What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2021-02-26 compared with 2020-02-26 · 239 added, 324 removed, 809 unchanged (41% of the section changed)

3 unchanged sentences

government-backed securities, and marketable securities of $372.1 million, primarily consisting of U.S.

government-backed securities.

government-backed securities, corporate equity securities and corporate debt securities.

Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S.

15 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Editas Medicine, Inc.

To the Stockholders and the Board of Directors of Editas Medicine, Inc.

Opinion on the Financial Statements

7 unchanged sentences

2016-02, Leases (Topic 842) .

Adoption of ASU No.

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for revenue in 2018 due to the adoption of Accounting Standards Update (ASU) No.

2014-09, Revenue from Contracts with Customers (Topic 606), and the related amendments

Basis for Opinion

12 unchanged sentences

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on

the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue recognition under the proportional performance model related to the Allergan Strategic Alliance and Option Agreement

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accrued Research and Development Expense

Description of the Matter

Collaboration and other research and development revenues recognized from the Allergan Pharmaceuticals Strategic Alliance and Option Agreement was $13.6 million for the year ended December 31, 2019.

As discussed in Note 9 to the consolidated financial statements, the Company entered into a Strategic Alliance and Option Agreement with Allergan during 2017 to develop and commercialize gene editing medicines for a range of ocular disorders over a seven year research term.

The Company recognizes revenue related to its research services for each Clinical Development Program, or CDP, as the underlying services are performed using a proportional performance model.

The Company measures proportional performance based on full time employee hours incurred relative to projected full time employee hours to complete the research services for each CDP.

The Company’s accrual for research and development expenses totaled $10.2 million at December 31, 2020.

As discussed in Note 2 to the consolidated financial statements, the Company expenses research and development costs as incurred.

The Company’s determination of costs incurred to conduct research and development on the Company’s product candidates, as well as the related accrued expenses at each reporting period incorporates judgment and utilizes various assumptions, including an evaluation of the information provided to the Company by third parties on actual costs incurred but not yet billed, estimated project timelines and patient enrollment.

Payments for these activities are based on the terms of the individual arrangements, which often differ from the pattern of costs incurred.

How We Addressed the Matter in Our Audit

Auditing collaboration and other research and development revenues recognized from the Allergan collaboration is especially challenging because the proportional performance calculation involves subjective management assumption about estimates of the expected remaining hours to complete the research services for each CDP.

Changes in this assumption can have a material effect on the amount of collaboration and other research and development revenues recognized.

We obtained an understanding of the Company’s process, evaluated the design and tested the operating effectiveness of internal controls over the Company’s collaboration and other research and development revenue recognition process, including controls over the underlying assumptions used by management to determine and support the completeness of the estimates used in the proportional performance calculation.

Our audit procedures included, among others, the inspection of the Company’s contract with Allergan and management’s relevant accounting memoranda.

Our audit procedures also included evaluating the significant assumption and the accuracy and completeness of the underlying data used in management's calculation.

Further, to audit management’s estimate of the remaining hours to complete the research services we tested the completeness and accuracy of management’s forecasted data, which included the evaluation of management’s budget process and performed cross-functional inquiries of individuals within R&D functions.

Additionally, we assessed the contractual arrangements in comparison to management’s estimate to ensure the completeness of the remaining hours in comparison to the required outputs of the contract.

We also performed audit procedures to compare the Company’s historical estimates of the remaining hours to complete the research services and a sensitivity analysis to evaluate the materiality of change in management’s estimation.

Auditing the Company’s research and development accruals is especially complex due to the judgments and estimations of the research and development expenses.

The Company uses judgment and estimation to estimate costs incurred and not yet billed at each reporting period as a result of the volume of pre-clinical and clinical trials and the related manufacturing activities, as well as the extent of third-party vendors utilized.

Additionally, due to the timing of invoices received from third parties, actual amounts incurred are not always known as of the audit report date.

We obtained an understanding of the Company’s process, evaluated and tested the design and operating effectiveness of internal controls that address the risks related to the completeness and valuation of accrued research and development expenses.

To test the research and development accrual, our audit procedures included, among others, testing the accuracy and completeness of the underlying data used in the estimates and evaluating and testing the significant assumptions that are used by management to estimate the accruals.

To test the significant assumptions, we inspected the contracts and any amendments to the contracts with third-party service providers, corroborated the progress of pre-clinical and clinical trials and other research and development projects with the Company’s research and development personnel that oversee the clinical trials and the related manufacturing activities, and obtained information received directly from third parties, which included the third parties’ estimate of costs incurred to date.

We also tested subsequent invoicing received from third parties.

/ s/ Ernst & Young LLP

11 unchanged sentences

Total current assets

Marketable securities

Property and equipment, net

11 unchanged sentences

Deferred revenue, net of current portion

Construction financing lease obligation, net of current portion

Other non-current liabilities

Total liabilities

Commitments and contingencies (see Note 8)

Stockholders’ equity

6 unchanged sentences

Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive (loss) income

Accumulated deficit

12 unchanged sentences

Other income (expense), net:

Other (expense) income, net

Interest income (expense), net

Total other income (expense), net

Other income (expense), net

Interest income, net

Total other income, net

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

Net loss attributable to common stockholders

Net loss per share attributable to common stockholders, basic and diluted

Net loss per share, basic and diluted

Weighted-average common shares outstanding, basic and diluted

3 unchanged sentences

(amounts in thousands)

Other comprehensive loss:

Unrealized gain (loss) on marketable securities

Other comprehensive (loss) income:

Unrealized (loss) gain on marketable debt securities

Comprehensive loss

5 unchanged sentences

Stockholders’

Balance at December 31, 2016

Issuance of common stock from public offering, net of issuance costs of $ 0.6 million

Issuance of common stock for repayment of notes payable

Issuance of common stock from public offering, net of issuance costs of $ 1.7 million

Exercise of stock options

Vesting of restricted common stock and common stock subject to repurchase

Stock-based compensation expense

Unrealized loss on marketable securities

Income (Loss)

Balance at December 31, 2017

19 unchanged sentences

Balance at December 31, 2019

Exercise of stock options

Vesting of restricted common stock awards

Purchase of common stock under benefit plan

Issuance of common stock from public offering,

net of issuance costs of $ 0.1 million

Stock-based compensation expense

Unrealized loss on marketable debt securities

Balance at December 31, 2020

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

5 unchanged sentences

Stock-based compensation expense

Non-cash research and development expenses

Realized gain on corporate equity securities

Non-cash investment in equity securities

10 unchanged sentences

Other current and non-current liabilities

Non-cash research and development expenses

Net cash used in operating activities

4 unchanged sentences

Proceeds from maturities of marketable securities

Net cash provided by (used in) investing activities

Proceeds from sale of corporate equity securities

Net cash (used in) provided by investing activities

Cash flow from financing activities

2 unchanged sentences

Payments on construction financing lease obligation

Issuances of common stock under benefit plans

Payments of notes payable

Issuance of common stock under benefit plans

Net cash provided by financing activities

3 unchanged sentences

Supplemental disclosure of cash and non-cash activities:

Right-of-use assets obtained in exchange of operating lease obligations

Cash paid in connection with operating lease liabilities

Fixed asset additions included in accounts payable and accrued expenses

Offering expenses included in accounts payable and accrued expenses

Cash paid in connection with operating lease liabilities

Offering costs included in accounts payable and accrued expenses

Right-of-use assets obtained in exchange of operating lease obligations

Reclassification of liability for common stock subject to repurchase

12 unchanged sentences

The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations and ability to transition from pilot-scale manufacturing to large-scale production of products.

In May 2020, the Company entered into a sales agreement with Cowen and Company, LLC (“Cowen”), under which the Company from time to time can issue and sell shares of its common stock through Cowen in at-the-market offerings for aggregate gross sale proceeds of up to $ 150.0 million ( the “ATM Facility”).

As of December 31, 2020, the Company has not sold any shares of its common stock under the ATM Facility.

In June 2020, the Company completed a public offering whereby the Company sold 6,900,000 shares of its common stock, inclusive of 900,000 shares of common stock sold by the Company pursuant to the full exercise of an option granted to the underwriters in connection with the offering and received net proceeds of approximately $ 203.7 million.

As of December 31, 2020, the Company has raised an aggregate of $ 648.7 million in net proceeds through the sale of shares of its common stock in public offerings and at-the-market offerings.

In March 2018, the Company entered into a sales agreement with Cowen and Company, LLC (“Cowen”), under which the Company from time to time could issue and sell shares of its common stock through Cowen in at-the-market offerings for aggregate gross sales proceeds of $ 150.0 million (the “March 2018 ATM Program”).

Through December 31, 2019, the Company sold an aggregate of 5,448,428 shares of its common stock pursuant to the March 2018 ATM Program at a weighted-average price of $ 27.53 per share for gross proceeds of $ 150.0 million.

The Company paid Cowen a 3 % cash commission on the gross sales price per share of its common stock sold under the March 2018 ATM Program.

No shares of common stock remain available for sale under the March 2018 ATM Program.

The Company has incurred annual net operating losses in every year since its inception.

The Company expects that its existing cash, cash equivalents and marketable securities at December 31, 2019 and anticipated interest income will enable it to fund its operating expenses and capital expenditure requirements for at least 24 months following the date of this Annual Report on Form 10-K.

The Company had an accumulated deficit of $ 549.2 million at December 31, 2019, and will require substantial additional capital to fund its operations.

The Company has an accumulated deficit of $ 665.2 million at December 31, 2020.

The Company expects that its existing cash, cash equivalents and marketable securities on December 31, 2020, anticipated interest income, and the proceeds of its subsequent public offering described in Note 18, will enable it to fund its operating expenses and capital expenditure requirements for at least 36 months following the date of this Annual Report on Form 10-K.

The Company will require substantial additional capital to fund its operations.

The Company has never generated any product revenue.

11 unchanged sentences

Certain prior period amounts have been reclassified for consistency with the current period presentation.

reclassifications had no effect on previously reported results of operations.

These reclassifications had no effect on previously reported results of operations.

Use of Estimates

16 unchanged sentences

The carrying amounts reflected in the consolidated balance sheets for cash and cash equivalents, restricted cash, marketable securities, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses, and other current liabilities approximate their fair values, due to their short-term nature.

believes that the carrying value of the notes payable approximates their fair value based on Level 3 inputs including a quoted rate.

Cash, Cash Equivalents, and Restricted Cash

2 unchanged sentences

government-backed securities.

