second allogeneic CAR T cell therapy product candidate, PBCAR20A. PBCAR20A is wholly owned by us and targets the validated tumor cell surface target CD20. It is being investigated in R/R NHL, including those with R/R chronic lymphocytic leukemia, CLL, or R/R small lymphocytic lymphoma, or SLL. A subset of the NHL patients will have the diagnosis of MCL and we have received orphan drug designation for PBCAR20A from the FDA for the treatment of this disease. Based on the safety profile observed to date with PBCAR0191, the FDA allowed us to commence dosing with PBCAR20A directly at 1 x 10 6 cells/kg. The study has continued to escalate through dose level two (3 x 10 6 cells/kg), and, in February 2021, we commenced patient dosing at dose level 3 (480 x 10 6 cell fixed dose) with a max dose of 6 x 10 6 cells/kg. We expect to report interim data for the PBCAR20A study in 2021. In June 2020, we commenced patient dosing in a Phase 1/2a clinical trial with our third allogenic CAR T cell therapy product candidate, PBCAR269A. The starting dose of PBCAR269A is 6 x 10 5 cells/kg. PBCAR269A is wholly owned by us and is designed to target the validated tumor cell surface target BCMA. It is being investigated in subjects with R/R multiple myeloma and we have received orphan drug designation and Fast Track Designation from the FDA for this indication. In September 2020, we announced that we entered into a clinical trial collaboration with SpringWorks Therapeutics, Inc. (“SpringWorks”), a clinical-stage biopharmaceutical company focused on developing medicines for patients with severe rare diseases and cancer. Pursuant to the collaboration, PBCAR269A will be evaluated in combination with nirogacestat, SpringWorks’ investigational gamma secretase inhibitor (“GSI”), in patients with R/R multiple myeloma, which is expected to commence in the first half of 2021. In February 2021, we commenced patient dosing at the highest dose cohort, dose level 3 o f 6 x 10 6 cells/kg and we expect to report interim data on the PBCAR269A trial in 2021. Additionally, in June 2020, Elo Life Systems (“Elo”), our wholly-owned subsidiary, established a strategic partnership with the Dole Food Company (“Dole”) and entered into a Research, Development, and Commercialization Agreement with Dole, with the aim to co-develop banana varieties resistant to Fusarium oxysporum f. sp cubense Tropical race 4 (“Foc TR4”), utilizing proprietary computational biology workflows and the ARCUS genome editing platform. The disease caused by Foc TR4, commonly known as Fusarium wilt, threatens the continued cultivation of the world’s most popular variety of banana called Cavendish, which is of considerable economic significance as this variety is used to produce export bananas for key markets around the globe and Dole is one of the largest producers in the industry. Fungicides, or other traditional means of disease control have failed as the pandemic continues to spread across vital banana growing economies. In September 2020, we regained full clinical development and commercialization rights, and all data we generated for the in vivo chronic hepatitis B virus (“HBV”) program developed under our 2018 collaboration agreement with Gilead Sciences. We are exploring partnership or alternative opportunities to enable the continued development of ARCUS-based HBV therapies. In October 2020, we announced the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (“PTAB”) issued judgements in our favor in two patent interference proceedings that challenged nine U.S. patents we owned. The patents, which issued in 2018, relate to allogeneic CAR T cells produced by inserting a gene encoding a CAR into the T cell receptor (“TCR”) alpha chain (“TRAC”) 1 locus, as well as methods of using those cells for cancer immunotherapy. In the interference proceedings, a third party argued that it had invented the technology in 2012. The PTAB, however, found that the third-party patent application did not satisfy the written description requirement and rejected these claims while maintaining the claims in all nine of our patents. In November 2020, we announced a research collaboration and exclusive license agreement with Eli Lilly and Company (“Lilly”) to utilize ARCUS for the research and development of potential in vivo therapies for genetic disorders, with an initial focus on Duchenne muscular dystrophy (“DMD”) and two other undisclosed gene targets. Under the agreement, Lilly has the right to nominate up to three additional gene targets for genetic disorders over the first four years of the Development and License Agreement, which may be extended to six years upon Lilly’s election and payment of an extension fee. In December 2020, we announced interim clinical results from our Phase 1/2a study of PBCAR0191 as a treatment of R/R NHL and R/R B-ALL. As of the November 16, 2020 cutoff, 27 patients including 16 patients with aggressive NHL and 11 patients with aggressive B-ALL were enrolled and evaluated. In this dose escalation and dose expansion study, PBCAR0191 had an acceptable safety profile with no cases of graft versus host disease, no cases of Grade ≥ 3 cytokine release syndrome, and no cases of Grade ≥ 3 neurotoxicity. PBCAR0191 demonstrated longest durability of response to 11 months in B-ALL. PBCAR0191 with enhanced lymphodepletion (“eLD”) resulted in objective response rate of 83% (5/6) in NHL and B-ALL as compared to 33% (3/9) in NHL with standard lymphodepletion (“sLD”). Additionally, in December 2020, researchers at Elo in collaboration with Alan Chambers, Ph.D., and the Tropical Research and Education Center at the University of Florida published a paper in Nature Food , reporting a chromosome-scale, phased Vanilla planifolia genome, which revealed sequence variants for genes that may impact the vanillin pathway, and therefore influence bean quality, including its productivity, flower anatomy, and disease resistance. In January 2021, we announced that the FDA has accepted our Initial New Drug (“IND”) application for PBCAR19B, our next-generation, stealth cell, CD19 allogenic CAR T candidate for Non-Hodgkin Lymphoma, and we expect to begin the Phase 1 study by mid-2021. Additionally, in January 2021, we announced that we received a Notice of Allowance from the U.S. Patent and Trademark Office for a patent application covering PBCAR19B. The allowed composition claims of this patent application encompass genetically-modified human T cells comprising the PBCAR19B construct, which is inserted within the T cell receptor alpha constant locus. Once issued, patents arising from this patent family will have standard expiration dates in April 2040. In preclinical studies, PBCAR19B has shown to delay both T cell and natural killer cell mediated allogeneic rejection in vitro and may improve the persistence of allogeneic CAR T cells. We expect to advance a program targeting the rare genetic disease primary hyperoxaluria type 1 (“PH1”) as our lead wholly owned in vivo gene correction program. PH1 affects approximately 1-3 people per million in the United States and is caused by loss of function mutations in the AGXT gene, leading to the accumulation of calcium oxalate crystals in the kidneys. Patients suffer from painful kidney stones which may ultimately lead to renal failure. Using ARCUS, we are developing a potential therapeutic approach to PH1 that involves knocking out a gene called HAO1 which acts upstream of AGXT. Suppressing HAO1 has been shown in preclinical models by us to prevent the formation of calcium oxalate. We therefore believe that a one-time administration of an ARCUS nuclease targeting HAO1 may be a viable strategy for a durable treatment of PH1 patients. Pre-clinical research has continued to progress, and we expect to provide an update on this program in the first half of 2021. In January 2021, we disclosed our intention to spinout our wholly owned subsidiary, Elo. We are continuing to explore our strategic options, and the timing of any such sale, spinout or other treatment of Elo remains uncertain. Our Pipeline Allogeneic CAR T Immunotherapy We believe that we have developed a transformative allogeneic CAR T immunotherapy platform with the potential to overcome certain limitations of autologous CAR T cell therapies and significantly increase patient access to these cutting‑edge treatments. Cancer immunotherapy is a type of cancer treatment that uses the body’s immune system to fight the disease. CAR T is a form of immunotherapy in which a specific type of immune cell, called a “T cell”, is genetically engineered to recognize and kill cancer cells. Current commercially available CAR T therapies are autologous, meaning the T cells used as the starting material for this engineering process are derived directly from the patient. As a consequence, the therapy is highly personalized, difficult to scale, and expensive. Our allogeneic approach uses donor‑derived T cells that are gene edited using ARCUS and are designed for safe delivery to an unrelated patient. We believe that this donor-derived approach will allow us to consistently produce a potent product by selecting donors with high quality T cells and will lessen the product-to-product variability seen in autologous therapies. We are able to produce allogeneic CAR T cells at a large scale in a cost-effective manner and have the potential to overcome the “one patient: one product” burden of autologous CAR T cell therapies. 2 Leveraging the unique gene editing capabilities of ARCUS, we have developed a one-step cell engineering process for allogeneic CAR T cells that is designed to maintain naïve and central memory T cell phenotypes throughout the CAR T manufacturing process, which we believe to be important for an optimized CAR T therapy. Due to our one-step editing method and the decision early in the development of our allogeneic CAR T immunotherapy platform to invest in process development, we have scaled our manufacturing process and are currently producing allogeneic CAR T cells at large scale in accordance with current good manufacturing practice, or c GMP. In February 2016, we entered into the Servier Agreement. Pursuant to this agreement we have agreed to perform early-stage research and development on individual T cell modifications for five unique antigen targets. Servier selected one target at the Servier Agreement’s inception and, during 2020, selected two additional hematological cancer targets beyond CD19 and two new solid tumor targets. With the addition of these new targets, we received development milestone payments in 2020 and may be eligible to receive additional development milestone payments in 2021. Upon selection of an antigen target, we have agreed to develop the resulting therapeutic product candidates through Phase 1 clinical trials and prepare the clinical supply of such product candidates for use in Phase 2 clinical trials. We have the ability to opt-in to a 50/50 co‑development and co-promotion agreement in the United States on all licensed products under the Servier Agreement. Our most advanced program, PBCAR0191, is an allogeneic CAR T cell therapy candidate targeting the well-validated tumor target CD19 and is being developed for the treatment of adult patients with NHL and B-ALL. CD19 is a protein that is expressed on the surface of B cells. The FDA has granted PBCAR0191 orphan drug designation for the treatment of ALL and, in August 2020 granted PBCAR0191 Fast Track Designation for treatment of B-ALL. We reported updated interim data from our ongoing Phase 1/2a clinical trial of PBCAR0191 including response rates across R/R NHL and R/R B-ALL patient cohorts as further described in “Our Allogeneic CAR T Immunotherapy Pipeline.” PBCAR0191, which incorporates our patented N6 co-stimulatory domain, demonstrated a clear dose dependent increase in peak cell expansion. Compared to sLD, eLD with PBCAR0191 at DL3 resulted in approximately 95-fold increase in peak cell expansion, and approximately 45-fold increase in area under the curve. This was associated with a higher CR rate in NHL (75%). In this dose escalation and dose expansion study, PBCAR0191 had an acceptable safety profile with no cases of graft versus host disease, no cases of Grade ≥ 3 cytokine release syndrome, and no cases of Grade ≥ 3 immune effector cell neurotoxicity. One NHL patient who was treated with PBCAR0191 and eLD had previously received nine prior lines of therapy before entering the trial. The patient presented with persistent cytopenias at baseline and a history of infections, including bacterial sepsis. The patient had an episode of sepsis at day 27 which appeared to have resolved at day 33, following which a partial response was achieved at day 34. Unfortunately, the patient died at day 42 with grade 5 sepsis. We reported the serious adverse event to the FDA and reported the patient death. We are enrolling additional patients with eLD and plan to present updated interim data on this study by mid-2021. In vivo Gene Correction. Our goal is to cure genetic diseases by correcting the DNA errors responsible for causing them. In vivo gene corrections are gene corrections that take place in a living organism. We have advanced a deep portfolio of diverse programs toward preclinical efficacy and toxicity studies. We have generated a significant large animal dataset that we believe to be the most comprehensive of any in the field and have observed high-efficiency in vivo genome editing in non-human primates (“NHPs”) in our preclinical studies, as highlighted in our July 2018 publication in Nature Biotechnology . We believe this is the first peer-reviewed publication of in vivo genome editing data in NHPs. In our preclinical studies, we observed the high-efficiency editing of the PCSK9 gene in NHPs using ARCUS and, even at the highest dose, the treatment was observed to be well-tolerated. As published in Molecular Therapy in February 2021, the NHPs have been monitored for more than three years and have continued to show a sustained reduction in low density lipoprotein cholesterol levels while maintaining stable gene editing without any obvious adverse effects. After the one-time vector administration more than three years ago, NHPs treated with ARCUS have experienced stable reductions of up to 85% in PCSK9 protein levels and a 56% reduction of low-density lipoprotein (“LDL”) cholesterol levels. 3 W e expect to advance a program for the treatment of the rare genetic disease PH1 as our lead wholly owned gene correction program, based on preclinical data we have generated high efficiency knock out of the HAO1 target gene in NHPs using ARCUS, and evidence from a mouse model of clinically meaningful biomarker changes using our approach. We expect to provide an update on t his program during the first half of 202 1 . As discussed above, in November 2020, we announced a research collaboration and exclusive license agreement with Lilly, pursuant to which we will be responsible for conducting certain pre-clinical research and IND-enabling activities with respect to the gene targets nominated by Lilly. Lilly will be responsible for conducting clinical development and commercialization activities for licensed products resulting from the collaboration and may engage with us for additional clinical and/or initial commercial manufacture of licensed products. We expect to advance a program for the treatment of the rare genetic disease PH1 as our lead wholly owned gene correction program, based on preclinical data we have generated high efficiency knock out of the HAO1 target gene in NHPs using ARCUS, and evidence from a mouse model of clinically meaningful biomarker changes using our approach. We expect to provide an update on this program during the first half of 2021. We are also in the discovery stage for other in vivo indications: lipoprotein lipase deficiency, familial amyloid polyneuropathy, familial hypercholesterolemia, and autosomal dominant retinitis pigmentosa. Food. Our food platform, which we operate through our wholly owned subsidiary, Elo, is an integrated suite of gene discovery and crop engineering technologies that is designed to generate products in collaboration with leading food producers. Elo has a team with in-depth experience in crop genome editing. Over the last decade, Elo has worked with some of the largest plant biotechnology companies to edit gene targets and develop potential product candidates in a variety of crop plants. By combining the power of the ARCUS technology platform with target discovery, transformation and high throughput trait evaluation, Elo has enabling our partners to potentially address critical issues in food and agriculture created by climate change and dramatic shifts in consumer preference toward healthier eating. Elo’s collaboration-driven business model enables Elo to remain capital efficient throughout the product development cycle while generating revenue through various revenue-sharing models. Elo achieved proof of concept with its ZeroMelon TM watermelon-based sweetener program and advanced the program to greenhouse trials. This program is intended to leverage ARCUS to develop a scalable low-calorie sweetener. As discussed above, Elo also entered into a Research, Development, and Commercialization Agreement with Dole. with the aim to co-develop banana varieties resistant to FOC TR4, utilizing proprietary computational biology workflows and the ARCUS genome editing platform. Elo’s ClimateSmart Chickpea program addresses the effect of climate change as a foundational trait for the plant-based protein industry. Edited chickpea plants were successfully created at a subsidiary of Elo in Australia in collaboration with the Queensland University of Technology. Genotypic and phenotypic screens are in progress. Our Team We believe that our team, whom we call Precisioneers, has among the deepest scientific experience and capabilities of all genome editing companies. Derek Jantz, Ph.D., our Chief Scientific Officer and a co-founder of Precision, and Jeff Smith, Ph.D., our Chief Technology Officer and also a co-founder of Precision, have been working with genome editing technology for more than 15 years. They are pioneers in the genome editing field and developed the ARCUS genome editing platform to address what they perceived as limitations in the existing genome editing technologies. Our Chief Executive Officer, Matthew Kane, also a co-founder of Precision, has almost 20 years’ experience in life sciences, most of which has been working in genome editing. We have selectively expanded our team of Precisioneers to include individuals with extensive industry experience and expertise in the discovery, development and manufacture of cell and gene therapies and the creation of innovative solutions to myriad problems affecting food systems. As of December 31, 2020, our team of Precisioneers included more than 57 scientists with Ph.D. degrees. We are a purpose-driven organization, and we have carefully promoted a culture that values innovation, accountability, respect, adaptability and perseverance. We strive to ensure that our open, collaborative culture empowers Precisioneers to be their best selves and do their best work. We strongly believe that our shared values will help our team navigate and overcome challenges we may experience as we pursue our mission of improving life through genome editing. Our culture has helped build a world-class team with industry-leading experience in genome editing and continually attracts new talent to further build our capabilities. Our team is a group of motivated individuals that value the opportunity to contribute their time and talents toward the pursuit of improving life. Precisioneers appreciate high-quality research and are moved by the opportunity to translate their work into treatments and solutions that will impact human health. 4 Our Strategy We are dedicated to improving life. Our goal is to broadly translate the potential of genome editing into permanent genetic solutions for significant unmet needs. Our strategy to achieve this goal includes the following key elements: • Create a fully integrated genome editing company capable of delivering solutions that address unmet needs impacting human health. We believe that to be a leader in the field of genome editing and maximize the impact of our ARCUS genome editing platform, we must be able to control those elements of our business that may provide us with certain strategic advantages or operational efficiencies. We intend to continue to invest in comprehensive research, development, manufacturing and commercial capabilities that provide control and oversight of our product candidates from discovery through commercialization. • Capitalize on our emerging leadership position in allogeneic CAR T immunotherapies. We believe that we have developed the first allogeneic CAR T cell platform capable of producing drug product at scale, with a potentially optimal cell profile for therapeutic efficacy and true off-the-shelf delivery without the need for harsh and potentially toxic lymphodepletion. We have selected three validated CAR T cell targets that we believe offer the greatest chance of clinical success for our initial product candidates. Our CAR T platform is modular, which we believe will allow us to leverage proof-of-concept from our ongoing and planned initial human trials for multiple other CAR T programs. We believe the combination of these factors, along with our unique ARCUS technology, puts us in a differentiated position to be the leader in the development of allogeneic CAR T therapies. • Advance ARCUS-based in vivo gene correction programs into human clinical trials. In our preclinical studies, we observed the high-efficiency and tolerability of in vivo genome editing using ARCUS in a non-human primate model, as published in Nature Biotechnology in July 2018 and Molecular Therapy in February 2021. To our knowledge, we are the first company to complete this milestone, which we believe to be critical to successful in vivo genome editing therapeutic development. We have built on this early success by diligently advancing a diverse portfolio of preclinical in vivo gene correction programs through additional large animal studies, focusing initially on gene targets occurring in the liver and eye. As discussed above, in November 2020, we also announced a research collaboration and exclusive license agreement with Lilly to utilize ARCUS for the research and development of potential in vivo therapies for genetic disorders, with an initial focus on DMD and two other undisclosed gene targets. • Continue investing in the optimization of ARCUS and enabling technologies. We believe that a key to our future success is the quality of the genome editing tools that we produce. Since our founding, we have devoted ourselves to continuously refining the precision and efficiency of our core genome editing platform. We intend to continue this investment in ARCUS while surrounding it with enabling technologies and expertise to retain what we believe is a leadership position in the field. • Create an environment that is a destination of choice for premier talent within the life sciences industry. We believe that we currently have among the deepest and strongest skill set within the genome editing industry and credit much of our past success to our commitment to our team and culture. Our future success will depend on our ability to continue to attract and retain world-class talent within our markets of interest. We intend to consciously invest in fostering an environment within our company that is both challenging and supportive and inspires our team to broadly translate genome editing into permanent genetic solutions. • Expand the breadth of our operations through additional product platforms and strategic relationships. We believe that the ARCUS genome editing platform has broad utility beyond our current areas of focus. We intend to invest in the development of additional product platforms and seek collaborations with companies with additive expertise in areas outside of our current target markets to maximize the value of our company. 