The Company has restricted cash of $ 1.6 million held in the form of a letter of credit, as collateral for the Company’s corporate headquarters.

The Company has restricted cash of $ 3.9 million held as collateral for the Company’s corporate headquarters and credit card program.

The restricted funds are maintained in a traditional bank account.

The following table presents cash, cash equivalents, and restricted cash as reported on the consolidated balance sheets that equal the total amounts on the consolidated statements of cash flows (in thousands):

As of December 31,

Cash and cash equivalents

3 unchanged sentences

The Company classifies marketable securities with a remaining maturity when purchased of greater than three months and less than one year from the balance sheet date as current.

Marketable securities with a remaining maturity date greater than one year are classified as non-current.

Marketable securities are classified as long-term assets on the consolidated balance sheets if the contractual maturity exceeds one year and the Company does not intend to utilize the marketable securities to fund current operations.

The Company classifies all of its marketable securities as available-for-sale securities.

Available-for-sale securities are carried at fair value with the unrealized gains and losses included in other comprehensive loss as a component of stockholders’ equity until realized.

Available-for-sale debt securities are carried at fair value with the unrealized gains and losses included in other comprehensive loss as a component of stockholders’ equity until realized.

Any premium or discount arising at purchase is amortized and/or accreted to interest income and/or expense over the life of the of the underlying security.

Realized gains and losses are included in other income (expense).

If any adjustment to fair value reflects a decline in value of the investment, the Company considers all available evidence to evaluate the extent to which the decline is “other-than-temporary.” To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary.

The Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity.

The Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) as of January 1, 2020, which did not have a significant impact on its consolidated financial statements.

For available-for-sale debt securities in unrealized loss positions, ASU 2016-13 requires the Company to record an allowance for credit losses using an expected loss model, which replaces the incurred loss model required under the previous guidance.

A credit loss is limited to the amount by which the amortized cost of an investment exceeds its fair value.

A previously recognized credit loss may be decreased in subsequent periods if the Company’s estimate of fair value for the investment increases.

To determine whether to record a credit loss, the Company considers issuer specific credit ratings and historical losses as well as current economic conditions and its expectations for future economic conditions.

Corporate Equity Securities

The Company records investments in privately issued corporate equity securities that do not have readily determinable fair values at cost and adjusts for changes in observable prices minus impairment.

Each reporting period the Company adjusts the carrying value of these investments if it observes that additional shares have been issued in an orderly transaction between market participants resulting in a price increase or decrease per share.

Additionally, each reporting period the Company reviews these investments for impairment considering all available information to conclude whether an impairment exists.

Changes in measurement for all corporate equity investments are recognized in “Other income (expense),” net in the Company’s consolidated statements of operations.

The Company classifies investments in equity securities that have a readily determinable fair value as marketable securities in the Company’s consolidated balance sheets.

The Company’s marketable securities are stated at fair value.

Typically, the fair value of these securities is based on a quoted price for an identical equity security.

If the equity security has a restriction that is determined to be an attribute of the security that would transfer to a market participant, the fair value of the security is measured based on the quoted price for an otherwise identical unrestricted equity security, adjusted for the effect of the restriction.

The adjustment reflects the discount that a market participant would demand for the risk relating to the inability to dispose of the security for a specified period of time.

That adjustment is based on the nature and duration of the restriction and the limitations imposed by the restriction to a buyer.

The Company records changes in the fair value of its equity securities in “Other Income (Expense), net” in the Company’s condensed consolidated statement of operations.

Accounts Receivable

The Company makes judgments as to its ability to collect outstanding receivables and provides an allowance for receivables when collection becomes doubtful.

Provisions are made based upon a specific review of all significant

outstanding invoices and the overall quality and age of those invoices not specifically reviewed.

The Company’s estimates for its allowance for credit losses, which has not been significant to date, is determined based on existing contractual payment terms, historical payment patterns, current economic conditions and the Company’s expectation for future economic conditions.

The Company's receivables primarily relate to amounts reimbursed under its collaboration agreements.

23 unchanged sentences

The Company classifies payments made under the cost sharing provisions of such arrangements as a component of research and development expenses to reflect the joint risk sharing nature of such profit-sharing arrangements.

The Company classifies payments owed or receivables recorded as other current liabilities or prepaid expenses and other current assets, respectively, in the Company’s consolidated balance sheets.

The Company classifies payments owed or receivables recorded as other current liabilities or prepaid expenses and other current assets, respectively, in the

Company’s consolidated balance sheets.

At December 31, 2020, the Company no longer had any agreements considered under ASC 808.

Revenue Recognition

To date, the Company has primarily earned revenue under the collaboration and license agreement with Juno Therapeutics and the strategic alliance with Allergan.

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), effective January 1, 2018.

The Company enters into collaboration agreements and certain other agreements

that are within the scope of ASC 606, under which the Company licenses, may license or grants an option to license rights to certain of the Company’s product candidates and performs research and development services in connection with such arrangements.

To date, the Company has primarily earned revenue under the collaboration and license agreement with Juno Therapeutics and the strategic alliance with Allergan, which was terminated on August 5, 2020.

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

The Company enters into collaboration agreements and certain other agreements that are within the scope of ASC 606, under which the Company licenses, may license or grants an option to license rights to certain of the Company’s product candidates and performs research and development services in connection with such arrangements.

The terms of these arrangements typically include payment of one or more of the following:

23 unchanged sentences

At the end of each reporting period, the Company re-evaluates the probability of achievement of such development and clinical milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration and other research and development revenues in the period of adjustment.

Any such adjustments are recorded on a

cumulative catch-up basis, which would affect collaboration and other research and development revenues in the period of adjustment.

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

10 unchanged sentences

Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional.

In connection with the Company’s adoption of ASC 606, the Company has included the following financial statement line items for comparability purposes for the year ended December 31, 2018 (in thousands, except per share data):

Year Ended December 31, 2018

As reported under Topic 606

Balances without adoption of ASC 606

Effect of Change

Collaboration and other research and development revenues

Operating loss

Net loss attributable to common stockholders

Net loss per share attributable to common stockholders, basic and diluted

Prior to ASC 606 Adoption

Revenue for the year ended December 31, 2017 was recognized in accordance with ASC Topic 605, Revenue Recognition (“ASC 605”).

Accordingly, revenue was recognized for each unit of accounting when all of the following criteria are met:

● Persuasive evidence of an arrangement exists;

● Delivery has occurred or services have been rendered;

● The seller’s price to the buyer is fixed or determinable;

● Collectability is reasonably assured.

Amounts received prior to satisfying the revenue recognition criteria were recorded as deferred revenue.

Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified in current liabilities.

Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion.

The Company evaluated multiple-element arrangements based on the guidance in ASC Topic 605-25, Revenue Recognition Multiple-Element Arrangements (“ASC 605-25”).

Pursuant to the guidance in ASC 605-25, the Company evaluated multiple-element arrangements to determine (1) the deliverables included in the arrangement and (2) whether the individual deliverables represented separate units of accounting or whether they must be accounted for as a combined unit of accounting.

This evaluation involved subjective determinations and required the Company to make judgments about the individual deliverables and whether such deliverables were separable from the other aspects of the contractual relationship.

Deliverables were considered separate units of accounting provided that the delivered item had value to the customer on a standalone basis and, if the arrangement included a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in the Company’s control.

In assessing whether an item had standalone value, the Company considered factors such as the research, development, manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace.

In addition, the Company considered whether the collaboration partner can use a deliverable for its intended purpose without the receipt of the remaining deliverable, whether the value of the deliverable is dependent on the undelivered item and whether there are other vendors that can provide the undelivered items.

Options were considered substantive if, at the inception of the arrangement, the Company was at risk as to whether the collaboration partner will choose to exercise the option.

Factors that the Company considered in evaluating whether an option is substantive include the cost to exercise the option, the overall objective of the arrangement, the benefit the collaborator might obtain from the arrangement without exercising the option and the likelihood the option will be exercised.

When an option was considered substantive, the Company does not consider the option or item underlying the option to be a deliverable at the inception of the arrangement and the associated option fees are not included in allocable consideration, assuming the option is not priced at a significant and incremental discount.

Conversely, when an option is not considered substantive, the Company would consider the option, including other deliverables contingent upon the exercise of the option, to be a deliverable at the inception of the arrangement and a corresponding amount would be included in allocable arrangement consideration.

In addition, if the price of the option includes a significant incremental discount, the discount would be included as a deliverable at the inception of the arrangement.

The consideration received under the arrangement that is fixed or determinable was then allocated among the separate units of accounting using the relative selling price method.

The Company determined the estimated selling price for units of accounting within each arrangement using vendor-specific objective evidence (“VSOE”) of selling price, if available, third-party evidence (“TPE”) of selling price if VSOE is not available, or best estimate of selling price (“BESP”) if neither VSOE nor TPE is available.

Determining the BESP for a unit of accounting required significant judgment.

In developing the BESP for a unit of accounting, the Company considered applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs.

The Company validated the BESP for units of accounting by evaluating whether changes in the key assumptions used to determine the BESP had a significant effect on the allocation of arrangement consideration between multiple units of accounting.

The Company recognized arrangement consideration allocated to each unit of accounting when all of the revenue recognition criteria in ASC 605 are satisfied for that particular unit of accounting.

In the event that a deliverable does not represent a separate unit of accounting, the Company recognized revenue from the combined unit of accounting over the Company’s contractual or estimated performance period for the undelivered elements, which is typically the term of the Company’s research and development obligations.

If there is no discernible pattern of performance or objectively measurable performance measures do not exist, then the Company recognized revenue under the arrangement on a straight-line basis over the period the Company is expected to complete its performance obligations.

Conversely, if the pattern of performance in which the service is provided to the customer can be determined and objectively measurable performance measures exist, then the Company recognized revenue under the arrangement using the proportional performance method.

Revenue recognized is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue earned, as determined using the straight-line method or proportional performance method, as applicable, as of the period ending date.

At the inception of an arrangement that includes milestone payments, the Company evaluated whether each milestone was substantive and at risk to both parties on the basis of the contingent nature of the milestone.

evaluation includes an assessment of whether:

(1) the consideration is commensurate with either the Company’s performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from its performance to achieve the milestone, (2) the consideration relates solely to past performance and (3) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement.

The Company evaluated factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone and the level of effort and investment required to achieve the particular milestone in making this assessment.

There was considerable judgment involved in determining whether a milestone satisfies all of the criteria required to conclude that a milestone is substantive.

Milestones that are not considered substantive were recognized as earned if there are no remaining performance obligations or over the remaining period of performance, assuming all other revenue recognition criteria are met.

Research and Development Expenses

43 unchanged sentences

ASC 718 requires all stock-based payments to employees, directors and non-employees to be recognized as expense in the consolidated statements of operations based on their grant date fair values.

The Company estimates the grant date fair value of each option award

using the Black-Scholes option-pricing model.

The Company estimates the grant date fair value of each option award using the Black-Scholes option-pricing model.

The fair value of the Company’s RSAs and RSUs is based on market value of the Company’s common stock on the date of grant.

4 unchanged sentences

Stock-based payments issued to non-employees were initially recorded at their fair value, and were revalued at each reporting date and as the equity instruments vest and were recognized as expense over the related service period.

For stock options granted to employees and to members of the Company’s board of directors for their services on the board of directors, the Company estimates the grant date fair value of each option award using the Black-Scholes option-pricing model.

The Company estimates the grant date fair value of each option award using the Black-Scholes option-pricing model.

The Black-Scholes option pricing model requires the input of certain subjective assumptions, including (1) the expected stock price volatility, (2) the calculation of expected term of the award, (3) the risk-free interest rate, and (4) the expected dividend yield.

8 unchanged sentences

The Company uses an assumed dividend yield of zero as the Company has never paid dividends and does not have current plans to pay any dividends on its common stock.

In 2014, certain of the Company’s stock option agreements allowed for the exercise of unvested awards.

The unvested shares were subject to repurchase by the Company if the employees ceased to provide service to the Company, with or without cause.

As such, the Company did not treat the exercise of unvested options as a substantive exercise.

The Company recorded the proceeds from the exercise of unvested stock options as a liability in the consolidated balance sheets.

The liability for unvested common stock subject to repurchase was reclassified into stockholders’ equity as the shares vested.

As of June 30, 2018, the early exercise stock options were fully vested.

RSAs are subject to repurchase rights.

23 unchanged sentences

Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders.

Comprehensive loss currently consists of net loss and changes in unrealized losses on marketable securities.

Comprehensive loss currently consists of net loss and changes in unrealized gains and losses on marketable securities.

Concentrations of Credit Risk and Off-Balance Sheet Risk

7 unchanged sentences

Recent Accounting Pronouncements –Adopted

As discussed above, the Company adopted ASC 842, using the modified-retrospective transition method, effective January 1, 2019, pursuant to which the Company recognized a cumulative-effect adjustment of $ 0.8 million to the opening balance of accumulated deficit on January 1, 2019 associated with de-recognizing the net asset balance recorded in property and equipment, net and the offsetting construction financing lease liability related to the Company’s headquarters which was previously accounted for under the built-to-suit guidance in ASC 840, Leases (“ASC 840”).

This resulted in a reversal of $ 32.6 million from total assets and $ 33.4 million from total liabilities.

All prior period balances are presented in accordance with ASC 840.

As of January 1, 2019, the Company recorded a right-of-use asset of $ 19.5 million and lease liability of $ 19.7 million associated with the adoption of ASC 842.

In addition, the Company elected to adopt the package of three practical expedients for leases that commenced prior to January 1, 2019, allowing it not to reassess (i) whether any expired or existing contracts contain leases, (ii) the lease classification for any expired or existing leases and (iii) the initial indirect costs for any existing leases.

The Company did not elect the hindsight practical expedient which allows the Company to reassess the lease term as it was not relevant to the Company’s leases.

Stock-Based Compensation Expense

Effective January 1, 2019, the Company adopted ASU No.

2018-07, Compensation – Stock Compensation:

Improvements to Nonemployee Share-Based Payment Accounting , which simplified the accounting for share-based payments to non-employees by aligning it with the accounting for share-based payments to employees, with certain exceptions.

There was no material impact to the Company’s consolidated financial position, results of operation, or cash flows.

Recent Accounting Pronouncements – Issued But Not Yet Adopted

In August 2018, the FASB issued ASU No.

2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies certain disclosure requirements on fair value measurements.

The amendments regarding changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty are required to be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.

All other amendments are required to be applied retrospectively to all periods presented upon their effective date.

ASU 2018-13 is effective for fiscal years beginning after December 15, 2019 and interim periods within those years.

The Company does not anticipate a material impact to disclosures as a result of the adoption of ASU 2018-13.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

The standard requires that a financial asset or a group of financial assets measured at amortized cost basis to be presented at the net amount expected to be collected.

Under current GAAP, a company only considered past events and current conditions in measuring an incurred loss.

Under ASU 2016-13, the information that a company must consider is broadened in developing an expected credit loss estimate for assets measured either collectively or individually.

The use of forecasted information incorporates more timely information in the estimate of expected credit loss.

The new guidance will be effective for annual and interim periods beginning after December 15, 2019.

The guidance is applied using a modified retrospective, or prospective approach, depending on a specific amendment.

The Company does not anticipate a material impact on its consolidated financial statements as a result of the adoption of ASU 2016-13.

In August 2018, the FASB issued ASU No.

2018-15, Intangibles—Goodwill and Other-Internal-Use Software (Topic 350):

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), which aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use-software.

ASU 2018-15 is effective for the Company for the fiscal years beginning after December 15, 2019 and interim periods within those years.

This guidance will be applied prospectively

to all implementation costs incurred after the date of adoption.

The Company does not anticipate a material impact on its consolidated financial statements as a result of the adoption of ASU 2018-15.

Cash Equivalents, Marketable Securities and Equity Securities

Cash equivalents, marketable securities and equity securities consisted of the following at December 31, 2019 (in thousands):

Financial Instruments- Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (“ASU 2016-13”) which was clarified and amended by the issuances of ASUs 2018-19, 2019-04, 2019-05 and 2019-11 in November 2018, April 2019, May 2019 and November 2019, respectively.

The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis to be measured using an expected-loss model, replacing the current incurred-loss model, and recorded through an allowance for credit losses which is a valuation account that is deducted from the amortized cost basis of the financial asset.

ASU 2016-13 requires evaluation of credit loss based on historical experience, current conditions and reasonable and supportable forecasts.

The Company’s estimate of expected credit losses includes a measure of the expected risk of credit loss even if the risk is remote.

When assessing financial assets for credit losses, the Company pools financial assets with similar risk characteristics and performs a collective evaluation.

However, the Company is not required to measure expected credit losses in which historical credit loss information adjusted for current conditions and reasonable and supportable forecasts results in an expectation that nonpayment of the amortized cost basis is zero.

At each reporting date, the Company will record an allowance for credit losses and reports it as credit loss expense which is included in “Other income (expense), net” in the Company’s condensed consolidated statement of operations.

However subsequent increases or decreases in the fair value of available-for-sale securities that do not result in recognition or reversal of an allowance for credit loss or write-down will continue to be recorded in other comprehensive loss.

The Company adopted the new standard and the related amendments on January 1, 2020 using a modified retrospective approach.

The modified retrospective approach requires the Company to record a one-time adjustment to opening accumulated deficit as of the effective date.

At adoption, the Company concluded that there are no indicators of credit loss with respect to its available-for-sale debt securities which consist of U.S Treasury securities and government-agency bonds.

The Company therefore did not record an allowance for credit losses or doubtful accounts upon adoption or during the first quarter of 2020.

The adoption of ASU 2016-13 had no impact on the Company’s condensed consolidated financial statements.

Intangibles and Goodwill

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal Use Software:

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”) .

ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

ASU 2018 - 15 was effective on January 1, 2020.

The Company adopted ASU 2018-15 using the prospective transition approach, which allows the Company to change the accounting method without restating prior periods or recording cumulative adjustments.

The adoption of ASU 2018-15 did not have a material impact on the Company’s condensed consolidated financial statements.

Fair Value Measurement

In 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which eliminates, adds, and modifies the disclosure requirements for fair value measurements.

ASU 2018-13 was effective on January 1, 2020.

The adoption of ASU 2018-13 results in additional disclosures related to the Company’s assets and liabilities that are valued based on Level 3 inputs and transfers between Level 1 and Level 2 fair value measurements.

The adoption of ASU 2018-13 did not have a material impact on the Company’s financial statement footnote disclosures.

Cash Equivalents and Marketable Securities

Cash equivalents and marketable securities consisted of the following at December 31, 2020 (in thousands):

December 31, 2020

2 unchanged sentences

Government agency securities

Equity securities included in other non-current assets:

Corporate equity securities

Cash equivalents, marketable securities and equity securities consisted of the following at December 31, 2018 (in thousands):

Commercial paper

Corporate notes/bonds

Cash equivalents and marketable securities consisted of the following at December 31, 2019 (in thousands):

December 31, 2019

4 unchanged sentences

Corporate equity securities

Total cash equivalents and marketable securities

At December 31, 2019, the Company held three securities that were in an unrealized loss position.

The aggregate fair value of securities held by the Company in an unrealized loss position for less than 12 months at December 31, 2019 was $ 26.6 million, and there were no securities held by the Company in an unrealized loss position for more than 12 months.

As of December 31, 2019, the Company did not intend to sell, and was not more likely than not required to sell, the debt securities in an unrealized loss position before recovery of their amortized cost bases.

As of December 31, 2020, the Company did no t hold any marketable securities that had been in an unrealized loss position for more than twelve months.

Furthermore, the Company has determined that there were no material changes in the credit risk of the debt securities.

As a result, the Company determined it did not hold any securities with any other-than-temporary impairment as of December 31, 2019.

There were no realized gains or losses on available-for-sale securities during the years ended December 31, 2019 or 2018.

As of December 31, 2020, the Company holds 62 securities with an aggregate fair value of $ 109.7 million that had remaining maturities between one and two years.

Fair Value Measurements

7 unchanged sentences

Government agency securities

Commercial paper

Corporate bonds

Restricted cash and other non-current assets:

Corporate equity securities

Money market funds

Total financial assets

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 were as follows (in thousands):

Assets measured at fair value on a recurring basis as of December 31, 2019 were as follows (in thousands):

Quoted Prices

1 unchanged sentence

Financial Assets

Cash and cash equivalents:

Cash equivalents:

Money market funds

5 unchanged sentences

Total financial assets

There were no transfers between fair value measurement levels during the years ended December 31, 2019 or 2018.

During the year ended December 31, 2020, the Company held an investment in Beam Therapeutics Inc.

(“Beam Therapeutics”) consisting of shares of Beam Therapeutics’ common stock.