5 Overview of Genome Editing Deoxyribonucleic acid, or DNA, carries the genetic instructions for all basic functions of a living cell. These instructions are encoded in four different molecules, called bases, which are strung together in specific sequences to form genes. Each gene is responsible for a specific function in a cell, and the complete set of genes in a cell, which can consist of tens of thousands of genes and billions of individual bases, is known as a genome. The complete genome sequence has been determined for many organisms, including humans. This allows scientists to identify specific genes and determine how their unique sequences contribute to a particular cellular function. Studying variations in gene sequences further informs an understanding of why a cell behaves a certain way, which can greatly enhance understanding of what causes and how to treat aberrant behavior that leads to disease. Genome editing is a biotechnology process that removes, inserts or repairs a portion of DNA at a specific location in a cell’s genome. Early applications of genome editing focused on advancing genetic research. As genome editing technologies have advanced, their application is moving beyond understanding disease to treating or preventing disease by editing DNA. Genome editing is accomplished by delivering a DNA cutting enzyme, called an endonuclease, to a targeted segment of genetic code. Once the endonuclease cuts the DNA, the cell has to repair the break to survive and will generally do so in one of two ways, as shown below. There are two primary mechanisms of DNA repair, non-homologous end joining, or NHEJ, and homology directed repair, or HDR. As shown in A) above, NHEJ is a pathway that repairs breaks in DNA without a template. NHEJ is the less precise method of repair that prioritizes speed over accuracy, making it prone to leaving insertions and/or deletions of DNA bases at the cut site. These insertions or deletions can disrupt the gene sequence and can be used to inactivate or “knock out” the function of the gene. Accordingly, genome editing technologies can be used to permanently knock out a gene in a cell or organism by creating a break in the DNA sequence of that gene. As shown in B) above, HDR is a mechanism of DNA repair whereby the cell uses a second DNA molecule with a sequence similar to that of the cut DNA molecule to guide the repair process. Since HDR uses a “template” of similar genetic information to guide the repair process, it is the more precise mechanism of cellular repair. HDR results in the sequence of the template being copied permanently into the genome at the site of the DNA cut. If we provide a template DNA molecule directly to the edited cell and the cell repairs itself using HDR, a new gene can be incorporated or “knocked in” at a precise location in the genome. Alternatively, the use of HDR can “repair” a DNA mutation by correcting it to the proper functioning sequence when repairing the break. Thus, genome editing endonucleases can be used to introduce a variety of different changes to the genetic code of a cell or organism including gene knockout, gene insertion and gene repair. There are several genome editing technologies, including ARCUS, zinc-finger nucleases, or ZFNs, TAL-effector nucleases, or TALENs, and CRISPR/Cas9. These technologies differ from one another principally in the properties of the endonuclease that they each employ. The different endonucleases have fundamentally different mechanisms of recognizing and cutting their DNA targets, which gives each technology advantages and disadvantages depending on how each is used. 6 Our Approach to Genome Editing We are pioneers in the field of genome editing and have extensive experience with a breadth of genome editing technologies. Our ARCUS platform was developed to address limitations of other editing technologies that could impair their deployment for therapeutic applications. We looked to nature for examples of genome editing and found the I-CreI endonuclease from the algae Chlamydomonas reinhardtii . Unlike ZFN, TALEN or CRISPR/Cas9, I-CreI is a natural enzyme that evolved to edit a large, complex genome. In nature, it is responsible for modifying a specific location in the algae genome by inserting a gene using the HDR process, according to scientific literature. We believe that I-CreI has a number of attributes that make it attractive for the development of novel genome editing endonucleases, such as: • Specificity. Complex genome editing applications, especially those involving the human body, require a high level of endonuclease specificity to limit the likelihood that the endonuclease will recognize and edit any genetic sequence other than its intended target. Based on scientific literature, we believe that several attributes of I-CreI naturally inhibit off-target cutting. I-CreI. • Efficiency. Most applications of genome editing technology require that a sufficient portion of the targeted cells are edited to achieve the desired result. The activity level of the endonuclease is one factor that can affect how many cells are edited. The slow catalytic mechanism of I-CreI imparts specificity but does not impact its on-target efficiency for genome editing purposes because genome editing involves cutting only a single site in a cell. As such, I-CreI is able to achieve a high level of on-target editing while rarely cutting off-target, as supported by scientific literature. • Delivery. Size and structural simplicity affect the ease with which endonucleases can be delivered to cells for editing. I-CreI is very small relative to other genome editing endonucleases. It is approximately one quarter to one sixth of the size of the ZFN, TALEN and CRISPR/Cas9 endonucleases. Unlike those endonucleases, I-CreI can be delivered as a single gene. As such, we believe it is compatible with many different delivery mechanisms. Additionally, I-CreI’s size and structure facilitate the simultaneous delivery of multiple engineered endonucleases to introduce more than one edit to a cell. Both of these properties significantly broaden the spectrum of potential applications for I-CreI-based genome editing endonucleases. • Type of Cut. The three prime, or 3’, overhangs created when I-CreI cuts DNA have been shown to promote DNA repair through a mechanism called “homology directed repair,” or HDR. 3’ overhangs are stretches of unpaired nucleotides in the end of a DNA molecule. A genome editing technology that facilitates cellular repair through HDR enables applications that require a gene insertion or gene repair. Unlike other editing endonucleases, I-CreI creates four base 3’ overhangs when it cuts its DNA site, which increases the likelihood that the cell will repair the DNA cut through HDR. As such, the DNA cuts created by I-CreI can be exploited to efficiently insert or repair DNA, consistent with the natural role of I-CreI in catalyzing the targeted insertion of a gene in algae. • Programmability. I-CreI recognizes its DNA target site through a complex network of interactions that is challenging to re-program for new editing applications involving different DNA sequences. The challenges associated with re-programming I-CreI have, historically, hampered its adoption by the genome editing community in favor of more easily engineered endonucleases. This engineering challenge represents a high barrier to entry and has enabled us to secure a strong intellectual property position and control over what we believe to be a superior genome editing technology. Other than the key programming challenge, we believed that the differentiated properties of I-CreI cited above made it an ideal “scaffold” for the development of novel genome editing tools. Moreover, we believed those properties were differentiated enough from other editing technologies to merit substantial investment in overcoming the key challenge of programmability. To that end, we invested 15 years of research effort to develop a robust, proprietary protein engineering method that now enables us to consistently re-program I-CreI to direct it to targeted sites in a genome. We call our approach ARCUS. Our ARCUS Genome Editing Platform ARCUS is a collection of protein engineering methods that we developed specifically to re-program the DNA recognition properties of I-CreI. In nature, the I-CreI endonuclease recognizes and cuts a DNA sequence in the genome of algae. To apply I-CreI to genome editing in other cells or organisms, we must modify it to recognize and cut a different DNA sequence for each new application we pursue. Since the I-CreI endonuclease evolved to recognize its target sequence in the algae genome with a high degree of selectivity, as supported by scientific literature, it was necessary for us to develop sophisticated protein engineering methods to re-engineer I-CreI endonucleases to bind and cut a different DNA sequence. Using the ARCUS process, we create customized endonucleases for particular applications. We call these custom endonucleases “ARCUS nucleases.” Our process is proprietary and core components are claimed in an extensive international patent portfolio. Moreover, since the ARCUS process involves a sophisticated blend of protein engineering art and science, each ARCUS nuclease we create is novel and, we believe, patentable. As of December 31, 2020, we have 7 obtained U.S. patents with claims directed to six ARCUS nucleases as compositions of matter, and currently claim over 2 90 ARCUS nucleases as compositions of matter in pending U.S. and foreign patent applications. Our objective with ARCUS is to redirect I-CreI to a new location in a genome without compromising its editing abilities. To accomplish this, we modify the parts of the enzyme that, as reported by scientific literature, are involved in recognizing the specific DNA target site. These enzyme parts are also reported to comprise the I-CreI active site and to be involved in anchoring the enzyme to its DNA site in the algae genome. In our preclinical studies, we have observed that these modifications allowed us to control how tightly an engineered variant of I-CreI binds to its intended DNA site, as well as how quickly it cuts, in a plant or animal cell. By adjusting these two parameters, we observed that we can generally control the efficiency with which the engineered endonuclease cuts its intended target site or any potential off-target sites. The natural I-CreI target site is pseudo-palindromic, meaning the first half of the sequence is approximately a mirror image of the second half of the sequence. Palindromic DNA sites are rare in most genomes so it was necessary for us to develop additional technology that would overcome this limitation on the diversity of DNA sites that we can target. To this end, the ARCUS process involves the production of two re-programmed I-CreI proteins for each target site. These two different proteins are then linked together into a single protein that can be expressed from a single gene. This approach, called a “single-chain endonuclease,” represents a major advancement in I-CreI engineering because it enables our ARCUS nucleases to recognize and cut non -palindromic target sites using an endonuclease that, like natural I-CreI, is very small and easy to deliver to cells. The graphic below depicts the molecular structure of natural I-CreI in comparison to an engineered ARCUS nuclease called “M1PCSK9.” The regions of the structures colored in pink or cyan represent the amino acid building blocks that are responsible for contacting the DNA target site and determining the sequence of DNA bases that the endonuclease recognizes and cuts. The DNA target sites recognized by the two endonucleases are shown below the structures. Since creating an ARCUS nuclease requires such extensive reengineering of I-CreI, it is, generally, an iterative process that involves multiple cycles of design and testing. We can typically produce a first-generation ARCUS nuclease in seven weeks. First-generation nucleases are suitable for research and development, proof-of-concept studies or other non-therapeutic applications. For therapeutic applications requiring the lowest possible off-targeting, however, we are rarely satisfied with generation one and each endonuclease undergoes extensive optimization. To this end, we thoroughly interrogate the nuclease with respect to its on-and off-target cutting properties using ultra-sensitive tests that we developed specifically for use with ARCUS. These results then inform our design of a second-generation nuclease with the goal of optimizing on-target efficiency while minimizing off-target cutting. Therapeutic ARCUS nucleases typically require two to four cycles of design and testing, often resulting in off-target cutting frequencies that are below the limit of detection with our most sensitive assays. This process can take six months or longer and has resulted in development of “therapeutic-grade” editing endonucleases. The ARCUS process is robust and reproducible. It enables us to create engineered variants of the I-CreI endonuclease that recognize and cut DNA sites that bear little resemblance to I-CreI’s natural target site. Importantly, however, ARCUS retains the attributes of I-CreI that we believe make it highly suitable as a genome editing endonuclease for complex commercial applications. We expect ARCUS nucleases to be exquisitely specific as a result of the natural structure of I-CreI and the intricate design process we employ to create them. We believe ARCUS nucleases are the smallest and easiest to deliver genome editing endonucleases. Like I-CreI, in our preclinical studies, ARCUS nucleases have been observed to produce DNA cuts with 3’ overhangs that promote HDR, facilitating 8 gene insertions and gene repairs in addition to gene knockouts. We believe that these attributes will enable us to translate ARCUS into patient-based clinical trials and a wide array of product candidates that have the potential to address the limitations of other genome editing technologies and improve life. We believe that ARCUS is a leading genome editing platform for therapeutic and food applications. Realizing the potential of ARCUS, however, requires supporting technologies and capabilities. To facilitate the potential commercial deployment of ARCUS in different fields, we surround it with ancillary technologies, domain expertise and infrastructure specific to that area of development. Our goal is to leverage ARCUS to build additional product-development platforms designed to rapidly generate new products in a given field. Our Allogeneic CAR T Immunotherapy Platform We are leveraging the properties of ARCUS in an integrated platform for the development and large-scale production of off-the-shelf (allogeneic) CAR T cell immunotherapies. A key to the success of this platform is our proprietary, one-step method for modifying the genetics of T cells from a healthy donor to make them detect and kill cancer cells. This method allows us to produce allogeneic CAR T therapy candidates with a potentially optimal phenotype for clinical development and scaled manufacturing. We have demonstrated that our approach yields an allogeneic product with a high proportion of naïve and central memory CAR T cells, which are the T cell phenotypes that have previously correlated best with good clinical benefit and fewer adverse events compared with terminally differentiated effector T cells. Additionally, because these cells are derived from healthy donors and maintain the phenotypic characteristics described, it is our hypothesis that they will be more capable of controlled in vivo expansion and tumor killing without requiring harsh lymphodepletion regimens to be administered to the patient. As such, we believe that our allogeneic CAR T cell platform will greatly increase patient access to these cutting-edge treatments. CAR T Cell Therapies CAR T cell therapy is a form of cancer immunotherapy that uses a patient’s immune system to kill cancer cells. T cells are a component of the immune system that can distinguish pathogen-infected or tumor cells from healthy cells and kill them. Recognition of pathogen-infected cells or tumor cells occurs through a protein called a TCR, that is expressed on the surface of T cells. Tumor cells, however, have evolved numerous ways to evade TCR-mediated killing by T cells. In CAR T cell therapy, T cells are engineered ex vivo to express a protein called a chimeric antigen receptor, or CAR, that recognizes specific tumor cell surface targets and allows the T cells to function independently of the TCR, thus circumventing tumor cells’ evasion of the TCR. CAR T cell therapy has been shown in clinical trials to be an effective treatment for patients who have not responded to traditional cancer treatments, and there are now two FDA approved CAR T cell products available to treat certain types of leukemia and lymphoma. The most common form of CAR T cell therapy, which includes the two approved therapies, is referred to as “autologous” CAR T cell therapy because the CAR T cells are generated using T cells taken directly from the cancer patient. T cells are harvested from the patient, genetically engineered ex vivo to express a CAR, and then injected back into the patient. While autologous CAR T cell therapy has been shown to be effective for treating certain tumor types, it has several significant drawbacks: • Patient eligibility. Many patients may not be eligible for the treatment because their cancer has lowered their T cell numbers and T cell quality, or because the risk of undergoing the process to harvest T cells is too great. • Consistency. Since each autologous therapy is, by definition, unique, it is difficult to define standards of safety and efficacy or to thoroughly assess the quality of the product prior to infusion into the patient. • Delay in treatment. Because the process to make autologous CAR T cells can take several weeks, there is a significant delay in treating what can often be very aggressive tumors. Patients’ disease often progresses before they can receive the CAR T therapy, or if manufacturing complications such as contamination, mislabeling or low yield are encountered, the patient may not survive long enough to attempt manufacturing a second time. • Cost. The autologous CAR T cell manufacturing process is complex and expensive and must be performed, in its entirety, for each patient. As such, scaling of the manufacturing process is exceedingly difficult, and the cost of product manufacturing has resulted in high treatment costs per patient. This high cost of treatment, along with the practical complexities described above, limits the availability of autologous CAR T cell therapies to patients. 9 Our Approach to Allogeneic CAR T Cells We believe that the use of allogeneic, or donor-derived, CAR T cells will address many of the challenges associated with autologous CAR T cell therapy. An allogeneic approach allows selection of donors using specific criteria to define “healthy” T cells possessing specific phenotypes, which we believe are important to clinical efficacy and which may lessen the product-to-product variability seen in autologous therapies. Donor-derived cells could be used in any patient, eliminating the “one patient: one product” burden of autologous CAR T cell therapies. Because healthy donors would provide the starting material, patients that were too sick or otherwise unqualified for an autologous approach may benefit from an allogeneic CAR T cell therapy. Additionally, patients receiving an off-the-shelf allogeneic treatment would not have to wait for the manufacture of a personalized autologous treatment, which could be further delayed by manufacturing difficulties. By scaling the manufacturing of CAR T cells and optimizing the manufacturing process for a specific pool of donors, we believe that allogeneic CAR T cells can be manufactured at costs that are significantly lower than autologous CAR T cells and that will, over time, approach the manufacturing costs for conventional biologic drugs. These potential advantages of an allogeneic approach should allow for a safer, more predictable product with defined quality standards and significantly increase patient access. We have used the unique qualities of ARCUS to create a one-step cell engineering process for allogeneic CAR T cells that we believe yields a well-defined cell product and is designed to maintain naïve and central memory T cell phenotypes throughout the CAR T manufacturing process; we believe this is of paramount importance for an optimized CAR T therapy. To produce an allogeneic CAR T cell, it is necessary to make two changes to the DNA of T cells from a healthy donor. First, it is necessary to knock out the gene that encodes the TCR to prevent the donor-derived T cells from eliciting GvHD in the patient. The TCR is actually a complex of several different components encoded by different genes, and knocking out any one of them is generally sufficient to prevent the TCR from functioning. Second, it is necessary to add, or knock in, a gene that encodes the CAR to give the T cells the ability to recognize and kill cancer cells. We developed a proprietary, one-step method for achieving both genetic changes simultaneously. This method, aspects of which are protected by nine issued U.S. patents, involves the use of ARCUS to target the insertion of a CAR gene directly into the gene that encodes the alpha subunit of the TCR. This approach adds the DNA encoding the CAR while simultaneously disrupting the DNA encoding the TCR, essentially replacing one gene with the other. One-step engineered allogeneic CAR T cells 10 We believe that our one-step engineering approach, and the differentiated attributes of the ARCUS nuclease used to implement it, will overcome many of the critical challenges associated with allogeneic CAR T cell production as follows: • T cell phenotype. According to scientific literature, T cell phenotype has a profound impact on the efficacy of CAR T cell therapy. Specifically, “young” CAR T cells with naïve and central memory phenotypes have been observed to undergo the most robust expansion following administration, which leads to a therapeutic effect. Therefore, we have established a T cell platform that is designed to maximize the percentage of cells with these ideal phenotypes. Our process starts with carefully screening donors to identify individuals with high percentages of naïve or central memory T cells and a ratio of CD4:CD8 T cells that we believe should yield the most potent cell product. To this end, we have developed our own set of analytics for screening candidate donors and have put significant effort into identifying individuals with the desired T cell profiles. We then use proprietary growth strategies and media to maintain naïve and central memory T cell phenotypes throughout the CAR T manufacturing process. We believe this is of paramount importance for an optimized CAR T therapy. Importantly, our one-step genome editing approach avoids making multiple breaks to the T cell’s DNA and also contributes to minimizing cell processing time, which helps prevent the CAR T cells from differentiating during the process. We believe our 10-day allogeneic manufacturing process is the shortest established process in the industry. The figure below shows results from seven full-scale manufacturing campaigns, each of which produced a cGMP batch of PBCAR0191 with desired product specifications. The figure below shows phenotype data from PBCAR0191 CAR T cells that were produced as drug product for our ongoing Phase 1/2a clinical trial in adult patients with R/R NHL and R/R B-ALL. The drug product comprises naïve (T N/SCM ) and central memory (T CM ) T cells. 