Prior to Beam Therapeutics’ initial public offering in February 2020, the Company valued such investment based on the cost of the equity securities adjusted for any observable market transactions.

Following the initial public offering, the equity securities had a readily determinable fair value, and were included in marketable securities on the consolidated balance sheet.

The Company sold this investment in October 2020, resulting in a realized gain of $ 16.4 million recorded in other income (expense), net on the consolidated statements of operations.

Property and Equipment, Net

1 unchanged sentence

Laboratory equipment

Construction-in-progress

Leasehold improvements

Computer equipment

Construction-in-progress

Furniture and office equipment

3 unchanged sentences

The Company recorded $ 4.0 million, $ 2.8 million, and $ 3.3 million in depreciation expense during the years ended December 31, 2020, 2019 and 2018, respectively.

See Note 7, “Leases” for additional information regarding ASC 842 adoption including derecognition of the building.

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

Sublicensing and success payment expenses

External research and development expenses

Employee related expenses

Intellectual property and patent related fees

Sublicensing expenses

Professional service expenses

Process and platform development expenses

Other expenses

Total accrued expenses

The Company has multiple lease agreements for office, laboratory and manufacturing space with varying contractual terms set to expire between 2021 and 2025.

2 unchanged sentences

The Company has two significant leases for office and laboratory space located in Cambridge, Massachusetts that are summarized below.

In prior periods, the Company accounted for leases as operating leases under ASC 840, Leases (“ASC 840”) and recognized straight-line rent expense over the remaining non-cancellable lease terms.

As part of its adoption of ASC 842, effective January 1, 2019, the Company elected to apply the package of practical expedients which, among other things, allowed the Company to carry forward its existing operating lease classification under ASC 840.

Prior to January 1, 2019, the Company accounted for leases as operating leases under ASC 840, Leases (“ASC 840”) and recognized straight-line rent expense over the remaining non-cancellable lease terms.

As part of its adoption of ASC 842, the Company elected to apply the package of practical expedients which, among other things, allowed the Company to carry forward its existing operating lease classification under ASC 840.

Additionally, the Company recorded right-of-use assets and lease liabilities for these operating leases on the effective date.

3 unchanged sentences

Operating lease liabilities, noncurrent

During the year ended December 31, 2019, the Company recorded $ 5.6 million related to operating lease costs and $ 1.0 million related to variable year costs associated with the Company’s operating leases under ASC 842.

Under ASC 840, the Company incurred rent expense of approximately $ 1.8 million and $ 1.2 million during the years ended December 31, 2018 and 2017, respectively.

During the years ended December 31, 2020 and 2019, the Company recorded $ 10.5 million and $ 5.6 million related to operating lease costs and $ 1.1 million and $ 1.0 million related to variable costs associated with the Company’s operating leases under ASC 842, respectively.

Under ASC 840, the Company incurred rent expense of approximately $ 1.8 million during the year ended December 31, 2018.

Maturities of the Company’s lease liabilities in accordance with ASC 842 as of December 31, 2020 were as follows (in thousands):

4 unchanged sentences

Total operating lease liabilities at December 31, 2020

The weighted-average remaining lease terms are 4.2 years and the weighted-average discount rate is 8.9 %.

The weighted-average remaining lease term is 3.4 years and the weighted-average discount rate is 8.8 %.

Hurley Street

4 unchanged sentences

The letter of credit, which is collateralized by the Company, is recorded in restricted cash and other non-current assets in the accompanying consolidated balance sheets as of December 31, 2020 and December 31, 2019.

The Company subleased approximately 10,000 square feet of the Hurley Street premises pursuant to a sublease, which commenced in February 2017 and terminated in June 2018.

The Company has the option to extend the lease for an additional five-year term at market-based rates.

The base rent payments commenced in November 2016 and continue through the term of the lease and are subject to increases over the term of the lease.

One Main Street

In December 2019, the Company entered into a lease agreement for 31,571 square feet of office space located on One Main Street in Cambridge, Massachusetts.

The term of the lease will begin on January 15, 2020 and continues until January 2025.

The term of the lease began on January 15, 2020 and continues until January 2025.

In connection with the lease and as a security deposit, the Company issued a letter of credit in the amount of approximately $ 0.8 million in January 2020.

The Company has the option to extend the lease for an additional five-year term at market-based rates.

The base rent payments will commence in January 2020 and continue through the term of the lease and are subject to increases

over the term of the lease.

The base rent payments commenced in January 2020 and continue through the term of the lease and are subject to increases over

the term of the lease.

Commitments and Contingencies

11 unchanged sentences

The Company fully settled the outstanding principal and accrued interest on the Initial Research Notes by issuing 330,617 shares of common stock to Broad in June 2018.

The Company triggered a Success Payment under the Broad Sponsored Research Agreement during the fourth quarter of 2020 when the Company’s average market capitalization (as determined pursuant to the agreement) reached $ 2.5 billion.

The Company accrued $ 12.5 million related to the Success Payment in the consolidated balance sheet at December 31, 2020.

In January 2021, the Company settled this liability through the issuance of shares of its common stock.

Other than the Initial Research Payments, the Company is not required to make additional Research Funding Payments if the Company, whether directly or through its affiliates or sublicensees, is not researching, developing, or commercializing products based on or incorporating inventions exclusively licensed to the Company from Broad under Sponsored Invention Licenses or based on or incorporating CRISPR technology owned, co-owned, or controlled by Broad and otherwise licensed to the Company, subject to certain exclusions (an “Applicable Product” and such exemption from payment, the “Funding Exemption”).

2 unchanged sentences

Unless the Company has undergone a change in control, Market Cap Research Funding is payable by the Company in cash, common stock, or in the form of promissory notes, which may be settled in shares of common stock at the election of the Company.

Following a change in control of the Company, Company Sale Research Funding is required to be made in cash.

Following a change in control of the Company, Company Sale Research Funding is

required to be made in cash.

The Sponsored Research Agreement is terminable by each party upon the occurrence of specified bankruptcy events of the other party and otherwise will continue in effect until the later of the expenditure of all Research Funding Payments by Broad and such time as the Company has no further rights of first negotiation for Sponsored Invention Licenses, unless otherwise mutually agreed between the parties.

20 unchanged sentences

Broad and Wageningen are collectively entitled to receive clinical and regulatory milestone payments totaling up to $ 20.0 million in the aggregate per licensed product approved in the United States, European Union, and Japan for the prevention or treatment of a human disease that afflicts at least a specified number of patients in the aggregate in the United States.

or treatment of a human disease that afflicts at least a specified number of patients in the aggregate in the United States.

The Company is also obligated to make additional payments to Broad and Wageningen, collectively, of up to an aggregate of $ 54.0 million upon the occurrence of certain sales milestones per licensed product for the prevention or treatment of a human disease that afflicts at least a specified number of patients in the aggregate in the United States.

Broad and Wageningen are collectively entitled to receive clinical and regulatory milestone payments totaling up to $ 6.0 million in the aggregate per licensed product approved in the United States, European Union and Japan for the prevention or treatment of a human disease that afflicts fewer than a specified number of patients in the aggregate in the United States or a specified number of patients per year in the United States (an “Ultra-Orphan Disease”).

13 unchanged sentences

The Company issued promissory notes for both Success Payments that were settled in 271,347 shares and 150,606 shares of common stock in August 2017 and January 2018, respectively.

The Company triggered the third Cpf1 Success Payment during the fourth quarter of 2020 when the Company’s average market capitalization (as determined pursuant to the agreement) reached $ 2.5 billion.

The Company accrued $ 15.0 million related to the Success Payment in the consolidated balance sheet for the year ended December 31, 2020.

In January 2021, the Company settled this liability through the issuance of shares of its common stock.

Unless terminated earlier, the term of the Cpf1 License Agreement will expire on a country-by-country basis, upon the expiration of the last to expire valid claim of the Cpf1 Patent Rights in such country.

The Company has the right to terminate the Cpf1 License Agreement at will upon four months’ written notice to Broad.

Either party may terminate the Cpf1 License Agreement upon a specified period of notice in the event of the other party’s uncured material breach of a material obligation, such notice period varying depending on the nature of the breach.

Either party may

terminate the Cpf1 License Agreement upon a specified period of notice in the event of the other party’s uncured material breach of a material obligation, such notice period varying depending on the nature of the breach.

Broad may terminate the Cpf1 License Agreement immediately if the Company challenges the enforceability, validity, or scope of any Cpf1 Patent Right or assist a third party to do so, or in the event of the Company’s bankruptcy or insolvency.

Amendment and Restatement of Cas9-I License Agreement

non-exclusive, subject to the limitation that each of Broad and Harvard would only be permitted to grant a license to only one third party at a time with respect to each such target within the field of the exclusive license, and to revise certain provisions relating to the rights of Harvard and Broad to grant further licenses under specified circumstances to third parties that wish to develop and commercialize products that target a particular gene and that otherwise would fall within the scope of the exclusive license under this agreement, so that Harvard and Broad together would have rights substantially similar to the equivalent rights possessed by Broad under the Cpf1 License Agreement to designate gene targets for which the designating institution, whether alone or together with an affiliate or third party, has an interest in researching and developing products that would otherwise be covered by rights licensed by Harvard and/or Broad to the Company under this agreement, the Cpf1 License Agreement or the Cas9-II License Agreement.

In December 2016, the Company amended and restated the Cas9-I License Agreement (such agreement, as amended, the “Amended and Restated Cas9-I License Agreement”) to exclude additional fields from the scope of the exclusive license previously granted to the Company, to make the exclusive license to three targets become non-exclusive, subject to the limitation that each of Broad and Harvard would only be permitted to grant a license to only one third party at a time with respect to each such target within the field of the exclusive license, and to revise certain provisions relating to the rights of Harvard and Broad to grant further licenses under specified circumstances to third parties that wish to develop and commercialize products that target a particular gene and that otherwise would fall within the scope of the exclusive license under this agreement, so that Harvard and Broad together would have rights substantially similar to the equivalent rights possessed by Broad under the Cpf1 License Agreement to designate gene targets for which the designating institution, whether alone or together with an affiliate or third party, has an interest in researching and developing products that would otherwise be covered by rights licensed by Harvard and/or Broad to the Company under this agreement, the Cpf1 License Agreement or the Cas9-II License Agreement.

In March 2017, the Company and Harvard and Broad further amended the Amended and Restated Cas9-I License Agreement to (i) grant an exclusive license from Broad to the Company with respect to certain patent rights that The Rockefeller University (“Rockefeller”) has or may have rights in and to and for which Rockefeller has, under a certain inter-institutional agreement that Broad and Rockefeller entered into in February 2017, appointed Broad as sole and exclusive agent for the purposes of licensing and (ii) provide to Rockefeller certain rights, including with respect to patent enforcement, indemnification, insurance, confidentiality, reservation of certain rights, and publicity, that are generally consistent with those granted to Broad, Harvard, MIT and the Howard Hughes Medical Institute under the Amended and Restated Cas9-I License Agreement.

8 unchanged sentences

The potential success payments range from a low seven digit dollar amount to a low eight digit dollar amount and will not exceed, in aggregate, $ 30.0 million, which maximum amount would be owed only if the Company reaches a market capitalization threshold of $ 9.0 billion and has at least one product candidate covered by a claim of a patent right licensed to the Company under either the Cas9-I License Agreement or the Cas9-II License Agreement that is or was the subject of a clinical trial pursuant to development efforts by the Company or any Company affiliate or sublicensee.

The Company triggered the first Success Payment under the Cas9-II License Agreement during the fourth quarter of 2017 when the Company’s market capitalization reached $ 1.0 billion, which the Company settled by issuing 75,303 shares of its common stock in January 2018.

Company triggered the first Success Payment under the Cas9-II License Agreement during the fourth quarter of 2017 when the Company’s market capitalization reached $ 1.0 billion, which the Company settled by issuing 75,303 shares of its common stock in January 2018.

Licensor Expense Reimbursement

The Company is obligated to reimburse to Broad and Harvard for expenses incurred by each of them associated with the prosecution and maintenance of the patent rights that the Company licenses from them pursuant to the license agreement by and among the Company, Broad and Harvard, including the interference and opposition proceedings involving patents licensed to the Company under the license agreement, and other license agreements between the

Company and Broad.

As such, the Company anticipates that it has a substantial commitment in connection with these proceedings until such time as these proceedings have been resolved, but the amount of such commitment is not determinable.

4 unchanged sentences

Collaboration Revenue

As of December 31, 2019, the Company’s contract liabilities were primarily related to the Company’s collaboration with Juno Therapeutics and strategic alliance with Allergan.

As of December 31, 2020, the Company’s contract liabilities were primarily related to the Company’s collaboration with Juno Therapeutics as well as other out-license agreements that are individually insignificant.

The following table presents changes in the Company’s accounts receivable and contract liabilities for the year ended December 31, 2020 (in thousands):

1 unchanged sentence

Balance at December 31, 2019

December 31, 2019

Balance at December 31, 2020

Accounts receivable

9 unchanged sentences

In May 2015, the Company entered into a collaboration and license agreement (the “Collaboration Agreement”) with Juno Therapeutics and in May 2018 the Company and Juno Therapeutics entered into an amended and restated collaboration and license agreement (the Collaboration Agreement, as amended and restated, the “2018 Amended Collaboration Agreement”).

The collaboration was initially focused on the research and development of engineered T cells with chimeric antigen receptors and T cell receptors that have been genetically modified to recognize and kill other cells.

In November 2019 (the “Amendment Date”), the Company amended and restated the 2018 Amended Collaboration and entered into a license agreement (the 2018 Amended Collaboration Agreement, as amended and restated, and collectively with the license agreement, the “2019 Amended Collaboration Agreement”) to focus on the research, development, and commercialization of autologous and allogenic alpha-beta T cell medicines for the treatment of all diseases, subject to certain exceptions.

2018 Amended Collaboration Agreement

Pursuant to the 2018 Amended Collaboration Agreement, the Company and Juno Therapeutics were pursuing

research in accordance with a mutually agreed upon research plan across four research areas.

Pursuant to the 2018 Amended Collaboration Agreement, the Company and Juno Therapeutics were pursuing research in accordance with a mutually agreed upon research plan across four research areas.

The 2018 Amended Collaboration Agreement increased the scope of the research plan from three to four research areas.

13 unchanged sentences

Royalties would have been paid on a licensed product-by-product and country-by-country basis from the date of the first commercial sale of each product in a country until the expiration date.

The Company achieved two $ 2.5 million development milestones under the Collaboration Agreement resulting from technical progress in a research program in each of May 2016 and July 2017.

The Company achieved two $ 2.5 million development milestones under the Collaboration Agreement resulting

from technical progress in a research program in each of May 2016 and July 2017.

The Company also achieved two additional $ 2.5 million development milestones under the 2018 Amended Collaboration Agreement resulting from technical progress in a research program in May 2018.

2 unchanged sentences

The Company identified the following performance obligations under the modified arrangement:

(i) Research License and the related research and development services during the Initial Research Program Term (the “Research License and Related Services”), (ii) four material rights related

to the first Development and Commercialization Licenses related to each of the four research areas (each, a “First Development and Commercialization License Material Right”) and (iii) six material rights related to the option to purchase up to three additional Development and Commercialization Licenses for two of the research areas (each, an “Additional Development and Commercialization License Material Right”).

(i) Research License and the related research and development services during the Initial Research Program Term (the “Research License and Related Services”), (ii) four material rights related to the first Development and Commercialization Licenses related to each of the four research areas (each, a “First Development and Commercialization License Material Right”) and (iii) six material rights related to the option to purchase up to three additional Development and Commercialization Licenses for two of the research areas (each, an “Additional Development and Commercialization License Material Right”).

The rights to be conveyed to Juno Therapeutics pursuant to each of the Development and Commercialization Licenses extend exclusively to an individual target or product, as applicable;

19 unchanged sentences

The Company may then present a Program to Juno Therapeutics for Juno Therapeutics to evaluate against predefined criteria.

To assess the Programs prior to opt-in, the Company granted Juno Therapeutics a non-exclusive perpetual research license in the Juno Field.

To assess the Programs prior to opt-in, the Company granted Juno Therapeutics a

non-exclusive perpetual research license in the Juno Field.

Juno Therapeutics has the option to obtain an exclusive, worldwide, development and commercialization license to each of the Programs in the Juno Field for a nominal option exercise fee.

2 unchanged sentences

Juno Therapeutics has the right to terminate the 2019 Amended Collaboration Agreement at any time upon no less than six months prior written notice.

The development and commercialization licenses granted to Juno Therapeutics are subject to the terms and

conditions of a license agreement that was entered into on the same day as the 2019 Amended Collaboration Agreement.

The development and commercialization licenses granted to Juno Therapeutics are subject to the terms and conditions of a license agreement that was entered into on the same day as the 2019 Amended Collaboration Agreement.

Pursuant to the license agreement, Juno Therapeutics must use commercially reasonable efforts and meet certain regulatory and commercial diligence requirements.

9 unchanged sentences

The contract modification was accounted for on a prospective basis as if it were a termination of the existing contract and the creation of a new contract since the promised goods and services were distinct from the goods and services that were transferred on or before the effective date of the amendment.

The Company has identified the following performance obligations under the 2019 Amended Collaboration Agreement:

The Company identified the following performance obligations under the 2019 Amended Collaboration Agreement:

(i) First 2019 Development and Commercialization License and (ii) seventeen material rights for additional development and commercialization licenses for other Programs.

6 unchanged sentences

The Company considers the stage of development and the risks associated with the remaining development required to achieve the milestone, as well as whether the achievement of the milestone is outside the control of the Company or Juno Therapeutics.

The outstanding milestone payments and extension term fees were fully constrained as of December 31, 2019, as a result of the uncertainty of whether any of the milestones will be achieved or the term would be extended.

The outstanding milestone payments and extension term fees were fully constrained as of December 31,

2019, as a result of the uncertainty of whether any of the milestones will be achieved or the term would be extended.

The Company has determined that any commercial milestones and sales-based royalties will be recognized when the related sales occurs.

2 unchanged sentences

Each development and commercialization license is differentiated only by the Program to which it relates.

The Company has considered the early stage of the science and the uncertainty of success and concluded that the

probability of scientific success and opt-in is equal amongst all Programs.

The Company has considered the early stage of the science and the uncertainty of success and concluded that the probability of scientific success and opt-in is equal amongst all Programs.

In addition, each Program is multi-functional, and a combination of Programs can be utilized in the development of a product candidate.

1 unchanged sentence

The Company will recognize the transaction price allocated to each material right when the material right is exercised, lapsed or expired.

During the year ended December 31, 2019, the Company recognized $ 6.2 million of the $ 102.5 million transaction price upon delivery of the First 2019 Development and Commercialization License and deferred the remaining $ 96.3 million allocated to the material rights.

During the year ended December 31, 2020 and 2019, the Company recognized $ 11.3 million and $ 6.2 million of revenue related to Juno Therapeutics.

As of December 31, 2020, the Company recorded $ 90.7 million of deferred revenue, of which $ 73.7 million is classified as long-term on our condensed consolidated balance sheet.

As of December 31, 2019, the $ 96.3 million was classified as long-term in the accompanying consolidated balance sheets.

During the year ended December 31, 2019 and 2018, the Company incurred $ 11.3 million and $ 1.7 million in sublicense fees owed to certain of the Company’s licensors in connection with the 2019 Amended Collaboration Agreement and 2018 Amended Collaboration Agreement, respectively, which the Company recorded as research and development expenses during such periods.

The sublicense fee owned in connection with the 2019 Amended Collaboration Agreement is fully accrued in the consolidated balance sheet as of December 31, 2019.

During the year ended December 31, 2020, 2019 and 2018, the Company incurred $ 0.8 million, $ 11.3 million and $ 1.7 million in sublicense fees owed to certain of the Company’s licensors in connection with certain exercise and milestone payments triggered in 2020, and the 2019 Amended Collaboration Agreement, respectively, which the Company recorded as research and development expenses during such periods.

The sublicense fee owed in connection with the milestone payment is fully accrued in the consolidated balance sheet as of December 31, 2020.

Allergan Pharmaceuticals Strategic Alliance and Profit-Sharing Agreement

In March 2017, the Company entered into a Strategic Alliance and Option Agreement with Allergan to discover, develop, and commercialize new gene editing medicines for a range of ocular disorders (the “Allergan Agreement”).

Over a seven-year research term, Allergan will have an exclusive option to exclusively license from the Company up to five collaboration development programs for the treatment of ocular disorders (each, a “CDP”), including the Company’s Leber congenital amaurosis 10 (“LCA10”) program and the related experimental therapeutic EDIT-101 to treat LCA10 (the “LCA10 Program”).