11 • Novel co-stimulatory domain. Our genetically engineered CAR T cells incorporate a novel, proprietary, costimulatory domain called N6, which enables us to enhance cell proliferation and effector function while preserving cell phenotype. We engineered N6 to improve on the function of the 4-1bb costimulatory domain commonly used in autologous CAR T products. Our preclinical data suggests that, compared to 4-1bb, N6 provides an activation signal to the CAR T cells that better preserves cell expansion potential while maintaining naïve cell phenotype following exposure to cancer cells. We also believe N6 can help avoid CAR T cell hyperstimulation, which can contribute to adverse events seen with autologous products. • Consistency. By consistently targeting the same insertion of the CAR gene to a defined location in the DNA of the cell, we are able to produce populations of T cells that are identical at the DNA level. This makes the cells in our CAR T cell drug formulation less heterogeneous as compared to manufacturing processes that use lentiviral vectors. Importantly, our genome editing process gives us greater control over the amount of CAR that is expressed on the surface of each CAR T cell, which determines how easily the CAR T cell is activated once it encounters a cancer cell. This allows us to “fine-tune” the CAR T cells to ensure that they respond appropriately to the cancer but do not become hyper‑activated or exhausted. The below comparison demonstrates the difference in consistency achieved by using lentivirus delivery compared with targeted delivery through an ARCUS nuclease. CAR T cells produced using ARCUS exhibit reduced cell-to-cell variability as well as more controlled levels of CAR gene expression depending on whether the cells are tuned for high expression or low expression. • Scalability. To realize the potential benefits of allogeneic CAR T cell therapy, it will be important to manufacture as many cells as possible in each batch in accordance with cGMP. Scaling efficiently requires scale-up at every step in the process and, as with all drug manufacturing, process development takes significant time and capital. In July 2019, we opened our 12 Manufacturing Center for Advanced Therapeutics (“ MCAT ”) facility, which we believe is the first in-house cGMP compliant manufacturing facility dedicated to genome-edited, off-the-shelf CAR T cell therapy product candidates in the United States. We made the decision early in the development of our CAR T cell platform to invest in process development and manufacturing rather than initiating clinical trials with a process that would not fully support development and commercialization. We did this, in part, because we believed that several attributes of ARCUS, such as high specificity and high knock-in efficiency, would allow us to scale manufacturing more effectively than our competitors. As a consequence of our early investment and the one-step editing method enabled by ARCUS, we have scaled our manufacturing process today, adding in-house capabilities through the opening of our MCAT facility. During 2020, we completed technology transfer of PBCAR0191 and PBCAR20A to MCAT, as well as manufactured the first batch and clinical trial material for PBCAR269A and produced clinical trial material for PBCAR19B stealth cell. Key features of Precision’s allogeneic CAR T platform Preventing CAR T Cell Rejection A patient’s immune system is expected to recognize allogeneic CAR T cells as foreign and destroy or reject the cells. This rejection could limit the efficacy of the CAR T therapy if the cells do not persist long enough in the patient to eradicate the tumor. Patients who receive CAR T therapy are typically preconditioned prior to being given the cell therapy using lymphodepleting drugs such as cyclophosphamide or fludarabine, which suppress the immune system of the patient. We believe that the degree of preconditioning can be modified by adjusting the doses of the cyclophosphamide or fludarabine to prevent CAR T cell rejection by patients who receive our treatments due to our unique approach to producing CAR T cells. Our CAR T production process preserves T cell phenotypes that we believe are highly expansile in vivo and therefore do not require an aggressive lymphodepletion regime to survive and proliferate in the body. 13 We expect to begin the Phase 1 study of PBCAR19B, our next-generation, stealth cell, CD19 allogenic CAR T candidate for Non-Hodgkin Lymphoma by mid-2021. The stealth cell technology is a modified CAR T vector that is designed to suppress expression of a gene called beta-2-microglobulin, or B2M, in CAR T cells using a short-hairpin RNA, or shRNA , and enable expression of a transgenic HLA-E molecule on the cell surface. B2M is a component of the major histocompatibility complex type 1 (“MHC-I”) , a cell surface receptor which enables alloreactive T cell recognition and activation . Suppression of B2M expression leads to reduced cell-surface expression of major histocompatibility complex components HLA-A, HLA-B, and HLA-C. In preclinical studies, we and others have observed that suppression or elimination of B2M reduces the rejection of CAR T cells by alloreactive T cells from an unrelated individual. However, we have found that reduction of cell-surface HLA-A, HLA-B, and HLA-C expression provokes rejection of the CAR T cells by an alternative immune cell called natural killer, or NK cells. Decreased expression of HLA-A , HLA-B, and HLA-C therefore necessitates an additional modification to enable overexpression of HLA-E, a non - classical MHC -I that inhibits cytotoxic killing by NK cells by interacting with inhibitory receptors on the NK cell surface (Gornalusse et al, 2017; Lanza et al, 2019) . Thus, the “stealth cell” is designed to avoid rejection by both alloreactive cytotoxic T cells and NK cells, which we believe has the potential to increase the ability of these cells to expand, persist, and mediate anti-tumor activity in unrelated recipients as summarized in the figure below . Pre-clinical studies showed anti-CD19 stealth CAR T cells resisted rejection by allo-reactive T cells and NKs in mixed-lymphocyte reactions 14 Our Allogeneic CAR T Immunotherapy Pipeline 1 In partnership with Servier. 2 In combination with gamma secretase inhibitor from SpringWorks Therapeutics. We are leveraging our CAR T cell platform to develop product candidates against validated CAR T cell targets. By focusing on validated targets, we seek to avoid many technical hurdles associated with early clinical development and can validate our allogeneic platform in patients with fewer variables. This approach also allows us to leverage the abundance of available public resources for these targets, including CARs, cell and animal models, and clinical protocols. We believe that our modular CAR T platform will allow us to leverage proof-of-concept from our ongoing and planned initial human trials for multiple other CAR T programs. We believe that we have developed the first allogeneic CAR T cell platform capable of producing drug product at scale, with a potentially optimal cell profile for therapeutic efficacy and true off-the-shelf delivery without the need for harsh and potentially toxic lymphodepletion. We believe that the combination of these factors, along with our next generation ARCUS technology, puts us in a differentiated position to become the leader in the development of allogeneic CAR T therapies. The first four product candidates in our allogeneic CAR T cell development pipeline are: • PBCAR0191 . We are developing PBCAR0191, an allogeneic anti-CD19 CAR T cell product candidate for the treatment of adult R/R NHL and adult R/R B-cell precursor ALL. CD19 is a protein that is expressed on the surface of B cells and is a well-validated target for CAR T cell therapy. The three currently marketed autologous CAR T cell therapy products also target CD19. In February 2016, we entered into the Servier Agreement, pursuant to which we have agreed to develop allogeneic CAR T cell therapies for CD19. 15 We are currently evaluating patients in a Phase 1/2a clinical trial of PBCAR0191 in adult patients with R/R NHL or R/R B-cell precursor ALL, the trial design of which is shown in the figure below. The primary objective of this trial is to evaluate the safety and tolerability of PBCAR0191, as well as to determine the maximum tolerated dose. Secondary objectives include evaluating the anti-tumor activity of PBCAR0191. We are also evaluating the expansion, trafficking and persistence of PBCAR0191 in this trial. NHL and ALL cohorts are evaluated independently . The base trial design include d up to three dose levels: 3.0 x 10 5 cells/kg, 1.0 x 10 6 cells/kg and 3.0 x 10 6 cells/kg. Recently, we have added higher dose levels in flat doses (DL4b: 500 x 10 6 cells and DL5: 750 x 10 6 cells). Patients will be further evaluated for a follow-up period of 11 months. Additionally, alternative lymphodepletion regimens, including enhanced doses of fludarabine and cyclophosphamide, are also being explored. Finally, repeat dosing after initial response and progression and scheduled repeat dosing, both with repeat lymphodepletion , are also being explored. The trial is being conducted at the multiple sites around the United States. A listing of these sites c an be found at https://clinicaltrials.gov/ct2/show/NCT03666000 . Updated Interim Data from Phase 1/2a Trial of PBCAR0191 in R/R NHL and R/R B-ALL In December 2020, we reported updated interim data from our ongoing Phase 1/2a clinical trial of PBCAR0191. As of the November 16, 2020 cutoff, 27 patients including 16 patients with R/R NHL and 11 patients with R/R B-ALL had been enrolled and evaluated. For this study, in which patients received either sLD or eLD, response rates across R/R NHL and R/R B-ALL patient cohorts were as follows: • 83% objective response rate (“ORR”) at day 28 or later for patients across NHL (n=4) and B-ALL (n=2) who received PBCAR0191 when coupled with eLD. • At day 28 or later, 75% (3/4) of NHL patients who received PBCAR0191 with eLD achieved a complete response (“CR”). Meanwhile, 33% of NHL patients (n=9) across DL2 and DL3 using sLD achieved a CR. • The longest demonstrated response was > 11 months in a B-ALL patient at DL2. Response Rates at Day ≥28 NHL (n=16) B-ALL (n=11) ORR CR ORR CR DL1 (3x10 5 cells) + sLD 67% (2/3) 0% (0/3) - - DL2 (1x10 6 cells) + sLD 67% (2/3) 33% (1/3) 33% (1/3) 33% (1/3) DL3 (3x10 6 cells) + sLD 50% (3/6) 33% (2/6) 25% (1/4) 25% (1/4) DL4 (2 doses at 3x10 6 cells) + sLD - - 50% (1/2) 50% (1/2) Enhanced LD Regimen 100% (4/4) 75% (3/4) 50% (1/2) 50% (1/2) PBCAR0191, which incorporates our patented N6 co-stimulatory domain, demonstrated a clear dose dependent increase in peak cell expansion. Compared to sLD, patients undergoing eLD with PBCAR0191 at DL3 resulted in approximately 95-fold increase in peak cell expansion, and approximately 45-fold increase in area under the curve. This was associated with a higher CR rate in NHL (75%). In this dose escalation and dose expansion study, PBCAR0191 had an acceptable safety profile with no cases of graft versus host disease, no cases of Grade ≥ 3 cytokine release syndrome, and no cases of Grade ≥ 3 immune effector cell neurotoxicity. One NHL patient who was treated with PBCAR0191 and eLD had previously received nine prior lines of therapy before entering the trial. The patient presented with persistent cytopenias at baseline and a history of infections, including bacterial sepsis. The patient had an episode of sepsis at day 27 which appeared to have resolved at day 33, following which a partial response was achieved at day 34. Unfortunately, the patient died at day 42 with grade 5 sepsis. We reported the serious adverse event to the FDA and reported the patient death. 16 We are enrolling additional patients with eLD and plan to present updated interim data on this study by mid-2021. Additionally, the FDA has accepted our IND application for PBCAR19B, our next-generation, stealth cell, CD19 allogeneic CAR T candidate for Non-Hodgkin Lymphoma, and we expect to begin the Phase 1 study by mid-2021. In preclinical studies, PBCAR19B has been shown to delay both T cell and natural killer cell mediated allogeneic rejection in vitro and may improve the persistence of allogeneic CAR T cells in recipients after infusion. PBCAR20A. Our second allogeneic CAR T therapy candidate is PBCAR20A, an allogeneic anti-CD20 CAR T cell product candidate for the treatment of NHL, including chronic lymphocytic leukemia, or CLL, and small lymphocytic lymphoma, or SLL. Like CD19, CD20 is a protein expressed on the surface of B cells. It is a validated target for cancer treatment and several CD20-targeted therapies, such as the monoclonal antibody Rituxan, have long histories of clinical and commercial success. In April 2020, we commenced patient dosing in a Phase 1/2a clinical trial of PBCAR20A. The trial will include patients with NHL, of which a subset will have the diagnosis of mantle cell lymphoma, or MCL. We have received orphan drug designation for the treatment of MCL. In our Phase 1/2a clinical trial, the primary objective is to evaluate the safety and tolerability of PBCAR20A, as well as to determine the maximum tolerated dose. Secondary objectives will include evaluating the anti-tumor activity of PBCAR20A. We also plan to evaluate the expansion, trafficking and persistence of PBCAR20A in this trial. Based on the safety profile observed to date with PBCAR0191, the FDA allowed us to commence dosing with PBCAR20A directly at 1 x 10 6 cells/kg. The study has continued to dose escalate through dose level two (3 x 10 6 cells/kg), and in February 2021, we commenced patient dosing at dose level 3 (480 x 10 6 cell fixed dose) with a max dose of 6 x 10 6 cells/kg. We expect to report interim data for the PBCAR20A study in 2021. Our accepted IND for PBCAR20A included data from our preclinical study in mice measuring cell proliferation, cytotoxic killing, and production of effector cytokines in response to co-culture with CD20+ or CD20- target cells. PBCAR20A CAR T cells were observed to proliferate in response to stimulation by CD20+ K20 cells (K562 myelogenous leukemia cells transfected to express human CD20) at a wide range of doses (effector to target ratios ranging from 1:1 to 1:9). These observations show that, in this study, PBCAR20A cells became activated by and killed CD20+ cells at a wide range of cell doses. In this study, we observed that PBCAR20A cells did not proliferate in response to co-culture with CD20 negative cell K562 cells. We also evaluated the potency of PBCAR20A in vivo . PBCAR20A was observed to prolong survival in a mouse model of lymphoma (Raji Sub-Q model) at both doses tested (1.0 x 10 6 and 5.0 x 10 6 cells per mouse), which we believe supports further development. PBCAR20A was observed to be well-tolerated in this study. PBCAR269A . We are developing PBCAR269A as an allogeneic anti-BCMA CAR T cell product candidate for the treatment of R/R multiple myeloma. BCMA is a protein that is expressed on the surface of mature B cells called “plasma cells” that are responsible for the disease and is a validated CAR T cell target. In January 2020, the FDA cleared our IND for PBCAR269A. In June 2020, we commenced a Phase 1/2a open-label, multi-center, dose-escalation clinical trial in patients with R/R multiple myeloma. In this trial, the primary objective will be to evaluate the safety and tolerability of PBCAR269A, as well as to determine the maximum tolerated dose. Secondary objectives will include evaluating the anti-tumor activity of PBCAR269A. We also plan to evaluate the expansion, trafficking and persistence of PBCAR269A in this trial. We expect to investigate up to three dose levels: 6.0 x 10 5 cells/kg, 2.0 x 10 6 cells/kg and 6.0 x 10 6 cells/kg and we expect to report interim data on the PBCAR269A trial in 2021. We evaluated the potency of PBCAR269A CAR T cells in a preclinical study in mice by measuring cell proliferation, cytotoxic killing and production of effector cytokines in response to co-culture with BCMA+ or BCMA- target cells. In this study, PBCAR269A CAR T cells were observed to proliferate in response to stimulation by BCMA+ target cells including MM.1S (a human multiple myeloma cell line) and KBCMA (K562 myelogenous leukemia cells transfected to express human BCMA) at a wide range of doses (effector to target ratios ranging from 1:1 to 1:8). These observations show that, in this study, PBCAR269A cells became activated by and killed BCMA+ cells at a wide range of cell doses. We further observed that PBCAR269A cells did not proliferate in response to co-culture with BCMA- K562 cells. We also evaluated the potency of PBCAR269A in vivo . PBCAR269A was observed to prolong survival in a mouse model of multiple myeloma, which we believe supports further development. PBCAR269A was observed to be well-tolerated in this study. 17 Our in vivo Gene Correction Platform 1 In partnership with Lilly Overview We expect in vivo genome editing to be a significant focus of our operations long-term because the differentiated attributes of ARCUS are particularly advantageous for this type of application. In vivo gene correction involves the delivery of ARCUS nucleases directly into a patient’s cells to treat disease at the level of the underlying DNA. In vivo genome editing is more complex and challenging than ex vivo approaches like CAR T cells due to the need to safely deliver ARCUS directly to cells in the body. We believe that in vivo applications are particularly well suited to ARCUS because they require extremely low levels of off-target editing and efficient delivery. Due to the demands of in vivo editing, we are taking a highly disciplined approach to managing our project portfolio that emphasizes studies in large animals, using both viral and non-viral delivery technologies. Thus, we are generating a large animal dataset that, we believe, is the most comprehensive of any in the field. Our two most advanced programs in this area are focused on PH1 which we wholly own and DMD in partnership with Lilly. Treatment of Genetic Disease Genetic diseases are caused by errors in the DNA that lead to dysfunction of a cell or tissue. While the underlying cause of a particular genetic disease can often be complex and variable, DNA errors generally fall into two categories: loss-of-function or gain-of-function. Genetic diseases are most frequently caused by loss-of-function errors in which a particular gene is mutated at the DNA level in such a way that it is either non-functional or less functional than it should be. In these cases, treating the disease requires adding the function that the cell or tissue is otherwise lacking. Gain of function genetic disorders are the result of DNA errors that cause a gene to acquire a new, harmful function that leads to disease. In these cases, it is necessary to remove the unwanted function to treat the disorder. Genetic disease is a very active area of therapeutic development, and the therapies that are available or in development are, to a large extent, as variable and specialized as the diseases themselves. There are, however, gene therapy platform approaches that are being broadly applied to the treatment of multiple genetic disorders. For the treatment of loss-of-function diseases, AAV-based gene therapy can often be an effective treatment. AAV is a non-integrating virus that can be used to deliver DNA to a wide range of different cell types in a patient. The virus can be engineered to deliver a functional copy of a gene that is otherwise missing or under-performing in the cell. This approach can, in some cases, restore normal function to the cell and alleviate the symptoms of the disease. 18 While a number of AAV-based gene therapies appear to be showing great promise in clinical trials, the approach is subject to a number of limitations. Many patients have antibodies in their blood that recognize and inactivate the AAV virus before it can deliver the DNA into the patient’s cells. In addition, among patients who do not have antibodies upon initial treatment with the virus, most will develop antibodies following the first dose. Therefore, in most cases, it is only possible to dose a patient one time. Most importantly, although AAV-based gene therapy can be an effective treatment, it is probably not a permanent cure because AAV-delivered genes do not generally persist for more than a few years in the body. While the duration of virus persistence varies from cell-to-cell and from patient-to-patient, it is not believed to be permanent and symptoms of the disease can return once the virus is no longer present in the body. Our Approach to in vivo Gene Correction Our goal is to cure genetic diseases by correcting the DNA errors responsible for causing them. In principle, in vivo genome editing can likely be used to cure any genetic disorder. In practice, however, in vivo genome editing is limited by several challenges that, we believe, are best addressed using ARCUS: • Specificity. In vivo genome editing requires an extremely high degree of precision to minimize the occurrence of any unwanted off-target editing. Off-target changes to the DNA could, potentially, have significant safety implications that may not manifest themselves until well after administration of the therapy. As described above, we believe that the differentiated attributes of ARCUS enable us to create endonucleases that have a high degree of specificity and minimal levels of off-target editing to address this significant safety concern. • Delivery. Gene therapy delivery technologies suitable for the delivery of genome editing tools to tissues in vivo have not been developed for all tissues. Delivery challenges are particularly pronounced for editing applications that require promoting DNA repair by HDR because it is necessary to deliver both the nuclease and the DNA “donor” template for HDR. We have focused our initial development efforts on genetic disorders of the liver and eye, two tissues for which we believe we have good options for delivery and in which we have shown ARCUS to be effective in preclinical studies. We believe the small size of our ARCUS nucleases and their ability to efficiently promote HDR will enable us to address a greater variety of genetic diseases requiring more complex delivery strategies. • Efficiency. Genome editing efficiency is a critical parameter for in vivo therapeutic efficacy because the requisite edit must be achieved in a sufficient number of cells to have therapeutic benefit. Efficiency is best measured in vivo in animals because it is affected by multiple parameters including delivery, endonuclease activity and the accessibility of the DNA target site in the organism. Moreover, we believe that only large animals such as NHPs accurately model these different parameters and are representative of the human condition. As such, we have placed significant emphasis on large animal studies and have demonstrated, we believe, therapeutic levels of editing efficiency using ARCUS in the most relevant models. This gives us greater confidence that ARCUS will translate from the lab bench to the clinic. The potential of ARCUS for in vivo genome editing is highlighted in a July 2018 publication in Nature Biotechnology that describes a research project performed as part of a sponsored research collaboration between our company with Dr. Jim Wilson and the Gene Therapy Program at the University of Pennsylvania. Co-authors of the publication include Derek Jantz and Jeff Smith, two of our co-founders. This publication is, to our knowledge, the first peer-reviewed publication of in vivo genome editing data in NHPs. We reported well-tolerated, long-term, high-efficiency editing of the PCSK9 gene in NHPs using ARCUS. A single IV administration of an AAV vector encoding a PCSK9-specific ARCUS nuclease was able to efficiently knock out the gene in the livers of Rhesus macaques, a species of monkey. Importantly, even at the highest dose the treatment was observed to be well tolerated in the study. As published in Molecular Therapy in February 2021, we have continued to monitor the NHPs for more than three years and have continued to show a sustained reduction in LDL cholesterol levels while maintaining stable gene editing without any obvious adverse effects. After the one-time vector administration more than three years ago, NHPs treated with ARCUS have experienced stable reductions of up to 85% in PCSK9 protein levels and a 56% reduction of LDL cholesterol levels. 19 PCSK9 and LDL Serum Levels We believe that establishing collaborations with other groups that have additive domain expertise and access to the most relevant animal models will be important to advancing our in vivo gene correction platform, and we have entered into a number of collaborations and licensing agreements with third parties to help us advance our in vivo editing portfolio. Primary Hyperoxaluria Type 1 (PH1) Program We plan to advance a program designed to target the rare genetic disease PH1 as our lead wholly owned in vivo gene correction program. PH1 affects approximately 1-3 people per million in the United States and is caused by loss of function mutations in the AGXT gene. This gene encodes an enzyme which is involved in the production of the amino acid glycine in the liver. In patients with PH1 who lack this enzyme, crystals of calcium oxalate form in the kidneys leading to painful kidney stones which may ultimately lead to renal failure. Approximately 40% of PH1 patients are found to have already progressed to end stage renal disease at the point of diagnosis, requiring a combined liver-kidney transplant. Using ARCUS, we are developing a potential therapeutic approach to PH1 that involves knocking out a gene called HAO1 which acts upstream of AGXT. Suppressing HAO1 has been shown in preclinical models to prevent the formation of calcium oxalate. We therefore believe that a one-time administration of an ARCUS nuclease targeting HAO1 may be a viable strategy for a durable treatment of PH1 patients. In preclinical studies we have demonstrated that ARCUS efficiently knocked out the HAO1 gene in NHPs. We have also demonstrated in a mouse model of PH1 that administration of an ARCUS nuclease targeting HAO1 resulted in approximately 70% reduction in urine calcium oxalate levels. We have also demonstrated that ARCUS efficiently reduced HAO1 mRNA levels by greater than 90% in the liver of NHPs. Pre-clinical research has continued to progress, and we expect to provide an update on this program in the first half of 2021. 20 Manufacturing We believe that we have strong internal scientific process development and manufacturing capabilities, including our MCAT, an in-house cGMP compliant manufacturing facility supporting our therapeutic product development platforms which we opened in 2019. We believe that MCAT is the first in-house cGMP compliant manufacturing facility in the United States dedicated to genome-edited, off-the-shelf CAR T cell therapy products. We believe that having internal manufacturing capacity and expertise is a competitive advantage that enables enhanced control over process development timelines, costs and intellectual property. We have leased over 33,800 square feet of space for our MCAT facility at a location approximately seven miles from our headquarters in Durham, North Carolina. We have four cleanroom production suites for CAR T cell, mRNA and AAV production for process development for our allogeneic CAR T immunotherapy platform. Our manufacturing facility leverages single-use, disposable, closed-system operations aligned to our technology platforms to ensure both flexibility and cost effectiveness. The initial scope is creating clinical trial material for certain of our planned clinical trials. In the longer term, we believe MCAT has the potential to be a commercial launch facility. During 2020, we completed tech transfer of PBCAR0191 and PBCAR20A to MCAT, as well as manufactured the first batch and clinical trial material for PBCAR269A and produced clinical trial material for PBCAR19B stealth cell. We currently contract with third parties for the manufacturing of materials used in the production of our product candidates. To date, our third-party manufacturers have met our manufacturing requirements. We believe that there are alternate sources of supply that can satisfy our requirements. The manufacturing process for our allogeneic CAR T immunotherapy platform utilizes a one-step cell engineering method in which a CAR gene is targeted directly into the TRAC locus. We believe this approach greatly streamlines the manufacturing process and have entered into a license agreement with a principal supplier for research and clinical licensed technology used in such process. Commercial raw materials and reagents for this production are readily available. Our manufacturing strategy for our in vivo gene correction platform and our food platform is to internally control process development and manufacturing to safeguard the proprietary nature of our technology and facilitate our ability to function as an integrated life sciences company. Our Food Platform Technology-Centric Solutions to Meet Changing Demands in Food and Agriculture The total global food and agriculture market, estimated to be worth $5 trillion (2015), is heavily influenced by the availability of critical raw material ingredients and changing consumer behavior. With the global population projected to reach 8.5 billion by 2030, demand for basic food and nutrition needs has already put a lot of pressure on traditional food production systems. Many staple foods and critical ingredients, such as citrus, bananas and coffee, are under threat from environmental changes and the new pathogens it can bring. The food and agriculture industry has also seen significant shifts in consumer preferences in which consumers are actively transitioning to high quality and healthier foods and beverages, while rejecting artificial ingredients, sugar and salt, creating a demand for natural and holistic ingredients built on a sustainable supply chain. Traditional approaches to agricultural innovation are slow, siloed, rely heavily on non-scalable academic advancements and continue to use inefficient crop improvement practices. We believe that many of the current pressures on the food and agriculture industry from climate-related threats and changing consumer preferences can be effectively addressed using biotechnology. 21 Elo Life Systems: Innovation-Focused Technology Platform and Business Model Elo Life Systems is our wholly owned subsidiary, dedicated to addressing the needs of consumers and consumer-facing industries in the food and agriculture sector. Our business model is heavily partner-focused. In the food and agriculture industry, timelines to market are long and the field is dominated by a relatively small number of entrenched companies. Therefore, it is a very difficult to bring a product to market without a larger partner. Thus, we seek partnerships early in the product development process to optimize our chances of market success. Under this partnership model, we are responsible for the early phases of the project, starting from concept through production of a “lead,” which is typically a gene edited plant that has the desired trait in greenhouse testing and is ready for scale-up and testing in the field. At that point, our partners typically assume responsibility for subsequent development and commercialization. In general, our partners are responsible for financing all or a portion of our development costs, which greatly reduces our capital requirements. We are then generally eligible to share in revenues derived from successfully commercialized products developed under these partnerships. Elo’s Technology Platform At the core of our food platform is our ARCUS editing technology. We are one of the first to apply genome editing technology to crop plants and we believe we have the most in-depth experience in crop genome editing in the industry. Over the last decade, we have developed highly efficient methods to improve delivery and functionality of ARCUS nucleases in plants to edit DNA. These nucleases have been successfully validated in collaborative projects with major food and agriculture companies like Dole, Cargill, BASF, Bayer CropScience and DuPont Pioneer Hi-bred. Importantly, ARCUS can be used to create small deletions or insertions in plants using a non-plant pest- or pathogen-based delivery approach. As such, we believe that many of the food and agriculture product candidates we may develop have the potential to obtain nonregulated status in the United States and other territories and thereby avoid GMO labels. This aspect of the technology platform is critical to food producers, particularly as they respond to consumer demands for healthier products. In addition to ARCUS, Elo’s in-house capabilities include: • Genomics. Many of the most attractive opportunities for Elo involve emerging and under-studied crops, such as stevia and monk fruit. We have integrated genome sequencing and bioinformatic platforms in-house in order to identify the genome sequence of plants, enabling us to identify targets for editing with ARCUS nucleases. • Target discovery and validation. Our informatics platform is built on principles of machine learning that allow us to synthesize, sequence and phenotype information from both public and internal datasets to correlate genome sequence with plant characteristics. This allows us to identify genetic targets for ARCUS editing that are predicted to yield a desired phenotype. These targets can then be validated in specific crops and at least partially validated in model systems such as tobacco and Arabidopsis using different molecular approaches such as editing or RNAi. • Multi-crop transformation. Most of the crops of interest to Elo and our partners do not have established transformation protocols and are not readily amenable to gene editing. To this end, we have developed a sophisticated collection of plant transformation vectors and protocols over the last decade that allow us to rapidly develop gene-edited variants of otherwise intractable species. This technology allows us to overcome what is otherwise a significant barrier to entry into a new crop species. • Plant growth infrastructure. Elo has a dedicated facility and capabilities of cultivating gene edited plants from incubator to greenhouse. Fusarium wilt resistant banana varieties (in collaboration with Dole Food Company) Fusarium wilt, caused by the Tropical Race 4 (TR4) strain of a plant pathogenic fungus called Fusarium, is a fast-spreading pandemic threatening the continued cultivation of the world’s most popular fruit in a $25 billion banana industry. The disease was detected in Colombia in August 2019 and is expected to spread throughout Latin America. Through our collaboration agreement with Dole, Elo intends to use its proprietary suite of tools, including cutting-edge knowledge mining platform, gene discovery pipeline, trait validation workflows, and end-to-end expertise in translational agriculture, in 22 combination with its proprietary homing endonuclease-based genome editing platform to develop potential TR4-resistant banana varieties in this important clonally propagated crop. Plant-Based Proteins In 2018, we launched Elo Life Systems Australia, a subsidiary of Elo that will support research programs in Australia. Elo Life Systems Australia’s primary focus is developing climate-resilient legumes with improved protein and nutritional profiles, starting with chickpea. Multiple edited events in chickpeas have been generated and are being screened in the laboratory. Through this program, we aim for the resulting products to make a significant contribution towards the increasing demand for sustainable plant-based proteins as a healthful alternative to animal protein. License and Collaboration Agreements Eli Lilly and Company In November 2020, we entered into a research collaboration and exclusive license agreement (the “Development and License Agreement”) with Lilly to utilize ARCUS for the research and development of potential in vivo therapies for genetic disorders. Lilly has initially nominated DMD and two gene targets for other genetic disorders, and has the right to nominate up to three additional gene targets for genetic disorders over the first four years of the Development and License Agreement (the “Nomination Period”). Lilly may extend the Nomination Period for an additional two years from the date on which such initial Nomination Period ends, upon Lilly’s election and payment of an extension fee. Under the terms of the Development and License Agreement, Lilly will receive an exclusive license to research, develop, manufacture and commercialize the resulting licensed products to diagnose, prevent and treat any and all diseases by in vivo gene editing directed against the applicable gene target. The Development and License Agreement provides that we will be responsible for conducting certain pre-clinical research and IND-enabling activities with respect to the gene targets nominated by Lilly to be subject to the collaboration, including manufacture of initial clinical trial material for the first licensed product. Lilly will be responsible for, and must use commercially reasonable efforts with respect to, conducting clinical development and commercialization activities for licensed products resulting from the collaboration, and may engage us for additional clinical and/or initial commercial manufacture of licensed products. In January 2021, we and Lilly closed the Development and License Agreement following clearance under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) . In connection with the closing, we received an upfront cash payment of $100.0 million as well as $35.0 million from Lilly’s purchase of 3,762,190 newly issued shares of our common stock pursuant to a stock purchase agreement as described below (the “Stock Purchase Agreement”). These cash receipts are not included in the cash and cash equivalents portion of the audited consolidated balance sheet included elsewhere in this Annual Report on Form 10-K. We will also be eligible to receive milestone payments of up to an aggregate of $420 million per licensed product as well as nomination fees for additional targets and certain research funding. If licensed products resulting from the collaboration are approved and sold, we will also be entitled to receive tiered royalties ranging from the mid-single digit percentages to the low-teens percentages on world-wide net sales of the licensed products, subject to customary potential reductions. Lilly’s obligation to pay royalties to us expires on a country-by-country and licensed product-by-licensed product basis, upon the latest to occur of certain events related to expiration of patents, regulatory exclusivity or a period of ten years following first commercial sale of the licensed product. We have the right to elect to co-fund the clinical development of one licensed product, which may be selected from among the third or any subsequent licensed products to reach IND filing. If we elect to co-fund such licensed product, we would reimburse Lilly for a portion of the clinical development expenses for such product and, in exchange, each royalty tier with respect to net sales of such licensed product would be increased by a low single digit percentage. During the term of the Development and License Agreement, we may not (and may not license or collaborate with any third party to) research, develop, or commercialize any in vivo gene editing product directed against any gene targets that have been nominated and are subject to the Development and License Agreement. Unless earlier terminated, the Development and License Agreement will remain in effect on a licensed product-by-licensed product and country-by-country basis until the expiration of a defined royalty term for each licensed product and country. Lilly has the right to terminate the Development and License Agreement for convenience by providing advance notice to us. Either party may terminate the Development and License Agreement (i) for material breach by the other party and a failure to cure such breach within the time period specified in the agreement or (ii) due to a challenge to its patents brought by the other party. Servier In February 2016, as further described above, we entered into the Servier Agreement. Pursuant to this Servier Agreement, we have agreed to develop allogeneic chimeric antigen receptor T cell therapies for five unique antigen targets. Servier selected one target at the Servier Agreement’s inception and, during 2020, selected two additional hematological cancer targets beyond CD19 and two new solid tumor targets. With the addition of these new targets, we received development milestone payments in 2020 and may be eligible 23 to receive additional development milestone payments in 2021. Upon selection of an antigen target, we perform early-stage research and development on individual T cell modifications for the selected target, develop the resulting therapeutic product candidates through Phase 1 clinical trials and manufacture clinical trial material for use in Phase 2 clinical trials. We received an upfront payment of $105.0 million under the Servier Agreement in 2016. At Phase 2 readiness for any product candidate covered by the Servier Agreement, Servier may exercise a commercial option to proceed with development and commercialization of the product candidate. Following the exercise of any such commercial option, Servier must use commercially reasonable efforts to develop and commercialize the product candidate. We have the ability to receive total payments, including the upfront payment, option fees and milestone payments, in the aggregate across all five targets of up to approximately $1.4 billion. This includes up to $1.3 billion in milestone payments, consisting of up to $329.3 million in development milestone payments and up to $925.0 million in commercial milestone payments. We are also entitled to receive tiered royalties ranging from the mid-single digit percentages to sub-teen percentages on worldwide net sales of any products developed under the Servier Agreement, subject to customary potential reductions. Servier’s obligation to pay royalties to us expires on a country-by-country and licensed product-by-licensed product basis upon the latest of (1) the expiration of the last to expire valid claim of all Precision patents covering a licensed product, (2) expiration of all regulatory exclusivity with respect to a licensed product in the applicable country of sale, and (3) the expiration of 10 years following the first commercial sale of such licensed product in such country. We also have the right to participate in the development and commercialization of any licensed products resulting from the collaboration through a 50/50 co-development and co-promotion option in the United States, subject to our payment of an option fee, which is exercisable after Servier’s commercial option exercise. So long as Servier holds a commercial license with respect to any particular licensed product, we may not develop, manufacture or commercialize any engineered human CAR T cells for use in humans directed to the same antigen target as the target of that licensed product. Unless terminated earlier, the Servier Agreement expires upon the first to occur of (1) the expiration of the period in which Servier may nominate antigen targets, if there are no included targets under the agreement, (2) the expiration of the period in which Servier may exercise a commercial option on a licensed product candidate, if no commercial options have been exercised by Servier, or (3) the expiration of the last to expire royalty term for the licensed products and satisfaction of all of Servier’s payment obligations under the agreement. Servier has the right to terminate the agreement for convenience, either in its entirety or on a target-by-target or product-by-product basis, by providing advance notice to us. We may terminate immediately upon notice to Servier if Servier (itself or through the use of certain affiliates or a third party) or any sublicensee initiates or participates in a patent challenge against our patents licensed by Servier under the agreement. In addition, the Servier Agreement may be terminated (a) by either party for the other party’s material breach that remains uncured as specified in the agreement, (b) by either party upon the occurrence of certain insolvency-related events of the other party and (c) upon mutual agreement of the parties in the event either party suffers an event of force majeure as specified in the agreement. If Servier terminates the agreement for our uncured material breach of provisions in the agreement that restrict development, manufacture or commercialization of engineered human T cells with chimeric antigen receptors for use in humans directed to a target selected by Servier, certain licenses we grant to Servier will become royalty-free, fully paid-up, perpetual and irrevocable with respect to the licensed product candidates and licensed products directed to the target that was the subject of such breach, and Servier will be deemed to have previously exercised its commercial option for any then-existing licensed product candidates directed to such target. 24 Gilead On July 6, 2020, Gilead Sciences (“Gilead”) notified us of its termination of the collaboration and license agreement dated September 10, 2018, subsequently amended by Amendment No. 1 dated March 10, 2020 or (the “Gilead Agreement”), to develop genome editing tools using ARCUS to target viral DNA associated with the hepatitis B virus. Pursuant to the termination notice, the Gilead Agreement terminated on September 4, 2020. Upon termination, we regained full rights and all data we generated for the in vivo chronic hepatitis B program developed under the Gilead Agreement. Duke University In April 2006, we entered into the Duke License, pursuant to which Duke University (“Duke”) granted us an exclusive (subject to certain non-commercial rights reserved by Duke), sublicensable, worldwide license under certain patents related to certain meganucleases and methods of making such meganucleases owned by Duke to develop, manufacture, use and commercialize products and processes that are covered by such patents, in all fields and in all applications. The patents that we license pursuant to the Duke License have been generated through the use of U.S. government funding and are therefore subject to certain federal regulations. See Part I, Item 1A. “Risk Factors— Risks Related to Intellectual Property—Some of our in‑licensed intellectual property has been discovered through government funded programs and thus may be subject to federal regulations such as “march-in” rights, certain reporting requirements and a preference for U.S.