Under the Allergan Agreement, the Company will use commercially reasonable efforts to develop at least five CDPs and deliver preclinical results and data meeting specified criteria with respect to each CDP (each, an “Option Package,” and such criteria, the “Option Package Criteria”) to Allergan.

The list of proposed targets that may be subject to a CDP may be amended from time to time by mutual agreement of the Company and Allergan.

The Company is responsible for the preparation and delivery of a written development plan for each particular CDP setting forth the discovery and research activities to be conducted which is subject to the approval of the alliance steering committee that was formed under the Allergan Agreement, comprised of three members from each of the Company and Allergan (the “Steering Committee”).

The Company will maintain primary responsibility for the development efforts under each CDP.

The Company is responsible for all research and development costs prior to the achievement of the Option Package Criteria.

Allergan will have the ability for a defined period of time (“Initial Option Period”) to exercise an option (each, an “Option”) to obtain a worldwide right and license to the Company’s background intellectual property and the Company’s interest in the CDP intellectual property to develop, commercialize, make, have made, use, offer for sale, sell, and import any gene editing therapy product that results from such CDP during the term of the Allergan Agreement (a “Licensed Product”) in any category of human diseases and conditions other than the diagnosis, treatment or prevention of any cancer in humans through the use of engineered T-cells and subject to specified other limitations.

Allergan has the option to extend the Initial Option Period and require the Company to perform additional research and development services, subject to the payment of additional consideration.

After exercise of an Option with respect to a CDP, with the exception of any CDP’s where the Company has exercised its profit-sharing option, Allergan will be responsible for all development, manufacturing, and commercialization activities in connection with licensed products arising from such CDP, other than with respect to the LCA10 Program, if LCA10 is designated as a CDP.

Pursuant to the Allergan Agreement, the Company granted Allergan an exclusive option (each, an “Option”) to exclusively license from the Company up to five collaboration development programs for the treatment of ocular disorders (each, a “CDP”), including the Company’s Leber congenital amaurosis 10 (“LCA10”) program and the related experimental therapeutic EDIT-101 to treat LCA10 (the “LCA10 Program”).

In July 2018, Allergan exercised its Option with respect to the LCA10 Program.

In connection with such exercise, Allergan paid the Company $ 15.0 million.

Following such exercise, the Company exercised its Profit-Share Election, as defined below, with respect to the LCA10 Program.

Following such election, the LCA10 Program became subject to a Profit-Sharing Arrangement, as defined below, and the Company and an affiliate of Allergan entered into a separate profit-sharing agreement with respect to the Profit-Sharing Arrangement for the LCA10 Program in February 2019.

The initial term of the Allergan Agreement commenced on March 14, 2017 and continues for seven years ending on March 14, 2024 (the “Research Term”).

If the Company has not delivered an Option Package, which includes the results and data from the CDP, for five CDPs that satisfy the Option Package Criteria, then the Research Term will

automatically extend by one-year increments until such obligation is satisfied, up to a maximum of ten years from March 2017.

The activities under the Allergan Agreement during the Research Term will be governed by the Steering Committee.

The Steering Committee will review and monitor the direction of the development plan, evaluate and determine which targets are selected to become CDP, establish the Option Package Criteria for each CDP and evaluate the achievement of such criteria as well as oversee the development and commercialization activities after Allergan has licensed a CDP.

Following such exercise, the Company exercised its profit-share election with respect to the LCA10 Program, following which the Company and an affiliate of Allergan entered into a separate Profit-Sharing Agreement with respect to the LCA10 Program in February 2019.

On August 5, 2020, the Company and Allergan terminated the Allergan Agreement and the Profit-Sharing Agreement.

Under the terms of the Allergan Agreement, the Company received a $ 90.0 million up-front, non-refundable, non-creditable cash payment related to the Company’s research and development costs for option packages for at least five CDPs and for reimbursement of the Company’s past out-of-pocket costs with respect to the prosecution and defense of patents that it owns and in-licenses.

Allergan has the option to purchase at least five development and commercialization licenses associated with CDPs that have satisfied the Option Package Criteria.

The option exercise fee during the Initial Option Period is $ 15.0 million per CDP.

If Allergan elects to extend the Initial Option Period, Allergan is required to pay an additional fee of $ 5.0 million to extend the option, at which point the Company is required to perform additional research services.

If Allergan elects to exercise its option to a development and commercialization license after extending the Initial Option Period, Allergan must pay the Company the option exercise fee of $ 22.5 million, plus specified costs incurred by the Company in connection with the additional development work.

Following the exercise by Allergan of an Option with respect to a CDP, Allergan would be required to make certain milestone payments to the Company upon the achievement of specified development, product approval and launch and commercial events, on a CDP by CDP basis.

On a CDP by CDP basis, for the first product in the first field to achieve the associated event, the Company is eligible to receive up to an aggregate of $ 42.0 million for development milestone payments and $ 75.0 million for product approval and launch milestone payments, in each case, for an indication in the field per CDP.

In addition, the Company is eligible to receive additional development and product approval and launch milestone payments for subsequent products developed within two additional fields.

The Company is also eligible for up to $ 90.0 million in sales milestone payments on a CDP by CDP basis, associated with aggregate worldwide sales.

Certain product approval milestones are subject to certain reductions under specified circumstances, including for payments required to be made by Allergan to obtain certain third party intellectual property rights.

Following the exercise by Allergan of its Option with respect to the LCA10 Program, Allergan was required to make certain milestone payments to the Company upon the achievement of specified development, product approval and launch and commercial events.

In December 2018, the Company received a $ 25.0 million payment from Allergan in connection with the acceptance of the IND for the LCA10 Program, the Company’s experimental therapeutic generated under the LCA10 Program (the “LCA-10 Program Milestone Payment”).

With respect to the LCA10 Program, and up to one other CDP of the Company’s choosing, following the exercise by Allergan of its Option to such programs the Company will have the right to elect to participate in a profit-sharing arrangement with Allergan in the United States, on terms mutually agreed by the Company and Allergan and subject to a right of Allergan to reject such election under certain circumstances, under which the Company and Allergan would share equally in net profits and losses on specific terms to be agreed between the Company and Allergan, in lieu of Allergan paying royalties on net sales of any applicable Licensed Products in the United States, and in such event Allergan’s milestone payment obligations would be reduced, with the Company being eligible to receive development and product approval and launch milestone payments up to a low nine-digit amount in the aggregate and further sales milestone payments up to a high-eight digit amount in the aggregate, subject to reduction under certain circumstances (such right, the “Profit-Share Election,” and such arrangement, a “Profit-Sharing Arrangement”).

If the Company elects to participate in a Profit-Sharing Arrangement, which it has for the LCA10 Program, the Company is obligated to reimburse Allergan for half of the United States development costs incurred by Allergan with respect to the applicable CDP, and Allergan will retain control of all development and commercialization activities for the applicable Licensed Products.

In addition, to the extent there is any Licensed Product, the Company would be entitled to receive tiered royalty payments of high single digits based on a percentage of net sales of such Licensed Product, subject to certain reductions under specified circumstances, and the Company will remain obligated to pay all license fees, milestone payments, and royalties due to its upstream licensors based on Allergan’s exercise of its license rights with respect to Licensed Products.

However, if a Licensed Product is subject to a Profit-Sharing Arrangement the royalties will only be paid on

Royalties are due on a Licensed Product by Licensed Product and country by country basis from the date of the first commercial sale of each Licensed Product in a country until the later of:

(i) the tenth anniversary of the first commercial sale of such Licensed Product in such country, (ii) the expiration date in such country of the last to expire valid claim within the licensed intellectual property covering the manufacture, use or sale of such Licensed Product in such country and (iii) the expiration of an exclusive legal right granted by the regulatory authority in such country to market and sell such Licensed Product.

Unless earlier terminated, the Allergan Agreement will terminate upon (i) the expiration of the Research Term, if Allergan does not exercise an Option, (ii) on a Licensed Product-by-Licensed Product and country-by-country basis, on the date of the expiration of all payment obligations under the Allergan Agreement with respect to such Licensed Product in such country or (iii) in its entirety upon the expiration of all payment obligations with respect to the last Licensed Product in all countries, unless terminated earlier due to the early termination provisions.

Either party may terminate the Allergan Agreement if the other party has materially breached or defaulted in the performance of any of its material obligations and such breach or default continues after the specified cure period.

During the Research Term, Allergan will have the right to terminate the Allergan Agreement on a CDP by CDP basis in the event of a change in control of the Company or for all CDPs, provided that Allergan will not have any right to exercise an Option for any CDPs following such termination.

After the exercise of an Option, Allergan will have the right, at its sole discretion, to terminate the Allergan Agreement, on a CDP by CDP basis, upon 90 days ’ written notice.

The Company may terminate the Allergan Agreement in the event that Allergan brings, assumes, or participates in, or knowingly, willfully or recklessly assists in bringing a dispute or challenge against the Company related to its intellectual property.

Lastly, Allergan may terminate the Allergan Agreement with respect to a CDP if a safety concern, as specified in the Allergan Agreement, arises.

Termination of the Allergan Agreement for any reason will not release either party from any liability which, at the time of such termination, has already accrued to the other party or which is attributable to a period prior to such termination.

In addition, termination of the Allergan Agreement will not preclude either party from pursuing any rights and remedies it may have under the agreement or at law or in equity with respect to any breach of the Allergan Agreement.

If Allergan terminates the Allergan Agreement as a result of the Company’s uncured material breach or default, then:

(i) the licenses and rights conveyed to Allergan will continue as set forth in the agreement for any CDP Allergan has already licensed and (ii) Allergan’s obligations related to milestones and royalties will continue as set forth in the agreement.

If the Allergan Agreement is terminated for any other reason, then the options and licenses conveyed to Allergan under the agreement will terminate.

Under the Allergan Agreement, the Company has identified a single performance obligation that includes (i) the research and development services during the Research Term (the “Allergan R&D Services”), and (ii) Steering Committee services during the Research Term (the “ASC Services”).

The Company has concluded that the Allergan R&D Services is not distinct from the ASC Services during the Research Term.

The Steering Committee provides oversight and management of the overall Allergan Agreement, and the members of the Steering Committee from the Company have specialized industry knowledge, particularly as it relates to genome editing technology.

The Steering Committee is meant to facilitate the early stage research being performed and coordinate the activities of both the Company and Allergan.

Further, the Steering Committee services are critical to the selection of a CDP, the ongoing evaluation of a CDP and the development and evaluation of the Option Package Criteria.