-based companies, and compliance with such regulations may limit our exclusive rights and limit our ability to contract with non-U.S. manufacturers.” Under the Duke License, in addition to upfront licensing fees, we are also required to pay Duke (1) a total of $0.3 million in milestone payments, a portion of which we paid upon the completion of our Series A financing, a further portion of which we paid upon our first signed partnership in excess of $1 million, and the remainder of which we will be required to pay upon successful commercialization of seed traits and human therapeutics, (2) royalties in the low single digit percentages on net sales of licensed products and licensed processes sold by us and our affiliates, subject to certain reductions in certain circumstances, with certain annual minimum royalties, and (3) certain percentages of sublicensing revenue received under sublicenses granted to third parties, which are creditable against annual minimum royalties and are subject to certain reductions in certain circumstances. For sublicenses of non-commercial products, the percentage of sublicensing revenue payable to Duke is in the mid-teen percentages for sublicense revenues owed from royalties received and low double-digits for sublicense revenues owed from non-royalty payments. For sublicenses of commercial products created by us and derivatives thereof, the percentage is determined by the highest negotiated royalty rate in such sublicense. If the highest negotiated royalty rate between us and our sublicensee exceeds a mid-single digit percentage, the percentage of sublicensing revenue payable to Duke will be high single digit, decreasing to low single digit as the highest negotiated royalty rate in such sublicense increases. We closed the transactions under the Lilly Agreement on January 6, 2021 following receipt of clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and, as a result we are required to make $3.0 million in payments under the Duke License in 2021, net of any outstanding credits. See Note 14 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding the Lilly Agreement. The Duke License will expire upon the expiration of the last-to-expire patent that is licensed to us. We may terminate the Duke License by providing advance written notice as specified in the Duke License. Either party may terminate the Duke License in the event of the other party’s uncured material breach or for the other party’s fraud, willful misconduct or illegal conduct with respect to the subject matter of the Duke License. Cellectis S.A. In January 2014, we entered into a cross-license agreement with Cellectis S.A., which we refer to as the Cellectis License, in connection with a settlement of litigation matters (1) between Cellectis and us and (2) among Cellectis, Duke and us. Cellectis granted us a non-exclusive, sublicensable, worldwide, fully paid, royalty-free license to certain modified I‑CreI homing endonuclease patents and Cellectis patents asserted in the litigation, to make, use and commercialize modified I-CreI homing nucleases and products developed using such nucleases, in all fields. The license we received from Cellectis is subject to the rights of a preexisting license agreement that Cellectis entered into with a third party, and the license granted to us excludes any rights exclusively granted by Cellectis under such preexisting license, which preexisting license is limited to certain specific applications unrelated to the fields of human therapeutics and plant agriculture, for so long as the rights under the preexisting license remain exclusive. We granted Cellectis a non-exclusive, sublicensable, worldwide, fully paid-up, royalty-free license to certain modified I CreI homing endonuclease patents and our patents asserted in the litigation matters (1) between Cellectis and us and (2) among Cellectis, Duke and us to make, use and commercialize modified I-CreI homing nucleases and products developing using such nucleases, in all fields except those for which we did not receive rights from Cellectis due to the preexisting license. 25 The Cellectis License will expire upon the expiration of the last-to-expire valid claim of all of the patents licensed to or from each of the parties to the agreement. Either party may terminate any of the licenses granted under the agreement (1) in the event of the other party’s material breach, subject to an opportunity to cure within the time period specified in the Cellectis License, or (2) if the other party directly or indirectly challenges a patent licensed to it by the other party. Competition As a diversified life sciences company, we compete in multiple different fields. The biotechnology, pharmaceutical and agricultural biotechnology industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on intellectual property and proprietary products. We principally compete with others developing and utilizing genome editing technology in the human health and plant sciences sectors, including companies such as Allogene Therapeutics, Inc., Alnylam Pharmaceuticals, Inc., Caribou Biosciences, Inc., Cellectis S.A., CRISPR Therapeutics, AG, Dicerna Pharmaceuticals, Inc., Editas Medicine, Inc., Intellia Therapeutics, Inc., Sangamo Therapeutics, Inc., and Beam Therapeutics, Inc. We compete with many biotechnology and pharmaceutical companies, academic research institutions, governmental agencies and public and private research institutions. We expect that our operations focused on CAR T cell product candidate development and commercialization will face substantial competition from those focusing on immunotherapy solutions. Several companies, including Novartis Pharmaceuticals Corp. and Gilead have obtained FDA approval for autologous cell therapies, and a number of companies, including Cellectis S.A., Celgene Corp., Allogene Therapeutics and CRISPR Therapeutics AG, are pursuing allogeneic cell therapies. We expect that our operations focused on developing products for in vivo treatment of genetic disease will face substantial competition from others focusing on gene therapy treatments, especially those that may focus on conditions that our product candidates target. Moreover, any human therapeutics products that we may develop will compete with existing standards of care for the diseases and conditions that our product candidates target and other types of treatments, such as small molecule, antibody or protein therapies. Many of our current or potential competitors in the therapeutics space, either alone or with their collaboration partners, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials and marketing approved products than we do. In addition to competing on the bases of safety, efficacy, timing of development and commercialization, convenience, cost, availability of reimbursement and rate of adoption of potential product candidates, we may also compete with these competitors in recruiting and retaining qualified personnel, establishing clinical sites, establishing relationships with collaborators or other third parties, registering patients for clinical trials and acquiring technologies complementary to, or necessary for, our product development platforms. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. Many of our current or potential competitors in the agricultural biotechnology space, either alone or with others, have significantly greater financial resources and expertise in research and development, manufacturing, testing and marketing approved products than we do. Mergers and acquisitions in the plant science, specialty food ingredient and agricultural biotechnology, seed and chemical industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through strategic relationships with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel, as well as in acquiring technologies complementary to, or necessary for, our food platform. Furthermore, we rely upon a combination of patents and trade secret protection, as well as license and confidentiality agreements to protect the intellectual property related to our proprietary technologies, product candidate development programs and product candidates. Our success depends in large part on our ability to secure and maintain patent protection in the United States and other countries with respect to the ARCUS nucleases used in our existing allogeneic CAR T immunotherapy, in vivo gene correction and food programs, as well as any future product candidates. Moreover, the industries in which we operate are characterized by the existence of large numbers of patents and frequent allegations of patent infringement. If, therefore, we are unable to obtain and maintain patent protection for our technology and product candidates, or if the scope of the patent protection obtained or in-licensed is not sufficiently broad or if the validity of such patent protection is threatened, we may not be able to compete effectively, as it could create opportunities for competitors to enter the market or dissuade other companies from collaborating with us to develop products and technology, any of which would hurt our competitive position and could impair our ability to successfully commercialize our product candidates in any indication for which they are approved. 26 Intellectual property , Our success depends in part on our abilities to (1) obtain and maintain proprietary protection for ARCUS, (2) defend and enforce our intellectual property rights, in particular, our patent rights, (3) preserve the confidentiality of our know-how and trade secrets, and (4) operate without infringing valid and enforceable intellectual property rights of others. We seek to protect our proprietary position by, among other things, exclusively licensing U.S. and certain foreign patent applications, and filing U.S. and certain foreign patent applications related to ARCUS, existing and planned programs, and improvements that are important to the development of our business. We also rely on trademarks, trade secrets, know-how, continuing technological innovation and confidential information, and the pursuit of licensing opportunities, to develop and maintain our proprietary position and protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and others who may have access to proprietary information, under which they are bound to assign to us inventions made during the term of their employment or term of service. 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. We cannot be sure that patents will be granted with respect to any patent applications we have licensed or filed or may license or file in the future, and we cannot be sure that any patents we have licensed or which have been granted to us, or patents that may be licensed or granted to us in the future, will not be challenged, invalidated or circumvented or that such patents will be commercially useful in protecting our technology. Moreover, trade secrets can be difficult to protect. While we have confidence in the measures we take to protect and preserve our trade secrets, such measures can be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. For more information regarding the risks related to our intellectual property, see Part I, Item 1A. “Risk Factors—Risks Related to Intellectual Property.” Our patent portfolio consists of a combination of issued patents and pending patent applications that are owned by us or licensed by us from third parties. As of December 31, 2020, we have an exclusive license from Duke under 12 issued U.S. patents and one pending U.S. patent application. In addition, as of December 31, 2020, we own 26 issued U.S. patents, 27 pending non-provisional U.S. patent applications, and 13 pending Patent Cooperation Treaty (“PCT”) international patent applications. We also exclusively license from Duke or own many corresponding patents and patent applications outside the United States, as described below. We intend to pursue, when possible, additional patent protection, including composition of matter, method of use and process claims, related to ARCUS. We also intend to obtain rights to existing delivery technologies through one or more licenses from third parties. ARCUS Platform Patent Families We license one patent family from Duke and own three patent families that are directed to the core technologies employed in our ARCUS platform for nuclease design. Thus, each of our product candidates is protected by one or more patents in these families. The first family, licensed from Duke, includes 12 issued U.S. patents, nine issued European patents, three issued Japanese patents, and one issued patent in each of Australia and Canada. This family also includes pending patent applications in each of the United States, Europe, Canada, and two pending patent applications in Japan. Patents in this family include claims directed to (1) recombinant meganucleases having altered cleavage specificity, altered heterodimer formation, and/or altered DNA binding affinity, (2) methods for cleaving target recognition sites in DNA using such meganucleases, and (3) methods for producing genetically modified eukaryotic cells using such meganucleases. Patents in this family have a standard expiration date of October 18, 2026, subject to potential extensions. The second family, which we own, includes four issued U.S. patents, three issued patents in Europe, two issued patents in Japan, and one issued patent in Australia. This family also includes two pending patent applications in the United States, and pending patent applications in each of Europe, Japan and Australia. Patents in this family include claims directed to (1) recombinant single-chain meganucleases, and (2) methods for producing isolated genetically modified eukaryotic cells using such meganucleases. Patents in this family have a standard expiration date of October 31, 2028, subject to potential extensions. The third family, which we own, includes three issued patents in the United States, and two issued patents in each of Europe and Australia. This family also includes two pending patent applications in the United States and one pending patent application in Europe. Patents in this family include claims directed to methods of cleaving DNA at specific four base pair sites using a recombinant meganuclease. Patents in this family have a standard expiration date of July 14, 2029, subject to potential extensions. The fourth family, which we own, includes a pending PCT international patent application. Patent applications in this family include claims directed to recombinant meganucleases engineered to cleave recognition sequences having specific four base pair sites. Patents in this family, if issued, will have a standard expiration date of May 7, 2040, subject to potential extensions. 27 Immunotherapy Patent Families We own 19 patent families that are directed to immunotherapy, including CAR T cell therapies. Some of these are applicable to immunotherapies and/or CAR T cells directed to killing a variety of different types of infected or cancerous cells. Others are directed to specific indications in which cells expressing particular antigens are targeted, or methods of manufacturing immunotherapies. Each of our immunotherapy product candidates is protected by one or more patents in these families. The first family includes nine issued U.S. patents, one issued patent in each of Europe and Japan, and pending patent applications in each of the United States, Europe, Australia, Canada, China, Hong Kong, Israel, Japan, Mexico and South Korea. Patents in this family include claims directed to (1) populations of genetically modified human T cells in which 20%-65% of the cells have reduced expression of an endogenous TCR and express an anti-cancer antigen CAR from DNA inserted into the cells’ TCR alpha constant region (TRAC) gene, (2) methods for using such populations of genetically modified human T cells for cancer immunotherapy, (3) pharmaceutical compositions comprising such populations of genetically modified human T cells, (4) genetically modified human T cells which have reduced expression of an endogenous TCR and express an anti-cancer antigen CAR from DNA inserted into the cells’ TRAC gene, (5) methods for using such genetically modified human T cells for cancer immunotherapy, and (6) pharmaceutical compositions comprising such genetically modified human T cells. Patents in this family have a standard expiration date of October 5, 2036, subject to potential extensions. The second family includes one issued patent in each of the United States and Europe, pending patent applications in each of the United States, Europe, Hong Kong, Canada and Japan, and two pending patent applications in Australia. Patent applications in this family include claims directed to (1) first-generation recombinant meganucleases that cleave a target in the TRAC gene, (2) nucleic acids and vectors encoding such recombinant meganucleases, (3) methods for producing genetically modified eukaryotic cells, including CAR T cells, using such meganucleases, and (4) methods of using such genetically modified eukaryotic cells for cancer immunotherapy. Patents in this family will have a standard expiration date of October 5, 2036, subject to potential extensions. The third family includes a pending PCT international patent application, and pending patent applications in each of the United States, Europe, Australia, Canada, China, Israel, Japan, Mexico, and South Korea. Patent applications in this family include claims directed to (1) second-generation engineered meganucleases that cleave a specific target in the TRAC gene, (2) nucleic acids and vectors encoding such recombinant meganucleases, (3) methods for producing genetically modified eukaryotic cells, including CAR T cells, using such meganucleases, (4) genetically modified eukaryotic cells or populations of cells prepared by such methods, (5) pharmaceutical compositions comprising such cells or populations of cells, and (6) methods of treating diseases using such cells, populations of cells or pharmaceutical compositions to treat diseases, including cancer immunotherapy. Patents in this family, if issued, will likely have a standard expiration date of April 11, 2039, subject to potential extensions. The fourth family includes one issued patent in each of the United States and Europe, pending patent applications in Europe, Canada and Japan, and two pending patent applications in the United States and Australia. Patent applications in this family include claims directed to (1) nucleic acids encoding co-stimulatory domains having certain amino acid sequences, (2) recombinant DNA constructs and vectors comprising such nucleic acids, (3) nucleic acids and vectors encoding such recombinant meganucleases, (4) genetically modified cells comprising such nucleic acids, (5) methods for producing such genetically modified cells, (6) pharmaceutical compositions comprising such cells, and (7) methods of immunotherapy using such cells. Patents in this family have a standard expiration date of October 4, 2037, subject to potential extensions. The fifth family includes pending patent applications in the United States and Europe. Patent applications in this family include claims directed to (1) methods of reducing cytotoxicity associated with DNA transfection in primary eukaryotic cells, (2) methods for increasing the number of gene-edited primary eukaryotic cells following DNA transfection, (3) methods for increasing gene editing frequency in primary eukaryotic cells following DNA transfection, (4) methods for increasing the number of primary eukaryotic cells comprising targeted insertion of an exogenous sequence of interest into the genome following DNA transfection, (5) methods for increasing insertion frequency of an exogenous sequence of interest into the genome in primary eukaryotic cells following DNA transfection, (6) methods for high throughput screening of primary human T cells expressing a CAR or exogenous TCR, (7) methods for high throughput screening of primary human T cells expressing a CAR or exogenous TCR, and (8) genetically modified primary eukaryotic cells produced by such methods. Patents in this family, if issued, will have a standard expiration date of April 30, 2038, subject to potential extensions. The sixth family includes pending patent applications in Europe, Australia, Canada and Japan, and two pending patent applications in the United States. Patent applications in this family include claims directed to (1) recombinant meganucleases that recognize and cleave a recognition sequence within the human beta-2-microglobulin gene, (2) nucleic acids and vectors encoding such recombinant meganucleases, (3) methods for producing genetically modified eukaryotic cells, including CAR T cells, using such meganucleases, (4) populations of genetically modified eukaryotic cells in which 80% of the cells have reduced expression of an endogenous TCR and 80% of the cells have reduced expression of beta-2-microglobulin, (5) pharmaceutical compositions comprising such populations of 28 genetically modified eukaryotic cells, and (6) methods for using such genetically modified eukaryotic cells for cancer immunotherapy. Patents in this family, if issued, will have a standard expiration date of December 22, 2036, subject to potential extensions. The seventh family includes an issued patent in the United States, and pending patent applications in the United States, Europe, Australia, Canada, Hong Kong, and Japan. Patent applications in this family include claims directed to (1) nucleic acids encoding an engineered antigen receptor (e.g., a CAR) and an inhibitory molecule (e.g., an RNA interfering with beta-2-microglobulin expression), (2) genetically modified eukaryotic cells comprising such nucleic acids, (3) methods for producing such genetically modified eukaryotic cells using such nucleic acids and an engineered nuclease that promotes insertion of such nucleic acids, (4) genetically modified eukaryotic cells expressing an engineered antigen receptor and having expression of beta-2-microglobulin or MHC Class I molecules reduced by 10%-95%, (5) pharmaceutical compositions comprising such genetically modified eukaryotic cells, and (6) methods for using such genetically modified eukaryotic cells for immunotherapy. Patents in this family have a standard expiration date of May 8, 2038, subject to potential extensions. The eighth family includes pending patent applications in the United States, Europe, Australia, Canada, Hong Kong, and Japan. Patent applications in this family include claims directed to (1) engineered meganucleases that recognize and cleave a recognition sequence in an upstream intron of the human TRAC gene, (2) nucleic acids and vectors encoding such engineered meganucleases, (3) methods for producing genetically modified T cells using such nucleic acids or vectors, (4) genetically modified T cells in which an exogenous sequence is inserted into an upstream intron of the human TRAC gene and endogenous TCR expression is reduced, (5) populations of such genetically modified T cells, (6) pharmaceutical compositions comprising such genetically modified T cells, and (7) methods of treating disease using such genetically modified T cells and pharmaceutical compositions, including cancer immunotherapy. Patents in this family, if issued, will have a standard expiration date of June 27, 2038, subject to potential extensions. The ninth family includes pending patent applications in the United States and Europe. Patent applications in this family include claims directed to (1) nucleic acids and vectors encoding certain modified human epidermal growth factor receptor, or EGFRs, (2) genetically modified cells and populations of cells, including T cells and CAR T cells, expressing such modified EGFRs, (3) methods for producing such genetically modified cells using such nucleic acids or vectors encoding such modified EGFRs, (4) pharmaceutical compositions comprising such genetically modified cells, (5) methods for isolating such genetically modified cells, (6) methods of treating disease using such genetically modified cells and pharmaceutical compositions, including cancer immunotherapy, and (7) methods of depleting such genetically modified cells in a subject using anti-modified EGFR antibodies. Patents in this family, if issued, will likely have a standard expiration date of October 3, 2038, subject to potential extensions. The tenth family includes a pending provisional patent application in the United States and a pending PCT international patent application. Patent applications in this family include claims directed to (1) methods for preparing genetically-modified immune cells, (2) populations of genetically-modified immune cells, (3) pharmaceutical compositions comprising such populations of genetically-modified immune cells, (4) methods of treating a disease using such populations of genetically-modified immune cells, (5) lipid nanoparticle compositions, and (6) kits for transfecting a eukaryotic cell with mRNA. Patents in this family, if issued, will have a standard expiration date of April 3, 2040, subject to potential extensions. The eleventh family includes a pending provisional patent application in the United States, a pending PCT international patent application, and a pending non-provisional patent application in the United States. Patent applications in this family include claims directed to (1) a genetically-modified immune cell comprising in its genome a nucleic acid sequence encoding a microRNA-adapted shRNA, (2) a method for reducing the expression of an endogenous protein in an immune cell, (3) immune cells made by such methods, (4) populations of such immune cells, (5) pharmaceutical compositions comprising such populations of immune cells, and (6) methods of immunotherapy for treating a disease in a subject. Patents in this family, if issued, will have a standard expiration date of April 3, 2040, subject to potential extensions. We own eight additional patent families that include pending provisional patent applications in the United States or pending PCT international patent applications that are directed to immunotherapies, including CAR T cell therapies, or to technologies that are useful for the manufacture of immunotherapies. We jointly own one patent family that includes a pending PCT international patent application directed to immunotherapies. We will determine in the future whether to pursue each of these applications. 29 In October 2020, we announced the U.S. Patent and Trademark Office’s PTAB issued judgements in our favor in two patent interference proceedings that challenged nine U.S. patents we owned. The patents, which issued in 2018, relate to allogeneic CAR T cells produced by inserting a gene encoding a CAR into the TRAC locus, as well as methods of using those cells for cancer immunotherapy. In the interference proceedings, a third party argued that it had invented the technology in 2012. The PTAB, however, found that the third-party patent application did not satisfy the written description requirement and rejected these claims while maintaining the claims in all nine of our patents. Other Patent Families We own three patent families directed to gene therapy for Hepatitis B virus. The first family includes two issued patents in the United States, one issued patent in Japan, and pending patent applications in the United States, Europe, Japan, Canada, Australia, China, South Korea, Mexico, Israel, Colombia, Costa Rica, the Dominican Republic, Egypt, Eurasia, Guatemala, Hong Kong, Morocco, Malaysia, New Zealand, Nigeria, Panama, Peru, the Philippines, Saudi Arabia, South Africa, Thailand and Vietnam. Patents in this family will have a standard expiration date of October 13, 2037, subject to potential extensions. The second family includes a pending PCT international patent application and patent applications in the United States, Europe, Taiwan and the Gulf Cooperation Council. Patents in this family, if issued, will have a standard expiration date of April 11, 2039, or April 12, 2039, subject to potential extensions. The third family includes a pending PCT international patent application. Patents in this family, if issued, will have a standard expiration date of December 4, 2040, subject to potential extensions. We own one patent family directed to engineered meganucleases and methods of treatment targeting the PCSK9 gene, which is associated with familial hypercholesterolemia. This family includes pending patent applications in the United States, Europe, Australia, Canada, China, Hong Kong, Israel, Japan, Mexico, and South Korea. Patents in this family, if issued, will have a standard expiration date of April 20, 2038, subject to potential extensions. We own two patent families directed to engineered meganucleases and methods of treatment targeting the rhodopsin gene, which is associated with retinitis pigmentosa. The first family includes two issued patents in the United States, one issued patent in Japan, pending patent applications in the United States, Europe, Canada and Japan, and two pending patent applications in Australia. Patents in this family will have a standard expiration date of September 8, 2036, subject to potential extensions. The second family includes two pending provisional patent application in the United States. Patents in this family, if issued, will likely have a standard expiration date of May 12, 2041, subject to potential extensions. We own one patent family that is directed to engineered meganucleases and methods of treatment targeting the hydroxyacid oxidase 1 gene, which is associated with primary hyperoxaluria 1. This family includes a pending PCT international patent application. Patents in this family, if issued, will have a standard expiration date of December 20, 2039, subject to potential extensions. We own two patent families that are directed to engineered meganucleases and methods of treatment targeting the Factor VIII gene, which is associated with Hemophilia A. The first family includes pending patent applications in the United States, Europe, Australia, Canada, and Japan. Patents in this family, if issued, will have a standard expiration date of May 3, 2037, subject to potential extensions. The second family includes pending patent applications in the United States and Europe. Patents in this family, if issued, will have a standard expiration date of November 1, 2038, subject to potential extensions. We own one patent family directed to engineered meganucleases and methods of treatment targeting the ApoC3 gene, which is associated with diseases resulting from abnormal triglyceride synthesis. This family includes a pending provisional patent application in the United States. Patents in this family, if issued, will likely have a standard expiration date of August 11, 2041, subject to potential extensions. We own one patent family directed to engineered meganucleases and methods of treatment targeting the transthyretin (TTR) gene, which is associated with TTR amyloidosis. This family includes a pending provisional patent applications in the United States. Patents in this family, if issued, will likely have a standard expiration date of August 21, 2041, subject to potential extensions. We own two patent families directed to engineered meganucleases and methods of treatment targeting the dystrophin gene, which is associated with Duchenne Muscular Dystrophy. The first family includes an issued patent in Europe, pending patent applications in Europe, Australia, Canada and Japan, and two pending patent applications in the United States. Patents in this family will have a standard expiration date of March 12, 2035, subject to potential extensions. The second family includes a pending provisional patent application in the United States. Patent applications in this family, if issued, will likely have a standard expiration date of November 12, 2041. We own one patent family directed to engineered meganucleases and methods of treatment targeting genomic trinucleotide repeats, which are associated with several trinucleotide repeat disorders. This family includes pending patent applications in the United States and Europe. Patents in this family, if issued, will have a standard expiration date of May 2, 2036, subject to potential extensions. 30 We license from Duke one patent family directed to engineered fusion proteins comprising engineered meganuclease domains and effector domains which may be useful in controlling gene expression. This patent family includes two pending patent applicatio ns in the United States. Patents in this family, if issued, will have a standard expiration date of October 18, 2026, subject to potential extensions. We own one patent family directed to engineered meganucleases that target amplifiable genetic loci and may be useful in producing cells with amplified transgenes. This family includes two issued patents in Europe, one issued patent in the United States, and one pending patent application in each of the United States and Europe. Patents in this family will have a standard expiration date of June 1, 2032, subject to potential extensions. We own two patent families directed to self-limiting viral vectors (e.g., AAV vectors) that encode engineered meganucleases which eliminate the vector after gene delivery. The first family includes an issued patent in the United States, and pending patent applications in the United States and Europe. Patents in this family will have a standard expiration date of June 20, 2036, subject to potential extensions. The second family includes one pending provisional patent application in the United States. Patents in this family, if issued, will likely have a standard expiration date of May 11, 2041, subject to potential extensions. We own one patent family directed to compositions and methods for sequential stacking of nucleic acid sequences into a genomic locus. This family includes a pending PCT international patent application. Patents in this family, if issued, will have a standard expiration date of July 24, 2040, subject to potential extensions. We own one patent family directed to eukaryotic cells comprising a modified transferrin gene that includes an exogenous nucleic acid sequence encoding a polypeptide of interest. This family includes a pending PCT international patent application. Patents in this family, if issued, will have a standard expiration date of January 10, 2040. We own one patent family directed to methods for separation of empty and full AAV capsids during manufacturing. This family includes a pending provisional application in the United States. Patents in this family, if issued, will likely have a standard expiration date of February 6, 2041. We own an issued patent in the United States directed to engineered meganucleases which target a genetic locus in maize and methods for genetically modifying that locus in maize. That patent has a standard expiration date of March 2, 2029, subject to potential extensions. We own, through our Elo Life Systems subsidiary, one patent family directed to the modulation of endogenous mogroside pathway genes in watermelon and other cucurbits. This family includes a pending provisional patent application in the United States. Patents in this family, if issued, will likely have a standard expiration date of March 31, 2041, subject to potential extensions. We own, through our Elo Life Systems subsidiary, one patent family directed to methods for producing vanilla plants with improved flavor and agronomic product. This family includes a pending provisional patent application in the United States. Patents in this family, if issued, will likely have a standard expiration date of October 23, 2041, subject to potential extensions. For any individual patent, the term depends on the applicable law in the country in which the patent is granted. In most countries where we have filed patent applications or in-licensed patents and patent applications, patents have a term of 20 years from the application filing date or earliest claimed non-provisional priority date. In the United States, the patent term is 20 years but may be shortened if a patent is terminally disclaimed over another patent that expires earlier. The term of a U.S. patent may also be lengthened by a patent term adjustment to address administrative delays by the USPTO in granting a patent. In the United States, the term of a patent that covers an FDA-approved drug or biologic may be eligible for patent term extension in order to restore the period of a patent term lost during the premarket FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the natural expiration of the patent. The patent term restoration period is generally equal to the portion of the FDA regulatory review period for the approved product that occurs after the date the patent issued, subject to certain exceptions. Only one patent may be extended for a regulatory review period for any product, and the application for the extension must be submitted prior to the expiration of the patent. In the future, we may decide to apply for restoration of patent term for one of our currently owned or licensed patents to extend its current expiration date, depending on the expected length of the clinical studies and other factors involved in the filing of the relevant BLA. We or our licensors may be subject to claims that former employees, collaborators or other third parties have an interest in our owned or in-licensed patents or other intellectual property as an inventor or co-inventor. If we are required to and unable to obtain an exclusive license to any such third-party co-owners’ interest in such patent applications, such co-owners may be able to license their rights to other third parties, including our competitors. In addition, we may need the cooperation of any such co-owners to enforce any patents that issue from such patent applications against third parties, and such cooperation may not be provided to us. We or our 31 licensors are subject to and may also become a party to similar proceedings or priority disputes in Europe or other foreign jurisdictions. Our registered trademark portfolio currently contains four registered trademarks in the United States, including ARCUS, ARC nuclease, Elo Life Systems and Zeromelon. We also own registered trademarks for both ARCUS and ARC nuclease in Europe, China and Australia, and a registered trademark for ARCUS in Canada. We own a registered trademark for Elo Life Systems in Australia, and pending trademark application for Zeromelon in each of Australia, Brazil, Canada, China, Europe, Germany, India, Japan, Mexico, South Korea, and the United Kingdom. Additionally, we own pending trademark applications for Zerocanola, Precision Biotechnology and Climate-Smart in the United States, Australia, Brazil, Canada, China, Europe, Japan, and Mexico. Licensed Intellectual Property Duke University In April 2006, we exclusively licensed from Duke families of patents and patent applications related to certain meganucleases and methods of making such nucleases owned by Duke. The patent family covered by the Duke License comprises the core patents covering ARCUS described above. See “—License and Collaboration Agreements—Duke University” above for additional information regarding the Duke License. Cellectis S.A . In January 2014, we entered into the Cellectis License, which relates to certain modified I-CreI homing endonuclease patents and patents that had been subject to litigation between us and Cellectis. The patents to which we have rights under the cross-license include at least eight issued patents in each of the United States and Australia, seven issued patents in Europe, two issued patents in Canada and one issued patent in Japan. These patents have standard expiration dates prior to January 29, 2034, subject to potential extensions. See “—License and Collaboration Agreements—Cellectis S.A.” above for additional information regarding the Cellectis License. Government Regulation The FDA and other regulatory authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of biological product candidates such as those we are developing. We, along with third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. U.S. Biologics Regulation The process required by the FDA before biologic product candidates may be marketed in the United States generally involves the following: • completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s Good Laboratory Practice requirements, or GLPs; • demonstration of successful, reproducible manufacture of clinical trial material produced in compliance with current Good Manufacturing Practices (cGMPs) and consistent with all release specifications for the product at initial manufacture and over time when stored under defined conditions; • submission to the FDA of an IND, which must become effective before clinical trials may begin, and which must be properly maintained throughout the course of clinical development; • approval by an Investigational Review Board (“IRB”) or ethics committee, and additional scientific and biosafety review committees at each clinical site before the trial is commenced; • performance of adequate and well-controlled human clinical trials following protocols agreed to by FDA to establish the safety, purity and potency of the proposed biologic product candidate for its intended purpose; • preparation of and submission to the FDA of a BLA after completion of all pivotal clinical trials; • a determination by the FDA within 60 days of its receipt of a BLA to file the application for review; 32 • satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed commercial product is produced to assess compliance with cGMP and to assure that the facilities, methods and controls are adequate to preserve the biological product’s continued safety, purity and potency, and of selected clinical investigation sites to assess compliance with GCPs; and • satisfactory completion of an FDA Advisory Committee review, if applicable; • FDA review and approval of the BLA to permit commercial marketing of the product for particular indications for use in the United States. Prior to beginning the first clinical trial with a product candidate in the United States, we must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. A central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical studies. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology, and pharmacodynamic characteristics of the product; chemistry, manufacturing, and controls information; and any available human data or literature to support the use of the investigational product according to the proposed clinical protocol including the proposed dose level(s). An IND must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial. In addition to the submission of an IND to the FDA before initiation of a clinical trial in the United States, certain human clinical trials involving recombinant or synthetic nucleic acid molecules are subject to oversight of institutional biosafety committees, or IBCs, as set forth in the NIH Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules, or NIH Guidelines. Specifically, under the NIH Guidelines, supervision of human gene transfer trials includes evaluation and assessment by an 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 environment, and such review may result in some delay before initiation of a clinical trial. While the NIH Guidelines are not mandatory unless the research in question is being conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acid molecule research, many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them. Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore, for each site proposing to conduct the clinical trial an independent IRB must review and approve the plan for any clinical trial and the informed consent form before the clinical trial begins at that site, and must monitor the study until completed. Regulatory authorities, the IRB, or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives. Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting of ongoing clinical studies and clinical study results to public registries. For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap or be combined: • Phase 1—The investigational product is initially introduced into healthy human subjects or patients with the target disease or condition. These studies are designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness. • Phase 2—The investigational product is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials. 33 • Phase 3—The investigational product is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval. • Phase 4—In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product. These so-called Phase 4 studies may be made a condition to approval of the BLA. Concurrent with clinical trials, companies may complete additional animal studies and develop additional information about the biological characteristics of the product candidate, and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product, or for biologics, the safety, purity and potency. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. BLA Submission and Review by the FDA Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications. The BLA must include all relevant data available from pertinent preclinical and clinical studies, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls, and proposed labeling, among other things. Data can come from company-sponsored clinical studies intended to test the safety and effectiveness of a use of the product, or from a number of alternative sources, including studies initiated by investigators. The submission of a BLA requires payment of a substantial user fee to FDA, and the sponsor of an approved BLA is also subject to an annual program fee. These fees are typically increased annually. A waiver of user fees may be obtained under certain limited circumstances. Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, unless the application also includes a non-orphan indication. Once a BLA has been submitted, the FDA’s goal is to review standard applications within ten months after it accepts the application for filing, or, if the application qualifies for priority review, six months after the FDA accepts the application for filing. Priority review designation will direct overall attention and resources to the evaluation of applications for products that, if approved, would be significant improvements in the safety or effectiveness of the treatment, diagnosis, or prevention of serious conditions. In both standard and priority reviews, the review process is often significantly extended by FDA requests for additional information or clarification. The FDA reviews a BLA to determine, among other things, whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed, or held meets standards designed to assure the product’s continued safety, purity and potency. The FDA may convene an advisory committee to provide clinical insight on application review questions. Before approving a BLA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP and adequate to assure consistent production of the product within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites involved in the pivotal studies submitted in the BLA to assure compliance with GCP. After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response Letter (“CRL”) if the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable. In the CRL, the FDA will outline the deficiencies in the BLA submission and often will request additional information or testing that the applicant might perform to place the BLA in condition for approval, including requests for additional information or clarification. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. Note that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the CRL without first conducting required inspections, testing submitted product lots, and/or reviewing proposed labeling. The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product. If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the BLA with the requirement that a Risk Evaluation and Mitigation Strategy (“REMS”) be established to ensure the benefits of the product outweigh its risks when used according to the approved label. A REMS is a safety strategy to manage a known or potential serious risk associated with a medicine and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries, required prescriber training, and other risk minimization tools. The FDA also may condition approval on, among other things, changes to 34 proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace. The FDA may require one or more Phase IV post-market studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies. In addition, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could impact the timeline for regulatory approval or otherwise impact ongoing development programs. Expedited Development and Review Programs A sponsor may seek approval of its product candidate under programs designed to accelerate FDA’s review and approval of new drugs and biological products that meet certain criteria. Specifically, new drugs and biological products are eligible for fast track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. For a fast track product, the FDA may consider sections of the BLA for review on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the application, the FDA agrees to accept sections of the application and determines that the schedule is acceptable and the sponsor pays any required user fees upon submission of the first section of the application. A fast track designated product candidate may also qualify for priority review, under which the FDA sets the target date for FDA action on the BLA at six months after the FDA accepts the application for filing. Priority review is granted pending availability of FDA review resources for the expedited review and when there is evidence that the proposed product would be a significant improvement in the safety or effectiveness of the treatment, diagnosis, or prevention of a serious disease or condition. If criteria are not met for priority review, the application is subject to the standard FDA review period of 10 months after FDA accepts the application for filing. Priority review designation does not change the scientific/medical standard for approval or the quality of evidence necessary to support approval. Under the accelerated approval program, the FDA may approve a BLA on the basis of either a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Post-marketing studies or completion of ongoing studies after marketing approval are generally required to verify the biologic’s clinical benefit in relationship to the surrogate endpoint or ultimate outcome in relationship to the clinical benefit. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. FDA may withdraw approval of a drug or indication approved under accelerated approval if, for example, the confirmatory trial fails to verify the predicted clinical benefit of the product. In addition, the Food and Drug Administration Safety and Innovation Act, or the FDASIA, which was enacted and signed into law in 2012, established the breakthrough therapy designation. A sponsor may seek FDA designation of its product candidate as a breakthrough therapy if the product candidate is intended, alone or in combination with one or more other drugs or biologics, 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. If the FDA designates a breakthrough therapy, it may take actions appropriate to expedite the development and review of the application, which may include holding meetings with the sponsor and the review team throughout the development of the therapy; providing timely advice to, and interactive communication with, the sponsor regarding the development of the drug to ensure that the development program will gather the nonclinical and clinical data necessary for approval as efficiently as practicable; involving senior managers and experienced review staff, as appropriate, in a collaborative, cross-disciplinary review; assigning a cross-disciplinary project lead for the FDA review team to facilitate an efficient review of the development program and to serve as a scientific liaison between the review team and the sponsor; and considering alternative clinical trial designs when scientifically appropriate, which may result in smaller trials or more efficient trials that require less time to complete and may minimize the number of patients exposed to a potentially less efficacious treatment. Breakthrough therapy designation comes with all of the benefits of fast track designation, which means that the sponsor may file sections of the BLA for review on a rolling basis if certain conditions are satisfied, including an agreement with the FDA on the proposed schedule for submission of portions of the application and the payment of applicable user fees before the FDA may initiate a review. 35 The Regenerative Medicine Advanced Therapy, or RMAT, designation facilitates an efficient development program for, and expedites review of, any drug that meets the following criteria: (1) it qualifies as a RMAT, which is defined as a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, with limited exceptions; (2) it is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition; and (3) preliminary clinical evidence indicates that the drug has the potential to address unmet medical needs for such a disease or condition. Like breakthrough therapy designation, RMAT designation provides potential benefits that include more frequent meetings with FDA to discuss the development plan for the product candidate, and eligibility for rolling review and priority review. Products granted RMAT designation may also be eligible for accelerated approval on the basis of a surrogate or intermediate endpoint reasonably likely to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of sites, including through expansion to additional sites. RMAT-designated products that receive accelerated approval may, as appropriate, fulfill their post-approval requirements through the submission of clinical evidence, clinical studies, patient registries, or other sources of real world evidence (such as electronic health records); through the collection of larger confirmatory data sets; or via post-approval monitoring of all patients treated with such therapy prior to approval of the therapy. Fast track designation, priority review, breakthrough therapy designation and RMAT designation do not change the standards for approval but may expedite the development or approval process. Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. Orphan Drug Designation and Exclusivity Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 individuals in the United States and when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United States will be recovered from sales in the United States for that drug or biologic. Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. If a product that has orphan drug designation subsequently receives the first FDA approval for a particular active ingredient within the product for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same active ingredient for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Orphan drug exclusivity does not prevent the FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the BLA application user fee. A designated orphan drug many not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drug exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or, as noted above, if the second applicant demonstrates that its product is clinically superior to the approved product with orphan exclusivity or the manufacturer of the approved product is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. We plan to seek orphan drug designation for some or all of our product candidates in specific orphan indications in which there is a medically plausible basis for the use of these products. Post-Approval Requirements Any products manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual program fees for any marketed products. Biologic manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance. 36 The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • fines, warning letters or holds on post-approval clinical studies; • refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals; • product seizure or detention, or refusal to permit the import or export of products; • consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs; • mandated modification of promotional materials and labeling and the issuance of corrective information; • the issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications containing warnings or other safety information about the product; or • injunctions or the imposition of civil or criminal penalties. The FDA closely regulates the marketing, labeling, advertising and promotion of biologics. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products. Biosimilars and Exclusivity The Affordable Care Act, signed into law in 2010, includes a subtitle called the BPCIA, which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. The FDA has issued several guidance documents outlining an approach to review and approval of biosimilars. Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical study or studies. Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. However, complexities associated with the larger, and often more complex, structures of biological products, as well as the processes by which such products are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still being worked out by the FDA. Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that applicant’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law. 37 A biological product can also obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study. The BPCIA is complex and continues to be interpreted and implemented by the FDA. In addition, government proposals have sought to reduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate impact, implementation, and impact of the BPCIA is subject to significant uncertainty. Genetically Engineered Food Products In the United States, the FDA and the USDA are primarily responsible for overseeing food regulation and safety, although many other federal agencies also play a role in food regulation. USDA has jurisdiction over certain genetically engineered crops through the Animal and Plant Health Inspection Services, or APHIS. Under the Plant Protection Act and APHIS’ Part 340 regulations, USDA requires anyone who wishes to import, transport interstate, or release into the environment a “regulated article” to apply for a permit or, in some cases, notify APHIS that the introduction will be made. Regulated articles are defined as “any organism which has been altered or produced through genetic engineering which USDA determines is a plant pest or has reason to believe is a plant pest.” Regulated articles may be subject to extensive regulation, including both permitting requirements and inspections. However, to the extent products are subject to APHIS regulation, APHIS may make a determination of nonregulated status for a product following the submission of a petition requesting such a determination. The petition process can be a multi-year process that varies based on a number of factors, including APHIS’s familiarity with similar products, the type and scope of the environmental review conducted, and the number and types of public comments received. APHIS conducts a comprehensive science-based review of the petition to assess, among other things, plant pest risk, environmental considerations pursuant to the National Environmental Policy Act of 1969, or NEPA, and any potential impact on endangered species. If, upon the completion of the review, APHIS grants the petition, the product is no longer deemed a “regulated article” and the petitioner may commercialize the product, subject to any conditions set forth in the decision. In January 2017, APHIS proposed significant amendments to its Part 340 regulatory framework that would, among other things, clarify the types of genetically engineered plants subject to regulation thereunder. In November 2017, however, APHIS withdrew its proposed rule and stated that it would “begin a fresh stakeholder engagement aimed at exploring alternative policy approaches.” That process appears to remain ongoing. On May 4, 2018, the USDA issued a proposed rule implementing the National Bioengineered Food Disclosure Standard, with a proposed compliance date of January 1, 2020. Under this proposed rule, the label of a bioengineered, or BE, food must include a disclosure that the food is a BE food or contains a BE ingredient, with certain exceptions. This proposed rule defines BE food as “a food that contains genetic material that was has been modified through in vitro recombinant deoxyribonucleic acid, or DNA, techniques and for which the modification could not otherwise be obtained through conventional breeding or found in nature,” except in the case of an incidental additive present in food at an insignificant level and that does not have any technical or functional effect in the food. The USDA’s proposed rule may change significantly prior to being finalized. The FDA’s oversight of food safety and security is primarily carried out by the Center for Food Safety and Applied Nutrition. To execute its responsibilities, the FDA conducts inspections and collects and analyzes product samples. Foods are typically not subject to premarket review and approval requirements, with limited exceptions, such as the requirement for premarket review and approval of food additives. Under Section 201(s) and 409 of the FDCA, any substance that is reasonably expected to become a component of food is considered a “food additive” that is subject to premarket approval by the FDA, unless it is already subject to a food additive regulation. Ingredients that are GRAS are exempt from the definition of food additive and from the premarket approval requirements. Under section 201(s), and FDA’s implementing regulations, the use of a food substance may be GRAS either through a determination by qualified experts or, for a substance used in food before 1958, through experience based on common use in food. Manufacturers of GRAS substances may voluntarily provide the FDA with a notification of GRAS determination, which includes, among other things, a description of the substance, the applicable conditions of use, the dietary exposure and an explanation of how the substance was determined to be safe for the intended use. Upon review of such a notification, the FDA may respond with a “no questions” letter stating that while it has not made its own GRAS determination, it has no questions at the time regarding the applicant’s own GRAS determination. Alternatively, manufacturers may self-affirm that a given substance is GRAS without the voluntary FDA notification. A company may market a new food ingredient based on its independent determination that the substance is GRAS; however, the FDA can disagree with this determination and take enforcement action. 38 The FDA regulates foods made with genetically modified organisms under the approach summarized in its 1992 “Statement of Policy: Foods Derived from New Plant Varieties.” Under this policy, updated in 2017, the FDA regulates foods derived from genetically modified plant varieties consistent with the framework for non-genetically modified foods. Under this framework, the FDA offers a voluntary consultation process to determine whether a food derived from a genetically modified plant variety raises any safety or other regulatory issues, such as whether any substance in the food from the plant may require premarket approval as a food additive. Foreign Regulation Medicinal products Clinical trials . Clinical trials of medicinal products in the European Economic Area (“EEA”) (which is comprised of the 27 Member States of the EU plus Norway, Iceland and Liechtenstein) must be conducted in accordance with European Union and national regulations and the International Conference on Harmonization (“ICH”) guidelines on GCPs. Additional GCP guidelines from the European Commission, focusing in particular on traceability, apply to clinical trials of advanced therapy medicinal products. If the sponsor of the clinical trial is not established within the EEA, it must appoint an entity within the EEA to act as its legal representative. The sponsor must take out a clinical trial insurance policy, and in most countries, the sponsor is liable to provide ‘no fault’ compensation to any study subject injured in the clinical trial. Prior to commencing a clinical trial, the sponsor must obtain a clinical trial authorization (“CTA”), from the competent authority, and a positive opinion from an independent ethics committee. The application for a CTA must include, among other things, a copy of the trial protocol and an investigational medicinal product dossier containing information about the manufacture and quality of the medicinal product under investigation. Currently, clinical trial authorization applications must be submitted to the competent authority in each member state in which the trial will be conducted. Under the new Regulation on Clinical Trials, which is currently expected to take effect in 2022, there will be a centralized application procedure where one national authority takes the lead in reviewing the application and the other national authorities have only a limited involvement. Any substantial changes to the trial protocol or other information submitted with the CTA applications must be notified to or approved by the relevant competent authorities and ethics committees. Investigational medicinal products used in clinical trials must be manufactured in accordance with the cGMPs specified in EudraLex, Volume 4, Annex 13 and certified by a Qualified Person before use. Other national and EEA-wide regulatory requirements may also apply. Marketing authorizations . To market a medicinal product in the EEA, we must obtain a Marketing Authorization (“MA”). There are two types of MAs: • The Union MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use (“CHMP”) of the European Medicines Agency (“EMA”) and which is valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of products, such as medicinal products derived from biotechnology processes, orphan designated medicinal products, advanced therapy medicinal products (such as gene therapy, somatic cell therapy and tissue engineered products), and medicinal products containing a new active substance indicated for the treatment certain diseases, such as AIDS, cancer, neurodegenerative disorders, diabetes, auto immune and viral diseases. The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU. Under the Centralized Procedure, the maximum timeframe for the evaluation of an MA application is 210 days, excluding clock stops. Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal product is of major interest from the point of view of public health and in particular from the viewpoint of therapeutic innovation. If the CHMP accepts such request, the time limit of 210 days will be reduced to 150 days but it is possible that the CHMP can revert to the standard time limit for the centralized procedure if it considers that it is no longer appropriate to conduct an accelerated assessment. • National MAs, which are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, are available for products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the EEA, this national MA can be recognized in another Member State through the Mutual Recognition Procedure. If the product has not received a national MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure. Under the Decentralized Procedure an identical dossier is submitted to the competent authority of each of the Member States in which the MA is sought, one of which is selected by the applicant as the Reference Member State. 39 Under the above described procedures, in order to grant the MA, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy. MAs have an initial duration of five years. After these five years, the authorization may be renewed on the basis of a reevaluation of the risk-benefit balance. Priority medicines scheme. Innovative products that target an unmet medical need and are expected to be of major public health interest may be eligible for a number of expedited development and review programs, such as the so-called Priority Medicines (“PRIME”) scheme, which provides incentives similar to the breakthrough therapy designation in the U.S. PRIME was launched in 2016 by the EMA to support the development and accelerate the review of new therapies to treat patients with unmet medical need. This voluntary scheme is based on enhanced interaction and early dialogue with developers of promising medicines, to optimize development plans and speed up evaluation so these medicines can reach patients earlier. To qualify for PRIME, product candidates require early clinical evidence that the therapy has the potential to offer a therapeutic advantage over existing treatments or benefits patients without treatment options. Among the benefits of PRIME are the appointment of a rapporteur to provide continuous support and help build knowledge ahead of an MA application, early dialogue and scientific advice at key development milestones, and the potential to qualify products for accelerated review earlier in the application process. Innovative medicines fulfilling a medical need may also benefit from different types of fast track approvals, such as a conditional marketing authorization or a marketing authorization under exceptional circumstances granted on the basis of less comprehensive clinical data than normally required (respectively in the likelihood that the sponsor will provide such data within an agreed timeframe or when comprehensive data cannot be obtained even after authorization). Advanced therapy classification. Based on legislation adopted in 2007, the EMA established an additional regulatory designation for products classified as an advanced therapy medicinal product (“ATMP”). The ATMP designation offers sponsors a variety of benefits similar to those associated with the PRIME scheme, including scientific and regulatory guidance, additional opportunities for dialogue with regulators, and presubmission review and certification of the CMC and nonclinical data proposed for submission in a forthcoming MA applications for micro-,small-, or medium-sized enterprises. To qualify for this designation, product candidates intended for human use must be based on gene therapy, somatic cell therapy, or tissue engineered therapy. Data and marketing exclusivity . In the EEA, new products authorized for marketing, or reference products, qualify for eight years of data exclusivity and an additional two years of market exclusivity upon marketing authorization. The data exclusivity period prevents generic or biosimilar applicants from relying on the pre-clinical and clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar marketing authorization in the EU during a period of eight years from the date on which the reference product was first authorized in the EU. The market exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product in the EU until 10 years have elapsed from the initial authorization of the reference product in the EU. The 10-year market exclusivity period can be extended to a maximum of eleven years if, during the first eight years of those 10 years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. Pediatric development . In the EEA, MA applications for new medicinal products have to include the results of studies