Accordingly, the Company’s participation on the Steering Committee is essential to Allergan receiving value from the Allergan R&D Services and as such, the ASC Services along with the Allergan R&D Services are considered one performance obligation (the “CDP Services”).

In addition, the Company has concluded that the option to purchase five development and commercialization licenses is considered a marketing offer as the options did not provide any discounts or other rights that would be considered a material right in the arrangement.

As of January 1, 2018, the date of the initial application of ASC 606 by the Company, the total transaction price was determined to be $ 90.0 million, consisting solely of the upfront non-refundable, non-creditable cash payment.

The Company also utilized the most likely amount method to estimate any development and regulatory milestone payments to be received.

As of January 1, 2018, there were no milestones included in the transaction price.

The milestones were fully constrained due to the significant uncertainties surrounding such payments.

The Company considered the stage of development and the risks associated with the remaining development required to achieve the milestone, as well as

whether the achievement of the milestone is outside the control of the Company or Allergan.

Upon achievement of the EDIT-101 Milestone Payment, $ 25.0 million was added to the transaction price in November 2018.

As of December 31, 2019, the total transaction price is $ 115.0 million.

The remaining milestone payments were fully constrained, as a result of the uncertainty as to whether any of the milestones would be achieved, as of December 31, 2019.

The Company has determined that any commercial milestones and sales-based royalties will be recognized when the related sales occur and therefore have also been excluded from the transaction price.

The Company re-evaluates the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur.

The Company recognizes revenue related to the CDP Services as the underlying services are performed using a proportional performance model.

The Company measures proportional performance based on full time employee hours relative to projected full time employee hours to complete the research service.

During the year ended December 31, 2019, the Company recognized revenue under the Allergan Agreement of approximately $ 13.6 million.

During the year ended December 31, 2018, the Company recognized revenue under the Allergan Agreement of approximately $ 21.5 million, which includes $ 15.0 million related to the LCA10 Option Exercise Payment.

The LCA10 Option Exercise Payment was recognized upon the grant to Allergan of the right to use intellectual property associated with the development and commercialization license for LCA10 and final decision making authority with respect to the LCA10 Program.

As of December 31, 2019 and 2018, there was $ 85.6 million and $ 99.2 million of deferred revenue related to the Allergan Agreement, respectively, of which $ 63.8 million and $ 86.4 million is classified as long-term on the consolidated balance sheet, respectively.

As part of the Profit-Sharing Arrangement, the Company and an affiliate of Allergan will equally split U.S.

profits and losses for the LCA10 Program in the United States and will co-develop the LCA10 Program in the United States.

The Company accounts for the Profit-Sharing Arrangement with respect to the LCA10 Program within the scope of ASC Topic 808, Collaborative Arrangements , given that the Company and the Allergan Entities are active participants in future research and development activities and all parties are exposed to significant risks and rewards dependent on the commercial success of such activities.

During the years ended December 31, 2019 and 2018, the Company and Allergan incurred $ 18.6 million and $ 5.9 million in expense associated with the LCA10 Program after the option exercise, respectively, of which the Company recognized 50 % in operating expense during such period.

The reimbursement of $ 1.8 million and $ 2.3 million is classified as prepaid expenses and other current assets and the liability of $ 2.6 million and $ 0.6 million in expenses owed to Allergan is classified as other current liabilities in the consolidated balance sheet as of December 31, 2019 and 2018, respectively.

During the year ended December 31, 2018, the Company incurred $ 6.0 million in sublicense fees owed to certain of the Company’s licensors in connection with the LCA10 Option Exercise Payment and EDIT-101 Milestone Payment, which the Company recorded as research and development expenses during such period, of which $ 3.8 million were accrued in the consolidated balance sheet as of December 31, 2018.

There were no sublicense fees incurred during the year ended December 31, 2019 related to Allergan.

Following the exercise by Allergan of its Option with respect to the LCA10 Program, the Company elected to participate in a profit-sharing arrangement with Allergan in the United States, under which the Company and Allergan agreed to share equally in net profits and losses, in lieu of Allergan paying royalties on net sales of any gene editing

therapy products that results from the LCA10 Program in the United States, and Allergan’s applicable milestone payment obligations were reduced (the “Profit-Sharing Agreement”).

Pursuant to the Profit-Sharing Agreement, the Company was obligated to reimburse Allergan for half of the United States development costs incurred by Allergan with respect to the LCA10 Program, and Allergan retained control of all development and commercialization activities.

Termination Agreements

Allergan was acquired by AbbVie Inc.

On August 5, 2020, the Company and Allergan agreed to terminate the strategic alliance and option agreement (the “Collaboration Agreement”) that was entered into in May 2017 and the profit-sharing arrangement (together with the Collaboration Agreement, the “Initial Agreements”) to equally split U.S.

profit and losses of EDIT-101, an experimental medicine for Leber congenital amaurosis 10 (“LCA10”) that was originally licensed to Allergan under the Collaboration Agreement (the “Termination Agreement”).

In addition, in connection with the termination, the Company entered into a transition services agreement with Allergan (together with the Termination Agreement, the “Termination Agreements”), primarily to facilitate the transfer of EDIT-101 back to the Company.

Pursuant to the Termination Agreements, the Company regained full global rights to research, develop, manufacture, and commercialize its ocular medicines, including EDIT-101.

Allergan has no further obligations pursuant to the Initial Agreements, all unexercised options and contingent payments contemplated under the Initial Agreements have terminated, which includes Allergan’s worldwide developmental and commercialization rights to EDIT-101.

Under the Termination Agreements, Allergan granted the Company a non-exclusive license to certain know-how that is necessary to develop, manufacture and commercialize EDIT-101 and will transfer to the Company certain materials produced under the Collaboration Agreement.

The Company will use commercially reasonable efforts to develop and commercialize products directed at four collaboration targets, one of which is LCA10.

In connection with the Termination Agreements, the Company agreed to make a $ 20.0 million payment to Allergan, $ 17.5 million of which was paid as of December 31, 2020.

In addition, the Company will make certain payments on achievements of clinical and regulatory milestones up to $ 20.0 million for each target program and aggregated sales milestones for all products covered by the Termination Agreement up to $ 90.0 million.

Allergan is also entitled to royalties in a low-single digit percentage, subject to reduction under specified circumstances, on net sales of specified products.

The Company’s obligation to pay royalties will expire on a country-by-country and product-by-product basis upon the later of the expiration of regulatory-based exclusivity with respect to such product in such country and the tenth anniversary of the first commercial sale of such product.

Lastly, the Company is obligated to pay for a portion of the transition services.

Accounting Assessment

The Company evaluated the Termination Agreements in accordance with the provisions of Accounting Standards Codification (“ASC”) 606 and concluded that they resulted in a modification followed by a termination of the Initial Agreements.

Upon execution of the Termination Agreements, the Company is no longer obligated to transfer control of any goods or services to Allergan, and therefore there are no remaining performance obligations.

As part of this assessment, the Company considered that Allergan relinquished its right to the remaining exclusive license options under the Collaboration Agreement and the Company reacquired the development and commercialization rights to EDIT-101.

Allergan no longer has any involvement in the development activities of the collaboration targets.

Since there are no remaining performance obligations, the Company accounted for the modification as part of the existing contract with a cumulative catch-up adjustment.

The Company applied the vendor consideration to a customer guidance pursuant to ASC 606 in accounting for the $ 20 million payment due to Allergan and concluded that the worldwide rights to EDIT-101 represent a distinct good or service.

The Company therefore recorded the fair value of the rights to EDIT-101 of $ 5 million as in-process Research and Development expense as of December 31, 2020 as the rights had no alternative future use.

The remainder of the $ 20 million was recorded as a reduction to the contract liability that was recognized as revenue upon termination.

The contingent payments associated with the collaboration targets not previously licensed by Allergan under the Collaboration Agreement did not impact the amount of deferred revenue recognized upon termination because it is not probable that a significant reversal of revenue will occur.

The contingent milestone and royalty payments associated with EDIT-101 qualify for scope exceptions from derivative accounting, and therefore there is no accounting

for the contingent payments upon termination.

On the termination date, the Company recognized $ 62.1 million of previously deferred revenue related to the Collaboration Agreement.

This amount consisted of $ 77.1 million of revenues that were previously deferred related to the collaboration agreement, partially offset by $ 15.0 million of the fee paid to Allergan that was determined to exceed the fair value of the re-acquired rights to EDIT-101.

During the year ended December 31, 2020, the Company recognized revenue of $ 70.6 million related to the Allergan arrangement.

During the years ended December 31, 2019 and 2018, the Company recognized revenue of $ 13.6 million and $ 21.5 million, respectively, under the Allergan Agreement.

At December 31, 2020 there was no remaining contract liability related to the Allergan arrangement.

Beam Therapeutics License Agreement

5 unchanged sentences

Additionally, the Company granted to Beam a royalty-free, non-exclusive license under certain intellectual property owned or controlled by the Company to perform research activities in the Beam Field (the “Beam Research License”).

The Company provided Beam with an exclusive option to obtain a Beam Development and Commercialization License to three additional groups of intellectual property owned or controlled by the Company, on a group by group basis,

during the specified option period, subject to certain exceptions.

Pursuant to the Beam License Agreement, Beam will use commercially reasonable efforts to develop a product that includes the rights licensed to Beam within a specified period of time and to commercialize any such product that have received regulatory approval in certain specified countries.

6 unchanged sentences

The license rights and option rights granted to Beam are subject to the terms and conditions of the underlying license agreements that the Company is a party to and under which the Company licensed rights or option rights to Beam and the termination of such in-licenses, as applicable.

Unless earlier terminated by either party pursuant to the terms of the agreement, the Beam License Agreement will continue in full force and effect and will expire on a licensed product-by-licensed product and country-by-country basis upon the expiration of the royalty term with respect to such licensed product in such country.

Unless earlier terminated by either party pursuant to the terms of

the agreement, the Beam License Agreement will continue in full force and effect and will expire on a licensed product-by-licensed product and country-by-country basis upon the expiration of the royalty term with respect to such licensed product in such country.

Beam has the right, at its sole discretion, at any time to terminate the Beam License Agreement in its entirety or on a group-by-group of intellectual property basis, upon ninety days written notice to the Company.

10 unchanged sentences

Accordingly, the satisfaction of each performance obligation occurs at inception of the arrangement and the transaction price at the inception of the arrangement is recognized in its entirety at such time.

The Company will re-evaluate the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur.

There were no changes to the transaction price during the year ended December 31, 2019.