conducted in the pediatric population, in compliance with a pediatric investigation plan (“PIP”), agreed with the EMA’s Pediatric Committee (“ PDCO”). The PIP sets out the timing and measures proposed to generate data to support a pediatric indication of the drug for which marketing authorization is being sought. The PDCO can grant a deferral of the obligation to implement some or all of the measures of the PIP until there are sufficient data to demonstrate the efficacy and safety of the product in adults. Further, the obligation to provide pediatric clinical trial data can be waived by the PDCO when these data is not needed or appropriate because the product is likely to be ineffective or unsafe in children, the disease or condition for which the product is intended occurs only in adult populations, or when the product does not represent a significant therapeutic benefit over existing treatments for pediatric patients. Once the MA is obtained in all member states of the EU and study results are included in the product information, even when negative, the product is eligible for six months’ supplementary protection certificate extension (if any is in effect at the time of authorization) or, in the case of orphan products, a two year extension of the orphan market exclusivity. Orphan drug designation. In the EEA, a medicinal product can be designated as an orphan drug if its sponsor can establish that (1) the product is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; and (2) either (a) such condition affects not more than five in ten thousand persons in the EU when the application is made, or (b) without incentives, it is unlikely that the marketing of the product in the EU would generate sufficient return to justify the necessary investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized in the EU or, if such method exists, the product will be of significant benefit to those affected by that condition. In the EEA, an application for designation as an orphan product can be made any time prior to the filing of a MA application. MA for an orphan drug leads to a ten-year period of market exclusivity. During this market exclusivity period, the EMA or the member state competent authorities, cannot accept another application for a MA, or grant a MA, for a similar medicinal product for the same indication. The period of market exclusivity is extended by two years for medicines that have also complied with an agreed PIP. 40 This period may, however, be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan drug designation, for example because the product is sufficiently profitable not to justify market exclusivity. Market exclusivity can be revoked only in very selected cases, such as consent from the marketing authorization holder, inability to supply sufficient quantities of the product, demonstration of “clinical superiority” by a similar medicinal product, or, after a review by the Committee for Orphan Medicinal Products, requested by a member state in the fifth year of the marketing exclusivity period (if the designation criteria are believed to no longer apply). Medicinal products designated as orphan drugs are eligible for incentives made available by the EU and its Member States to support research into, and the development and availability of, orphan drugs. Orphan designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. Genetically Modified Food Products In the EEA food products are generally governed by Regulation (EC) No 178/2002 laying down the general principles and requirements of food law as well as the procedures in matters of food safety and establishing the European Food Safety Authority (“EFSA”). Food business operators are regulated by, among other authorities, the European Commission and EFSA, and national food safety authorities in EEA countries. In addition, food additives (such as substances preserving, coloring or sweetening food) are specifically regulated by Regulation (EC) No 1333/2008, which sets the conditions of use and labeling requirements for additives, and Commission Regulation (EU) No 234/2011, which establishes a common authorization procedure for food improvement agents (including food additives). To be used on the EEA market, additives must be safe and authorized by the European Commission for that purpose. EFSA and/or the Scientific Committee on Food assess the safety of food additives. Authorized additives and their conditions of use are listed in a European list. For some categories of food additives, additional requirements may apply. A genetically modified organism (“GMO”) is an organism, with the exception of human beings, in which the genetic material has been altered in a way that does not occur naturally by mating and/or natural recombination. In July 2018, the Court of Justice of the European Union (“CJEU”) clarified in its ruling C-528/16 that organisms from new mutagenesis techniques also fall within the scope of the European GMO legislation. Food which contains or consists of such GMOs, or is produced from GMOs, is called genetically modified food, and is regulated by a number of specific EU and national regulations. In particular, Regulation (EC) No. 1829/2003 on genetically modified food and feed (complemented by Commission Implementing Regulation (EU) No 503/2013) and Directive 2001/18/EC on the deliberate release of GMOs into the environment (as amended by Commission Directive (EU) 2018/350) provide that both the cultivation of GMOs and the use of GMOs in food, feed and derived products in the EEA are subject to prior authorizations. Authorizations for these respective activities are granted by the national competent authorities of EEA countries following a thorough risk assessment (of the risks the GMO may present to the environment, human health and animal safety) by EFSA. Authorizations are valid throughout the EEA, for a maximum of 10 years, and are renewable. In accordance with Directive (EU) 2015/412 individual countries may further restrict or prohibit GMO cultivation on their territory. The European Commission holds and maintains a register of genetically modified food and feed which is available to the general public. GMO operators must also comply with traceability and labeling requirements as notably provided for in Regulation (EC) No 1830/2003. All operators, such as farmers or food and feed producers, which introduce such products in the supply chain or purchase such products, must be able to identify their supplier and the companies to which the products have been delivered. Operators must provide their customers with an indication that the product – or certain ingredients – contains, consists of, or is obtained from GMOs, and information on the unique identifier(s) for these GMOs. Operators must keep a record for a five year period after every transaction. In addition, subject to an exception of a proportion no higher than 0.9 percent of the food/feed ingredients considered individually, the list of ingredients on the labeling of pre-packed genetically modified food/feed products must indicate “genetically modified” or “produced from genetically modified [name of the organism].” For products without packaging, this information must be clearly displayed in close proximity to the product. Specific post-authorization requirements apply. For instance, GMO operators must implement and regularly report on a post-market environmental monitoring plan, including general surveillance for unanticipated adverse effects and case-specific monitoring to detect direct and indirect effects which have been identified in the environmental risk assessment. In addition, post-market monitoring plans may be requested in specific cases to ensure that the conditions of use are duly applied and to monitor the consumption of the product. Further to Regulation (EU) 2017/625, GMOs are subject to official controls by EEA countries for the deliberate release of GMOs in the EEA and the presence of GMOs and/or genetically modified material in food, feed and seeds at import stage and on the EEA market. Official controls, which may consist of audits and inspections, verify the absence of unauthorized GMOs and genetically modified material on the EEA market and check proper traceability and labeling. Transboundary movements of GMOs are regulated by Regulation (EC) 1946/2003 which transposes the Cartagena Protocol on Biosafety into EU law. The Regulation obliges countries to take legal, administrative and other measures to implement their commitments under the Protocol, and in particular addresses GMOs exports, requiring a notification to importing parties, information to the Biosafety Clearing House as well as other identification and accompanying documentation. 41 Even though EU regulations are directly applicable in all EU Member States and – when specified – in Iceland, Liechtenstein and Norway, additional national laws, regulations, implementing rules and guidelines on specific aspects may impose further requirements on GMOs operators. GMOs and modern biotechnologies are under scrutiny in the EEA. As a variety of new techniques, based on advances in biotechnology, has been developed in the last decade, the European Commission follows these developments to strike a balance between innovation in the food and agricultural sector while maintaining high safety standards. In November 2019, the Council of the European Union requested the European Commission to provide a study on new genomic techniques, the results of which are expected by April 30, 2021. Other U.S. Healthcare Laws and Compliance Requirements In the United States, our activities are potentially subject to regulation under various federal and state healthcare laws including, among others, the federal Anti-Kickback Statute, the federal False Claims Act and HIPAA. Similar laws exist in foreign jurisdictions including the EEA, as well. The U.S. federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. A person does not need to have knowledge of the statute or specific intent to violate it to have committed a violation. The U.S. federal civil and criminal false claims laws, including the civil False Claims Act, which can be enforced through civil whistleblower or qui tam actions, and civil monetary penalties laws, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or approval by, the federal government or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. government. In addition, the government may assert that a claim including items or services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act. The U.S. Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the U.S. 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. Additionally, the federal Physician Payments Sunshine Act, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to CMS information related to certain payments or other transfers of value made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other health care professionals beginning in 2022, and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually to CMS certain ownership and investment interests held by physicians and their immediate family members. Moreover, analogous state and non-U.S. laws and regulations may apply to our activities, such as state anti-kickback and false claims laws, which may apply to our business practices, including, but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, or by the patients themselves, state laws that require pharmaceutical and device companies to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources, state and local laws and regulations that require manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and pricing information, and state and local laws which require the registration of pharmaceutical sales representatives. Efforts to ensure that current and future business arrangements with third parties comply with applicable healthcare laws and regulations involves substantial costs. If a business is found to be in violation of any of these or any other health regulatory laws that may apply to it, it may be subject to significant penalties, including the imposition of significant civil, criminal and administrative 42 penalties, damages, monetary fines, disgorgement, individual imprisonment, possible exclusion from participation in Medicare, Medicaid and other U.S. healthcare programs, additional reporting requirements and oversight if subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of operations. Coverage, Pricing and Reimbursement Significant uncertainty exists as to the coverage and reimbursement status for newly approved therapeutics. In the United States and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend, in part, on the extent to which third-party payors provide coverage, and establish adequate reimbursement levels for such products. In the United States, third-party payors include federal and state healthcare programs, private managed care providers, health insurers and other organizations. For products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Moreover, the coverage provided may be more limited than the purposes for which the product is approved by the FDA. It is also possible that a third-party payor may consider a product as substitutable and only offer to reimburse patients for the less expensive product. Adequate third-party payor reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. Coverage policies and third-party payor reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future. In the EEA, governments influence the price of products through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of those products to consumers. Member States are free to restrict the range of pharmaceutical products for which their national health insurance systems provide reimbursement, and to control the prices and reimbursement levels of pharmaceutical products for human use. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed to by the government. Member states may approve a specific price or level of reimbursement for the pharmaceutical product, or alternatively adopt a system of direct or indirect controls on the profitability of the company responsible for placing the pharmaceutical product on the market, including volume-based arrangements, caps and reference pricing mechanisms. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost effectiveness of a particular product candidate to currently available therapies. Other member states allow companies to fix their own prices for medicines, but monitor and control company profits. The downward pressure on health care costs in general, particularly prescription products, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross border imports from low-priced markets exert a commercial pressure on pricing within a country. Healthcare Reform In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect the ability to profitably sell product candidates for which marketing approval is obtained. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively the Affordable Care Act, enacted in March 2010, has substantially changed healthcare financing and delivery by both governmental and private insurers. Among other things the Affordable Care Act included the following provisions: • an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs; • an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program; • a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to point-of-sale discounts of 70% off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D; • extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations; • expansion of eligibility criteria for Medicaid programs; • expansion of the entities eligible for discounts under the 340B Drug Discount Program; 43 • a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; • 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; and • a licensure framework for follow on biologic products. On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, or Texas District Court Judge, ruled that the entire Affordable Care Act is invalid based primarily on the fact that the legislation enacted on December 22, 2017, the Tax Cuts and Jobs Act of 2017, or the TCJA, repealed the tax-based shared responsibility payment imposed by the Affordable Care Act, on certain individuals who fail to maintain qualifying health coverage for all or part of a year, which is commonly referred to as the “individual mandate.” On December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the district court’s decision that the individual mandate was unconstitutional but remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. The U.S. Supreme Court is currently reviewing the case, although it remains unclear when or how the Supreme Court will rule. It is also unclear how other efforts, if any, to challenge, repeal or replace the Affordable Care Act will impact the Affordable Care Act. In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, included reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2021, unless additional Congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Additionally, on May 30, 2018, the Right to Try Act was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase 1 clinical trial and are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for a drug manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act. Finally, there has been heightened governmental scrutiny recently over pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies, rebates and price negotiation for pharmaceutical products. How the incoming Biden Administration chooses to prioritize such reforms and other policy initiatives, and how such events may impact our ability to realize returns on our product development investments remains to be seen. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product and medical device pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and medical devices to purchase and which suppliers will be included in their prescription drug and other healthcare programs. Data Privacy and Security Numerous state, federal and foreign laws, including consumer protection laws and regulations, govern the collection, dissemination, use, access to, confidentiality and security of personal information, including health-related information. In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws, including HIPAA, and federal and state consumer protection laws and regulations (e.g., Section 5 of the FTC 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 partners. In addition, certain state and non-U.S. laws, such as the California Consumer Privacy Act, or the CCPA, the California Privacy Rights Act, or the CPRA, and the EU General Data Protection Regulation, or the GDPR, govern the privacy and security of personal information, including health-related information in certain circumstances, some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and private litigation. Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing. 44 Human Capital We are a purpose-driven organization, and we have carefully promoted a culture that values innovation, accountability, respect, adaptability and perseverance. We strive to ensure that our open, collaborative culture empowers Precisioneers to be their best selves and do their best work. We strongly believe that our shared values will help our team navigate and overcome challenges we may experience as we pursue our mission of improving life through genome editing. Our culture has helped build a world-class team with industry-leading experience in genome editing and we believe this will continue to attract new talent to further build our capabilities. Our team is a group of motivated individuals that value the opportunity to contribute their time and talents toward the pursuit of improving life. We believe all Precisioneers appreciate high-quality research and are moved by the opportunity to translate their work into treatments and solutions that could impact human health. We are a company and a community dedicated to improving life. This isn’t just a statement supporting the products that we are developing – it is a statement that speaks to our collective desire to do our part in improving the lives of those around us. Through our newly launched Diversity and Inclusion initiative, we are actively fostering an environment that attracts the best talent, values diversity of life experiences and perspectives, and encourages innovation in pursuit of our mission. With guest lectures, new trainings, employee resource groups, and other activities, we are supporting a workplace that reflects and embraces the gender, race, ethnicity, sexual orientation, age, physical ability, as well as all cultural backgrounds in our community. Notable benefits we offer to our full-time Precisioneers include: • employer sponsored health insurance; • employer 401(k) matching contributions; • generous paid time off policies; • wellness programs including employee assistance programs, wellness reimbursement, and an on-site gym; and • professional development programs including a tuition reimbursement program The health and safety of our Precisioneers is also a top priority. The global effects associated with the COVID-19 pandemic have been unprecedented in their scope and depth. We have implemented measures to mitigate exposure risks and support operations. We initiated a health and safety program addressing mandatory use of face masks, social distancing, sanitary handwashing practices, use of personal protective equipment stations, stringent cleaning and sanitization of all facilities and measures to reduce total occupancy in facilities. We have implemented temperature and symptom screening procedures at each location, and we have continuously communicated to all our Precisioneers that if they are not comfortable coming to work, regardless of role, then they do not have to do so. Throughout this crisis, our focus has been on keeping our workplace as safe as possible, while ensuring business continuity and positioning ourselves well for the future. As of December 31, 2020, we had 231 full-time Precisioneers, comprised of 208 from our Therapeutics Segment and 23 from our Food Segment. Of these full-time employees, 184 are engaged in research and development activities and 57 have Ph.D. degrees. None of our employees are represented by a labor union or covered by a collective bargaining agreement. Corporate Information We were incorporated in Delaware in January 2006. Our principal executive offices are located at 302 East Pettigrew St., Suite A-100, Durham, North Carolina 27701, and our telephone number is (919) 314-5512. Our website address is www.precisionbiosciences.com. The information contained in, or accessible through, our website does not constitute a part of this Annual Report on Form 10-K. Available Information We file annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and Exchange Commission (“SEC”). Our SEC filings are available to the public over the Internet at the SEC’s website at www.sec.gov . Our SEC filings are also available free of charge under the Investors and Media section of our website at www.precisionbiosciences.com as soon as reasonably practicable after they are filed with or furnished to the SEC. Our website and the information contained on or connected to that site are not incorporated into this Annual Report on Form 10-K. We may use our website as a distribution channel of material information about the Company. Financial and other important information regarding the Company is routinely posted on and accessible through the Investors and Media section of our website at www.precisionbiosciences.com . In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Email Alerts” option under Investor Tools of the Investors and Media section of our website at www.precisionbiosciences.com . 45