Following the initial public offering of Beam Therapeutics in 2020, the Company held equity securities that had a readily determinable fair value, and were included in marketable securities on the condensed consolidated balance sheet.

The Company sold this investment in October 2020, resulting in a realized gain of $ 16.4 million recorded in other income (expense), net on the consolidated statements of operations.

During the year ended December 31, 2020 and 2019, the Company recognized revenue under the Beam License Agreement of approximately $ 0.2 million and $ 0.2 million, respectively.

The Beam preferred stock is classified in restricted cash and other non-current assets.

Preferred Stock

On February 8, 2016, the Company filed a restated certificate of incorporation with the Secretary of State of the State of Delaware.

The restated certificate amended and restated the Company’s certificate of incorporation in its entirety to, among other things increase the authorized number of shares of common stock to 195,000,000 shares, eliminate all references to the previously existing series of preferred stock, and authorize 5,000,000 shares of undesignated preferred stock that may be issued from time to time by the Company’s board of directors in one or more series.

The Company’s amended and restated certificate of incorporation authorized 5,000,000 shares of undesignated preferred stock that may be issued from time to time by the Company’s board of directors in one or more series.

As of December 31, 2020 , the Company had no shares of preferred stock issued or outstanding.

12 unchanged sentences

Certain options provide for accelerated vesting in the event of a change in control, as defined in the applicable options.

Awards granted to non-employee consultants generally vest monthly over a period

of one to four years .

Awards granted to non-employee consultants generally vest monthly over a period of one to four years .

In connection with the Company’s initial public offering (“IPO”), the Company’s board of directors determined to grant no further awards under the 2013 Plan.

2015 Stock Incentive Plan

The Company’s board of directors adopted and the Company’s stockholders approved the 2015 stock incentive plan (the “2015 Plan”), which became effective immediately prior to the effectiveness of the registration statement related to the IPO.

The Company’s board of directors adopted and the Company’s stockholders approved the 2015 stock incentive plan (the “2015 Plan”).

The 2015 Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock units, stock appreciation rights and other stock-based awards.

3 unchanged sentences

2015 Employee Stock Purchase Plan

The Company’s board of directors adopted and the Company’s stockholders approved the 2015 employee stock purchase plan (the “2015 ESPP”), which became effective upon the closing of the IPO.

The Company’s board of directors adopted and the Company’s stockholders approved the 2015 employee stock purchase plan (the “2015 ESPP”).

The number of shares reserved for issuance under the 2015 ESPP is subject to annual increases, to be added as of the first day of each fiscal year, from January 1, 2017 until, and including, January 1, 2026, in an amount equal to the least of (a) 769,230 shares of common stock, (b) 1 % of the total number of shares of common stock outstanding on the first day of the applicable year, and (c) an amount determined by the board of directors.

4 unchanged sentences

Inducement awards are typically a service-based option or a restricted stock unit and are subject to the Company’s typical vesting terms and the employee’s continued service relationship with the Company through the applicable vesting dates.

In January 2020, the Company’s board of directors approved an inducement grant to the Company’s recently hired Chief Financial Officer, including an option to purchase up to 120,000 shares of the Company’s common stock and an award of 20,000 restricted stock units.

In November 2020, the Company’s board of directors approved an inducement grant to the Company’s recently hired Chief Medical Officer, including an option to purchase up to 120,000 shares of the Company’s common stock and an award of 20,000 restricted stock units.

Shares Reserved for Future Issuance

1 unchanged sentence

Shares reserved for outstanding stock option awards under the 2013 Stock Incentive Plan, as amended

Shares reserved for outstanding stock option awards under the 2015 Stock Incentive Plan

Shares reserved for outstanding stock option awards and restricted stock units under the 2015 Stock Incentive Plan

Shares reserved for outstanding inducement stock option award

5 unchanged sentences

General and administrative

Total stock-compensation expense

Total stock-based compensation expense

Restricted Stock and Restricted Stock Unit Awards

4 unchanged sentences

The expense related to restricted stock and restricted stock unit awards granted to employees and non-employees was $ 4.7 million and $ 1.6 million, respectively, for the year ended December 31, 2019.

The expense related to restricted stock and restricted stock unit awards granted to employees and non-employees was $ 0.5 and $ 4.1 million, respectively, for the year ended December 31, 2017.

As of December 31, 2019, the Company had $ 4.3 million and $ 4.5 million in unrecognized stock-based compensation expense related to its employee and non-employee unvested restricted stock and restricted stock unit awards which is expected to be recognized over a remaining weighted average vesting period of 1.8 years and 2.7 years, respectively.

The expense related to restricted stock and restricted stock unit awards granted to employees and non-employees was $ 0 million and $ 2.4 million, respectively, for the year ended December 31, 2018.

As of December 31, 2020, total unrecognized compensation expense related to unvested restricted stock and restricted stock unit awards was $ 11.9 million, which the Company expects to recognize over a remaining weighted-average period of 2.7 years.

Stock Options

3 unchanged sentences

Exercise Price

Contractual Life

Contractual Life (years)

Value (in thousands)

1 unchanged sentence

( 1,203,370 )

( 1,004,556 )

Outstanding at December 31, 2020

Exercisable at December 31, 2020

The stock options granted during the year ended December 31, 2019 include an option granted to the Company’s Chief Executive Officer to purchase 250,000 shares of the Company’s common stock that contains market-based vesting provisions.

The total intrinsic value of options exercised for the years ended December 31, 2020, 2019 and 2018 was $ 15.6 million, $ 14.6 million, and $ 15.9 million, respectively.

3 unchanged sentences

Expected volatility

Expected term (in years)

Expected option term (in years)

Risk free interest rate

Expected dividend yield

There were no options granted to persons other than employees and directors during the years ended December 31, 2019, 2018 and 2017.

As of December 31, 2019, the Company had unrecognized stock-based compensation expense related to its employee service-based stock options and market-based stock options of $ 3 4.5 million and $ 2.9 million which the Company expects to recognize over a remaining weighted average vesting period of 2.8 years and 1.5 years, respectively.

As of December 31, 2020, total unrecognized compensation expense related to stock options was $ 40.4 million, which the Company expects to recognize over a remaining weighted-average period of 2.7 years.

401(k) Savings Plan

10 unchanged sentences

Non-deductible expenses

Federal tax rate reduction

Change in valuation allowance

19 unchanged sentences

As of December 31, 2020, and 2019, the Company also had state net operating loss carryforwards of approximately $ 258.4 million and $ 183.3 million, respectively, which may be available to offset future income tax liabilities and will expire beginning in 2035 and will continue to expire through 2039.

Loss generated in 2020 expires in 2040.

Under the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the NOL and tax credit carryforward are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities.

7 unchanged sentences

The Company applies ASC 740 related to accounting for uncertainty in income taxes.

The Company’s reserves related to income taxes are based on a determination of whether, and how much of, a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit.

present related to the tax benefit.

At December 31, 2020 and 2019, the Company had no unrecognized tax benefits.

10 unchanged sentences

The Company did not have any international operations as of December 31, 2020.

There are no federal or state audits in process.

There is a 2018 IRS audit in process.

Net Loss per Share

3 unchanged sentences

Contingently issuable shares are included in diluted loss per share based on the number of shares, if any, that would be issuable under the terms of the arrangement if the end of the reporting period was the end of the contingency period, if the results are dilutive.

For purposes of the diluted net loss per share calculation, stock options are considered to be common stock equivalents, but they were excluded from the Company’s calculation of diluted net loss per share allocable to common

stockholders because their inclusion would have been anti-dilutive.

Therefore, basic and diluted net loss per share applicable to common stockholders was the same for all periods presented.

1 unchanged sentence

As of December 31,

Unvested restricted common stock

Unvested restricted stock and restricted stock unit awards

Outstanding stock options

Estimated number of shares issuable for convertible notes (1)

(1) Represents the number of shares that would have been issued if the Company had elected to pay the December Success Payment Notes, as discussed in Note 8, in shares of the Company’s common stock, based on the closing price of the common stock on December 31, 2020.

The number of shares issued, for purposes of this presentation, is calculated by dividing the principal of the notes payable, including accrued interest, by the stock price per share

The table above reflects restricted stock issued upon exercise of unvested stock options as exercised on the dates that the shares are no longer subject to repurchase.

Related-Party Transactions

The Company received $ 0.4 million and $ 0.8 million in rent and facility-related fees from a related party during the years ended December 31, 2018 and 2017, respectively, in connection with subleasing a portion of its headquarters and no rent or facility-related payments were received from this related party during the year ended December 31, 2019.

During the years ended December 31, 2018 and 2017, the Company paid a related party $ 0.8 million and $ 0.3 million, respectively, in connection with certain research and development expenses.

The Company did no t make any payments to this related party during the year ended December 31, 2019.

The Company received $ 0.4 million in rent and facility-related fees from a related party during the year ended December 31, 2018 in connection with subleasing a portion of its headquarters and no rent or facility-related payments were received from this related party during the years ended December 31, 2020 and 2019.

During the year ended December 31, 2018, the Company paid a related party $ 0.8 million in connection with certain research and development expenses.

The Company did no t make any payments to this related party during the years ended December 31, 2020 and 2019.

Selected Quarterly Financial Data (unaudited) –

11 unchanged sentences

Total other income (expense), net

Net loss applicable to common stockholders

Net loss per share applicable to common stockholders — basic and diluted

Net (loss) income

Net (loss) income applicable to common stockholders

Net (loss) income per share attributable to common shareholders:

Three months ended

9 unchanged sentences

Net loss per share applicable to common stockholders — basic and diluted

Subsequent Events

In January 2021, the Company issued an aggregate of 303,599 shares of its common stock to Broad in connection with settling the third Cpfl Success Payment and the third research payment under the Sponsored Research Agreement (see Note 8).

In January 2021, the Company triggered the second Success Payment under the Cas9-II License Agreement when the Company’s market capitalization reached $ 3.0 billion, which the Company settled in cash for a mid-seven digit dollar amount (see Note 8).

Upon achieving a market capitalization of $ 3.0 billion, the Company also triggered a mid-seven digit dollar amount success payment under another license agreement, which remains due and payable.

In January 2021, the Company completed a public offering whereby the Company sold 3,500,000 shares of its common stock and received net proceeds of approximately $ 216.9 million.

In February 2021, the underwriters in the public offering exercised their option to purchase an additional 525,000 shares, resulting in additional net proceeds to the Company of approximately $ 32.6 million.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk