Editas Medicine, Inc. 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to market risk related to changes in interest rates. As of December 31, 2020, we had cash and cash equivalents of $139.7 million, primarily held in money market mutual funds consisting of U.S. government-backed securities, and marketable securities of $372.1 million, primarily consisting of U.S. 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. interest rates, particularly because our investments, including cash equivalents, are in the form, or may be in the form of, money market funds or marketable securities and are or may be invested in U.S. Treasury and U.S. government agency obligations. Due to the short-term maturities and low risk profiles of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our investments. ​ While we contract with certain vendors and institutions internationally, substantially all of our total liabilities as of December 31, 2020 were denominated in the United States dollar and we believe that we do not have any material exposure to foreign currency exchange rate risk. ​ 116 Table of Contents Item 8. Financial Statement and Other Supplementary Information. EDITAS MEDICINE, INC. INDEX TO FINANCIAL STATEMENTS ​ ​ ​ Report of Independent Registered Public Accounting Firm 118 Consolidated Balance Sheets 120 Consolidated Statements of Operations 121 Consolidated Statements of Comprehensive Loss 122 Consolidated Statements of Stockholders’ Equity 123 Consolidated Statements of Cash Flows 124 Notes to Consolidated Financial Statements 125 ​ ​ ​ 117 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Editas Medicine, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Editas Medicine, Inc. (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, stockholders’ equity , and cash flows for each of the three years in the period ended December 31, 2020 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 26, 2021 expressed an unqualified opinion thereon. Adoption of ASU No. 2016-02 As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in year ended December 31, 2019 due to the adoption of ASU No. 2016-02, Leases (Topic 842) . Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (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. 118 Table of Contents ​ Accrued Research and Development Expense Description of the Matter 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 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 We have served as the Company’s auditor since 2015. Boston, Massachusetts February 26, 2021 119 Table of Contents Editas Medicine, Inc. Consolidated Balance Sheet s (amounts in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2020 ​ 2019 ASSETS ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 139,682 ​ $ 238,183 Marketable securities ​ ​ 262,428 ​ ​ 218,957 Accounts receivable ​ 6,048 ​ 418 Prepaid expenses and other current assets ​ 10,929 ​ 6,286 Total current assets ​ 419,087 ​ 463,844 Marketable securities ​ ​ 109,664 ​ ​ — Property and equipment, net ​ 14,020 ​ 10,887 Right-of-use assets ​ ​ 25,128 ​ ​ 28,761 Restricted cash and other non-current assets ​ 4,703 ​ 5,393 Total assets ​ $ 572,602 ​ $ 508,885 LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 6,408 ​ $ 5,843 Accrued expenses ​ 24,046 ​ 22,120 Deferred revenue, current ​ ​ 20,943 ​ ​ 23,514 Operating lease liabilities ​ ​ 6,811 ​ ​ 5,804 Other current liabilities ​ — ​ 2,682 Total current liabilities ​ 58,208 ​ 59,963 Operating lease liabilities, net of current portion ​ ​ 19,324 ​ ​ 23,277 Deferred revenue, net of current portion ​ ​ 73,984 ​ ​ 163,207 Other non-current liabilities ​ 27,500 ​ 1 Total liabilities ​ ​ 179,016 ​ ​ 246,448 Stockholders’ equity ​ ​ ​ ​ ​ ​ Preferred stock, $ 0.0001 par value per share: 5,000,000 shares authorized; no shares issued or outstanding ​ — ​ — Common stock, $ 0.0001 par value per share: 195,000,000 shares authorized; 62,689,457 and 54,533,798 shares issued, and 62,563,457 and 54,355,798 shares outstanding at December 31, 2020 and December 31, 2019, respectively ​ 6 ​ 5 Additional paid-in capital ​ 1,058,823 ​ 811,546 Accumulated other comprehensive (loss) income ​ ​ ( 46 ) ​ ​ 107 Accumulated deficit ​ ( 665,197 ) ​ ( 549,221 ) Total stockholders’ equity ​ ​ 393,586 ​ ​ 262,437 Total liabilities and stockholders’ equity ​ $ 572,602 ​ $ 508,885 ​ The accompanying notes are an integral part of the consolidated financial statements. 120 Table of Contents Editas Medicine, Inc. Consolidated Statements of Operations (amounts in thousands, except per share and share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2020 ​ 2019 ​ 2018 Collaboration and other research and development revenues ​ $ 90,732 ​ $ 20,531 ​ $ 31,937 Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ 157,996 ​ 96,898 ​ 90,654 General and administrative ​ 67,576 ​ 64,555 ​ 55,010 Total operating expenses ​ 225,572 ​ 161,453 ​ 145,664 Operating loss ​ ( 134,840 ) ​ ( 140,922 ) ​ ( 113,727 ) Other income (expense), net: ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense), net ​ 16,259 ​ ( 137 ) ​ 328 Interest income, net ​ ​ 2,605 ​ ​ 7,313 ​ ​ 3,445 Total other income, net ​ 18,864 ​ 7,176 ​ 3,773 Net Loss ​ $ ( 115,976 ) ​ $ ( 133,746 ) ​ $ ( 109,954 ) Reconciliation of net loss to net loss attributable to common stockholders: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 115,976 ) ​ $ ( 133,746 ) ​ $ ( 109,954 ) Net loss per share, basic and diluted ​ $ ( 1.98 ) ​ $ ( 2.68 ) ​ $ ( 2.33 ) Weighted-average common shares outstanding, basic and diluted ​ 58,609,389 ​ 49,983,329 ​ 47,097,735 ​ The accompanying notes are an integral part of the consolidated financial statements. ​ ​ ​ 121 Table of Contents Editas Medicine, Inc. Consolidated Statements of Comprehensive Loss (amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2020 ​ 2019 ​ 2018 Net loss ​ $ ( 115,976 ) ​ $ ( 133,746 ) ​ $ ( 109,954 ) Other comprehensive (loss) income: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized (loss) gain on marketable debt securities ​ ( 153 ) ​ 136 ​ ​ 47 Comprehensive loss ​ $ ( 116,129 ) ​ $ ( 133,610 ) ​ ​ ( 109,907 ) ​ The accompanying notes are an integral part of the consolidated financial statements. ​ ​ ​ ​ 122 Table of Contents Editas Medicine, Inc. Consolidated Statements of Stockholders’ Equity (amounts in thousands except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ Other ​ Total ​ Common Stock ​ Paid-In ​ Accumulated ​ Comprehensive ​ Stockholders’ ​ Shares Amount ​ Capital ​ Deficit ​ Income (Loss) ​ Equity Balance at December 31, 2017 44,507,960 ​ $ 4 ​ $ ​ 514,002 ​ $ ( 305,850 ) ​ $ ( 76 ) ​ $ 208,080 Cumulative effect adjustment for adoption of new accounting guidance — ​ ​ — ​ ​ ​ — ​ ​ ( 474 ) ​ ​ — ​ ​ ( 474 ) Issuance of common stock for repayment of notes payable 636,526 ​ ​ — ​ ​ ​ 22,030 ​ ​ — ​ ​ — ​ ​ 22,030 Issuance of common stock from at-the-market offering, net of issuance costs of $ 0.1 million 1,429,205 ​ ​ 1 ​ ​ ​ 48,493 ​ ​ — ​ ​ — ​ ​ 48,494 Issuance of common stock from at-the-market offering, net of issuance costs of $ 0.6 million 1,107,000 ​ ​ — ​ ​ ​ 28,387 ​ ​ — ​ ​ — ​ ​ 28,387 Issuance of common stock for asset purchase agreement 56,099 ​ ​ — ​ ​ ​ 1,942 ​ ​ — ​ ​ — ​ ​ 1,942 Exercise of stock options 749,294 ​ ​ — ​ ​ ​ 10,328 ​ ​ — ​ ​ — ​ ​ 10,328 Stock-based compensation expense 0 ​ ​ 0 ​ ​ ​ 26,598 ​ ​ 0 ​ ​ 0 ​ ​ 26,598 Purchase of common stock under benefits plans 26,272 ​ ​ — ​ ​ ​ 680 ​ ​ — ​ ​ — ​ ​ 680 Vesting of restricted common stock awards 72,000 ​ ​ — ​ ​ ​ — ​ ​ — ​ ​ — ​ ​ — Vesting of employee restricted common stock and common stock subject to repurchase 174,595 ​ ​ — ​ ​ ​ 4 ​ ​ — ​ ​ 47 ​ ​ 4 Unrealized gain on marketable securities — ​ ​ — ​ ​ ​ — ​ ​ — ​ ​ — ​ ​ 47 Net loss — ​ ​ — ​ ​ ​ — ​ ​ ( 109,954 ) ​ ​ — ​ ​ ( 109,954 ) Balance at December 31, 2018 48,758,951 ​ $ 5 ​ $ ​ 652,464 ​ $ ( 416,278 ) ​ $ ( 29 ) ​ $ 236,162 Cumulative effect adjustment for adoption of new accounting guidance — ​ ​ — ​ ​ ​ — ​ ​ 803 ​ ​ — ​ ​ 803 Issuance of common stock from at-the-market offering, net of issuance costs of $ 0.2 million 4,341,428 ​ ​ — ​ ​ ​ 116,356 ​ ​ — ​ ​ — ​ ​ 116,356 Exercise of stock options 1,120,186 ​ ​ — ​ ​ ​ 14,863 ​ ​ — ​ ​ — ​ ​ 14,863 Stock-based compensation expense — ​ ​ — ​ ​ ​ 27,243 ​ ​ — ​ ​ — ​ ​ 27,243 Purchase of common stock under benefits plans 35,314 ​ ​ — ​ ​ ​ 620 ​ ​ — ​ ​ — ​ ​ 620 Vesting of restricted common stock and awards 99,919 ​ ​ — ​ ​ ​ — ​ ​ — ​ ​ — ​ ​ — Unrealized gain on marketable securities — ​ ​ — ​ ​ ​ — ​ ​ — ​ ​ 136 ​ ​ 136 Net loss — ​ ​ 0 ​ ​ ​ — ​ ​ ( 133,746 ) ​ $ — ​ $ ( 133,746 ) Balance at December 31, 2019 54,355,798 ​ $ 5 ​ $ ​ 811,546 ​ $ ( 549,221 ) ​ $ 107 ​ $ 262,437 Exercise of stock options 964,412 ​ ​ — ​ ​ ​ 19,500 ​ ​ — ​ ​ — ​ ​ 19,500 Vesting of restricted common stock awards 304,638 ​ ​ — ​ ​ ​ — ​ ​ — ​ ​ — ​ ​ — Purchase of common stock under benefit plan 38,609 ​ ​ — ​ ​ ​ 896 ​ ​ — ​ ​ — ​ ​ 896 Issuance of common stock from public offering, net of issuance costs of $ 0.1 million 6,900,000 ​ ​ 1 ​ ​ ​ 203,725 ​ ​ — ​ ​ — ​ ​ 203,726 Stock-based compensation expense — ​ ​ — ​ ​ ​ 23,156 ​ ​ — ​ ​ — ​ ​ 23,156 Unrealized loss on marketable debt securities — ​ ​ — ​ ​ ​ — ​ ​ — ​ ​ ( 153 ) ​ ​ ( 153 ) Net loss — ​ ​ — ​ ​ ​ — ​ ​ ( 115,976 ) ​ ​ — ​ ​ ( 115,976 ) Balance at December 31, 2020 62,563,457 ​ $ 6 ​ $ ​ 1,058,823 ​ $ ( 665,197 ) ​ $ ( 46 ) ​ $ 393,586 ​ ​ The accompanying notes are an integral part of the consolidated financial statements. ​ ​ 123 Table of Contents Editas Medicine, Inc. Consolidated Statements of Cash Flow s (amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2020 2019 2018 Cash flow from operating activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 115,976 ) ​ $ ( 133,746 ) ​ $ ( 109,954 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation expense ​ 23,156 ​ 27,243 ​ 26,598 Depreciation ​ 3,959 ​ 2,830 ​ 3,254 Realized gain on corporate equity securities ​ ​ ( 16,366 ) ​ ​ — ​ ​ — Non-cash investment in equity securities ​ ​ ​ ​ — ​ ( 3,667 ) Other non-cash items, net ​ 104 ​ ( 2,928 ) ​ ( 3,268 ) Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ Accounts receivable ​ ​ ( 5,630 ) ​ ​ ( 388 ) ​ ​ 649 Prepaid expenses and other current assets ​ ​ ( 4,643 ) ​ ​ ( 495 ) ​ ​ ( 3,410 ) Right-of-use assets ​ ​ 3,633 ​ ​ ( 9,300 ) ​ ​ — Other non-current assets ​ ​ ( 719 ) ​ ​ ( 15 ) ​ ​ ( 92 ) Accounts payable ​ ​ 855 ​ ​ 274 ​ ​ 1,780 Accrued expenses ​ ​ 1,707 ​ ​ 9,485 ​ ​ 4,042 Deferred revenue ​ ( 91,794 ) ​ 55,395 ​ 22,889 Operating lease liabilities ​ ( 2,946 ) ​ 9,324 ​ — Other current and non-current liabilities ​ ​ ( 2,683 ) ​ ​ 1,652 ​ ​ 1,030 Non-cash research and development expenses ​ ​ 27,500 ​ ​ — ​ ​ 14,442 Net cash used in operating activities ​ ( 179,843 ) ​ ( 40,669 ) ​ ( 45,707 ) Cash flow from investing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Purchases of property and equipment ​ ( 7,162 ) ​ ​ ( 6,167 ) ​ ​ ( 4,754 ) Proceeds from the sale of equipment ​ ​ 12 ​ ​ 102 ​ ​ 37 Purchases of marketable securities ​ ​ ( 458,404 ) ​ ​ ( 342,183 ) ​ ​ ( 459,370 ) Proceeds from maturities of marketable securities ​ ​ 305,000 ​ ​ 360,500 ​ ​ 411,000 Proceeds from sale of corporate equity securities ​ ​ 20,032 ​ ​ — ​ ​ — Net cash (used in) provided by investing activities ​ ( 140,522 ) ​ 12,252 ​ ( 53,087 ) Cash flow from financing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Proceeds from offering of common stock, net of issuance costs ​ ​ 203,726 ​ ​ 116,341 ​ ​ 76,789 Proceeds from exercise of stock options ​ ​ 19,501 ​ ​ 14,863 ​ ​ 10,328 Payments on construction financing lease obligation ​ ​ — ​ ​ — ​ ​ ( 857 ) Issuance of common stock under benefit plans ​ ​ 895 ​ ​ 620 ​ ​ 680 Net cash provided by financing activities ​ 224,122 ​ 131,824 ​ 86,940 Net increase (decrease) in cash, cash equivalents, and restricted cash ​ ( 96,243 ) ​ ​ 103,407 ​ ​ ( 11,854 ) Cash, cash equivalents, and restricted cash, beginning of period ​ 239,802 ​ ​ 136,395 ​ ​ 148,249 Cash, cash equivalents, and restricted cash, end of period ​ $ 143,559 ​ $ 239,802 ​ $ 136,395 Supplemental disclosure of cash and non-cash activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed asset additions included in accounts payable and accrued expenses ​ $ 656 ​ $ 728 ​ $ 659 Cash paid in connection with operating lease liabilities ​ ​ 9,760 ​ ​ 5,970 ​ ​ — Offering costs included in accounts payable and accrued expenses ​ ​ — ​ ​ 15 ​ ​ 92 Right-of-use assets obtained in exchange of operating lease obligations ​ ​ — ​ ​ 19,461 ​ ​ — Reclassification of liability for common stock subject to repurchase ​ ​ — ​ ​ — ​ ​ 4 Issuance of common stock for repayment of notes payable ​ ​ — ​ ​ — ​ ​ 22,030 Issuance of common stock for asset acquisition ​ ​ — ​ ​ — ​ ​ 1,942 ​ The accompanying notes are an integral part of the consolidated financial statements. ​ ​ 124 Table of Contents Editas Medicine, Inc. Notes to Consolidated Financial Statement s 1. Nature of Business Editas Medicine, Inc. (the “Company”) is a leading, clinical stage genome editing company dedicated to developing potentially transformative genomic medicines to treat a broad range of serious diseases. The Company was incorporated in the state of Delaware in September 2013. Its principal offices are in Cambridge, Massachusetts. Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital. The Company has primarily financed its operations through various equity financings, payments received under a research collaboration with Juno Therapeutics, a wholly-owned subsidiary of the Bristol-Myers Squibb Company (“Juno Therapeutics”), and payments received under a strategic alliance and option agreement with Allergan Pharmaceuticals International Limited (together with its affiliates, “Allergan”). 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. Liquidity 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. ​ The Company has incurred annual net operating losses in every year since its inception. 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. There can be no assurance that the Company will be able to obtain additional debt or equity financing or generate product revenue or revenues from collaborative partners, on terms acceptable to the Company, on a timely basis or at all. The failure of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company’s business, results of operations, and financial condition. ​ 2. Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of Editas Medicine, Inc. and its wholly owned subsidiary, Editas Securities Corporation, which is a Delaware subsidiary created to buy, sell and hold securities. All intercompany transactions and balances have been eliminated. 125 Table of Contents Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). Reclassification Certain prior period amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on previously reported results of operations. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to, estimates related to revenue recognition, accrued expenses, stock-based compensation expense, research and development expenses and deferred tax valuation allowances. The Company bases its estimates on historical experience and other market-specific or relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions. Fair Value of Financial Instruments ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. ASC 820 identifies fair value as the exchange price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following: ● Level 1 – Quoted market prices in active markets for identical assets or liabilities. ● Level 2 – Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted market prices, interest rates, and yield curves. ● Level 3 – Unobservable inputs developed using estimates of assumptions developed by the Company, which reflect those that a market participant would use. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. 126 Table of Contents 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. Cash, Cash Equivalents, and Restricted Cash The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents. Cash and cash equivalents include cash held in banks and amounts held in money market funds and U.S. government-backed securities. 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2020 ​ 2019 Cash and cash equivalents ​ $ 511,774 ​ $ 238,183 Restricted cash included in "Restricted cash and other non-current assets" ​ ​ 3,877 ​ ​ 1,619 Total cash, cash equivalents, and restricted cash ​ $ 515,651 ​ $ 239,802 ​ Marketable Securities 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 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 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). 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 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. 127 Table of Contents 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. 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. The Company believes that credit risk associated with its collaborations partners is not significant. To date, the Company has no t had any write-offs of bad debt, and the Company did no t have an allowance for doubtful accounts as of December 31, 2020 and 2019. Property and Equipment Property and equipment consists of computers, laboratory equipment, furniture and office equipment, and leasehold improvements and is stated at cost, less accumulated depreciation. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed to operations as incurred, while costs of major additions and betterments are capitalized. Depreciation is calculated over the estimated useful lives of the assets using the straight-line method. The Company capitalizes laboratory equipment used for research and development if it has alternative future use in research and development or otherwise. ​ ​ ​ ​ ​ Asset: Estimated Useful life Lab equipment 5 years ​ Computer equipment and software 3 years ​ Furniture and equipment 5 years ​ Leasehold improvements Shorter of useful life or remaining lease term ​ ​ Impairment of Long-lived Assets The Company evaluates long-lived assets for potential impairment when events or changes in circumstances indicate the carrying value of the assets may not be recoverable. Recoverability is measured by comparing the book values of the assets to the expected future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the book values of the assets exceed their fair value. The Company has no t recognized any impairment losses from inception through December 31, 2020. Profit-Sharing Arrangements The Company considers the nature and contractual terms of the arrangements and assesses whether such arrangements involve a joint operating activity pursuant to which the Company is an active participant and is exposed to significant risks and rewards with respect to such arrangement. If the Company is an active participant and is exposed to significant risks and rewards with respect to such arrangement, the Company accounts for such arrangement as a collaboration under ASC Topic 808, Collaborative Arrangements (“ASC 808”). ASC 808 describes arrangements within its scope and considerations surrounding presentation and disclosure, with recognition matters subjected to other authoritative guidance, in certain cases by analogy. Payments received from a collaboration partner to which this policy applies are recorded as contra-expense in the applicable period and may include development costs or patent expense reimbursements. 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 128 Table of Contents 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, 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: non-refundable, up-front fees; reimbursement of research and development costs; development, clinical, regulatory and commercial sales milestone payments; and royalties on net sales of licensed products. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, the Company performs the following five steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer. The promised goods or services in the Company’s arrangements typically consist of a license, or option to license, rights to the Company’s intellectual property or research and development services. The Company provides options to additional items in such arrangements, which are accounted for as separate contracts when the customer elects to exercise such options, unless the option provides a material right to the customer. Performance obligations are promised goods or services in a contract to transfer a distinct good or service to the customer and are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised good or services are distinct, the Company considers factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on its own or whether the required expertise is readily available and whether the goods or services are integral or dependent to other goods or services in the contract. The Company estimates the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include fixed consideration or variable consideration. At the inception of each arrangement that includes variable consideration, the Company evaluates the amount of potential payment and the likelihood that the payments will be received. The Company utilizes either the most likely amount method or expected value method to estimate the amount expected to be received based on which method best predicts the amount expected to be received. The amount of variable consideration that is included in the transaction price may be constrained and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. The Company’s contracts often include development and regulatory milestone payments that are as assessed under the most likely amount method and constrained if it is probable that a significant revenue reversal would occur. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. 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 129 Table of Contents 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). To date, the Company has not recognized any royalty revenue resulting from any of the Company’s collaboration or strategic alliance arrangements. The Company allocates the transaction price based on the estimated standalone selling price. The Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. The Company utilizes key assumptions to determine the stand-alone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs. Variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated are consistent with the amounts the Company would expect to receive for the satisfaction of each performance obligation. The consideration allocated to each performance obligation is recognized as revenue when control is transferred for the related goods or services. For performance obligations which consist of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. The Company receives payments from its customers based on billing schedules established in each contract. Up-front payments and fees are recorded as deferred revenue upon receipt or when due until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. ​ ​ Research and Development Expenses Research and development expenses are charged to expense as incurred in performing research and development activities. The costs include employee-related expenses including salaries, benefits, and stock-based compensation expense, costs of funding research performed by third parties that conduct research and development and preclinical and clinical activities on the Company’s behalf, the cost of purchasing lab supplies and non-capital equipment used in preclinical and clinical activities and in manufacturing preclinical and clinical study materials, consultant fees, facility costs including rent, depreciation, and maintenance expenses, and fees for acquiring and maintaining licenses under third party licensing agreements, including any sublicensing or success payments made to the Company’s licensors. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the Company’s estimate, the accrual or prepaid is adjusted accordingly. The Company defers and capitalizes non-refundable advance payments made by the Company for research and development activities until the related goods are received or the related services are performed. In circumstances where amounts have been paid in excess of costs incurred, the Company records a prepaid expense. In-process Research and Development Assets In-process research and development assets that are acquired in a transaction that does not qualify as a business combination under GAAP and that do not have an alternative future use are expensed in the period in which the assets are acquired. 130 Table of Contents Patent Costs The Company expenses patent and patent application costs and related legal costs for the prosecution and maintenance of such patents and patent applications, including patents and patent applications the Company in-licenses, as incurred and classifies such costs as general and administrative expenses in the accompanying consolidated statements of operations. Construction Financing Lease Obligation Beginning in 2016, the Company began recording certain estimated construction costs incurred and reported to the Company by a landlord as an asset and corresponding construction financing lease obligation on the Company’s consolidated balance sheets because the Company was deemed to be the owner of the building during the construction period for accounting purposes. In each reporting period, the landlord estimated and reported to the Company the costs incurred to date and provided supporting invoices for the Company to review. The Company periodically met with the landlord and its construction manager to review the estimates and observe construction progress prior to recording such amounts. Construction was completed in October 2016 and the Company considered the requirements for sale-leaseback accounting treatment, which included an evaluation of whether all risks of ownership had transferred back to the landlord as evidenced by a lack of continuing involvement in the lease property. The Company determined that the arrangement did not qualify for sale lease-back accounting treatment, the building asset will remain on the Company’s consolidated balance sheet at its historical cost, and such asset would be depreciated over its estimated useful life of thirty years . Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASC 842”) and derecognized the balances relating to the building, accumulated depreciation and the corresponding construction financing lease as summarized in the table below (in thousands). In applying the ASC 842 transition guidance, the Company determined that the lease should be classified as an operating lease and recorded a right-of-use asset and lease liability on the effective date, accordingly. ​ ​ ​ ​ As of ​ January 1, 2019 Property and equipment, net $ 32,627 Other current liabilities $ ( 1,014 ) Construction financing lease obligation, net of current portion $ ( 32,417 ) Accumulated deficit $ 803 ​ Leases The Company accounts for leases in accordance with ASC 842. At the inception of an arrangement the Company determines whether the arrangement contains a lease. If a lease is identified in an arrangement, the Company recognizes a right-of-use asset and liability on its balance sheet and determines whether the lease should be classified as a finance or operating lease. The Company does not recognize assets or liabilities for leases with lease terms of less than 12 months. Lease payments for short-term leases are recorded to operating expense on a straight-line basis over the lease term and variable lease payments are recorded in the period in which the obligation for those payments is incurred. A lease qualifies as a finance lease if any of the following criteria are met at the inception of the lease: (i) there is a transfer of ownership of the leased asset to the Company by the end of the lease term, (ii) the Company holds an option to purchase the leased asset that it is reasonably certain to exercise, (iii) the lease term is for a major part of the remaining economic life of the leased asset, (iv) the present value of the sum of lease payments equals or exceeds substantially all of the fair value of the leased asset, and (v) the nature of the leased asset is specialized to the point that it is expected to provide the lessor no alternative use at the end of the lease term. All other leases are recorded as operating leases. 131 Table of Contents Finance and operating lease assets and liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term using the discount rate implicit in the lease. If the rate is not readily determinable, the Company utilizes its incremental borrowing rate at the lease commencement date. Operating lease assets are further adjusted for prepaid or accrued lease payments. Operating lease payments are expensed using the straight-line method as an operating expense over the lease term. Finance lease assets are amortized to depreciation expense using the straight-line method over the shorter of the useful life of the related asset or the lease term. Finance lease payments are bifurcated into (i) a portion that is recorded as imputed interest expense and (ii) a portion that reduces the finance liability associated with the lease. The Company does not separate lease and non-lease components when determining which lease payments to include in the calculation of its lease assets and liabilities. Variable lease payments are expensed as incurred. If a lease includes an option to extend or terminate the lease, the Company reflects the option in the lease term if it is reasonably certain it will exercise the option. Stock-based Compensation Expense The Company’s stock-based compensation program grant awards which have included stock options, restricted stock awards (“RSAs”), restricted stock unit awards (“RSUs”), a market-based option award, and shares issued under the Company’s 2015 employee stock purchase plan (“ESPP”). The Company accounts for stock-based compensation awards in accordance with ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). 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 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. For awards subject to service-based vesting conditions, the Company recognizes the stock-based compensation expense on a straight-line basis over the requisite service period. If an employee or non-employee service requirement is concluded to be non-substantive, the stock-based compensation expense would be expensed immediately. Forfeitures are recorded as they occur. Prior to 2019, the Company accounted for stock-based payments issued to non-employees in accordance with ASC Topic 505-50, Equity Based Payments to Non-Employees . 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. 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. Because there had been no public market for the Company’s common stock prior to its initial public offering, there was a lack of company-specific historical and implied volatility data. Accordingly, the Company based its estimates of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The Company calculates historical volatility based on a period of time commensurate with the expected term. The Company computes expected volatility based on the historical volatility of a representative group of companies with similar characteristics to the Company, including their stages of product development and focus on the life science industry. The Company uses the simplified method as prescribed by the Securities and Exchange Commission’s Staff Accounting Bulletin No. 107, Share-Based Payment , to calculate the expected term for options granted to employees as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. For options granted to non-employees, the Company utilizes the contractual term of the arrangement as the basis for the expected term. The Company determines the risk-free interest rate based on a treasury instrument whose term is consistent with the expected term of the stock options. 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. 132 Table of Contents RSAs are subject to repurchase rights. Accordingly, the Company has recorded the proceeds from the issuance of restricted stock as a liability in the consolidated balance sheets. The restricted stock liability is reclassified into stockholders’ equity as the restricted stock vests. ​ For market-based awards, the Company recognizes the fair value of the market-based options over the earlier of the derived service period, pursuant to a Monte-Carlo simulation model, or when the market-based vesting conditions are met. The Company estimates an award's derived service period based on the best estimate of the period over which an award's vesting condition(s) will be achieved. If the market-based vesting conditions are met ahead of the derived service period, the expense will be accelerated. If the market-based vesting conditions are not met and the market-based award is cancelled, the expense will not be reversed unless the market-based award is forfeited. If factors change or different assumptions are used, the Company’s stock-based compensation expense could be materially different in the future. Success Payments, Research Funding Payments and Notes Payables Certain arrangements require the Company to make payments, if and when, the Company’s market capitalization reaches specified thresholds for a specific period of time or upon a sale of the Company for consideration in excess of those thresholds or above a specific amount. The payments were historically accounted for under the provisions of ASC Topic 505-50 and as of January 1, 2019, are accounted for under the provisions of ASC 718, whereby the Company recognizes the expense and liability when it becomes probable that the amounts will become due. The Company records this expense as a research and development expense in its consolidated statements of operations. The arrangements and payments are described more fully in Note 8. The payments are payable in either cash, common stock or promissory notes payable, depending upon the licensor and the Company’s election. If the Company elects to issue a promissory note relating to contractual obligations, the promissory note bears interest at 4.8 % per annum. Outstanding principal and accrued interest on the promissory notes are typically payable on the earlier of five months or a specified period of time following a Company sale or change of control event, subject to certain exceptions. Income taxes Income taxes are recorded in accordance with ASC Topic 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and the tax reporting basis of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The Company provides a valuation allowance against net deferred tax assets unless, based upon the weight of available evidence, it is more likely than not that the deferred tax assets will be realized. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. Comprehensive Loss Comprehensive loss is comprised of net loss and other comprehensive income or loss. 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 gains and losses on marketable securities. 133 Table of Contents Concentrations of Credit Risk and Off-Balance Sheet Risk The Company has no financial instruments with off-balance sheet risk such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments that potentially subject the Company to a concentration of credit risk are cash, cash equivalents, marketable securities and receivables owed to the Company from collaboration partners. The Company’s cash, cash equivalents and marketable securities are held in accounts at a financial institution that may exceed federally insured limits. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds. Segment Information Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker in deciding how to allocate resources and assess performance. The Company and the Company’s chief operating decision maker, the Company’s Chief Executive Officer, view the Company’s operations and manage the Company’s business as a single operating segment, which is the business of developing and commercializing genome editing technology. Recent Accounting Pronouncements –Adopted 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. 134 Table of Contents ​ 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. ​ 3. Cash Equivalents and Marketable Securities Cash equivalents and marketable securities consisted of the following at December 31, 2020 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance ​ ​ Gross ​ Gross ​ ​ ​ ​ Amortized ​ for Credit ​ ​ Unrealized ​ Unrealized ​ Fair December 31, 2020 ​ Cost ​ Losses ​ ​ Gains ​ Losses ​ Value Cash equivalents and marketable securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market funds ​ $ 139,682 ​ $ — ​ ​ $ — ​ $ — ​ $ 139,682 U.S. Treasuries ​ ​ 180,376 ​ ​ — ​ ​ ​ 8 ​ ​ ( 11 ) ​ ​ 180,373 Government agency securities ​ ​ 107,665 ​ ​ — ​ ​ ​ — ​ ​ ( 20 ) ​ ​ 107,645 Commercial paper ​ ​ 41,912 ​ ​ — ​ ​ ​ — ​ ​ ( 8 ) ​ ​ 41,904 Corporate notes/bonds ​ ​ 42,185 ​ ​ — ​ ​ ​ 10 ​ ​ ( 25 ) ​ ​ 42,170 Total ​ $ 511,820 ​ $ — ​ ​ $ 18 ​ $ ( 64 ) ​ $ 511,774 ​ Cash equivalents and marketable securities consisted of the following at December 31, 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ Amortized ​ Unrealized ​ Unrealized ​ Fair December 31, 2019 ​ Cost ​ Gains ​ Losses ​ Value Cash equivalents and marketable securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market funds ​ $ 230,201 ​ $ — ​ $ — ​ $ 230,201 U.S. Treasuries ​ ​ 71,348 ​ ​ 20 ​ ​ — ​ ​ 71,368 Government agency securities ​ ​ 155,484 ​ ​ 87 ​ ​ — ​ ​ 155,571 Equity securities included in other non-current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporate equity securities ​ ​ 3,667 ​ ​ — ​ ​ — ​ ​ 3,667 Total ​ $ 460,700 ​ $ 107 ​ $ — ​ $ 460,807 ​ ​ 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 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. ​ ​ ​ 135 Table of Contents 4. Fair Value Measurements Assets measured at fair value on a recurring basis as of December 31, 2020 were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quoted Prices Significant ​ ​ ​ ​ ​ ​ ​ in Active ​ Other ​ Significant ​ ​ ​ ​ ​ Markets for ​ Observable ​ Unobservable ​ ​ December 31, ​ Identical Assets ​ Inputs ​ Inputs Financial Assets ​ 2020 ​ (Level 1) ​ (Level 2) ​ (Level 3) Cash equivalents: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market funds ​ $ 139,682 ​ $ 139,682 ​ $ — ​ $ — Marketable securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. Treasuries ​ ​ 180,373 ​ ​ 180,373 ​ ​ — ​ ​ — Government agency securities ​ ​ 107,645 ​ ​ — ​ ​ 107,645 ​ ​ — Commercial paper ​ ​ 41,904 ​ ​ — ​ ​ 41,904 ​ ​ — Corporate bonds ​ ​ 42,170 ​ ​ — ​ ​ 42,170 ​ ​ — Restricted cash and other non-current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market funds ​ ​ 3,877 ​ ​ 3,877 ​ ​ — ​ ​ — Total financial assets ​ $ 515,651 ​ $ 323,932 ​ $ 191,719 ​ $ — ​ Assets measured at fair value on a recurring basis as of December 31, 2019 were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quoted Prices Significant ​ ​ ​ ​ ​ ​ ​ in Active ​ Other ​ Significant ​ ​ ​ ​ ​ Markets for ​ Observable ​ Unobservable ​ ​ December 31, ​ Identical Assets ​ Inputs ​ Inputs Financial Assets ​ 2019 ​ (Level 1) ​ (Level 2) ​ (Level 3) Cash equivalents: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market funds ​ $ 230,201 ​ $ 230,201 ​ $ — ​ $ — U.S. Treasuries ​ ​ 7,982 ​ ​ 7,982 ​ ​ — ​ ​ — Marketable securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. Treasuries ​ ​ 63,386 ​ ​ 63,386 ​ ​ — ​ ​ — Government agency securities ​ ​ 155,571 ​ ​ 155,571 ​ ​ — ​ ​ — Restricted cash and other non-current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporate equity securities ​ ​ 3,667 ​ ​ — ​ ​ 3,667 ​ ​ — Money market funds ​ ​ 1,619 ​ ​ 1,619 ​ ​ — ​ ​ — Total financial assets ​ $ 462,426 ​ $ 458,759 ​ $ 3,667 ​ $ — ​ ​ 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. ​ ​ ​ 136 Table of Contents 5. Property and Equipment, Net Property and equipment, net consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ ​ December 31, ​ December 31, ​ 2020 2019 Laboratory equipment ​ $ 18,433 ​ $ 14,571 ​ Leasehold improvements ​ ​ 4,967 ​ ​ 1,042 ​ Computer equipment ​ 858 ​ 858 ​ Construction-in-progress ​ ​ 500 ​ ​ 1,336 ​ Furniture and office equipment ​ ​ 239 ​ ​ 166 ​ Software ​ 118 ​ 118 ​ Total property and equipment ​ 25,115 ​ 18,091 ​ Less: accumulated depreciation ​ ( 11,095 ) ​ ( 7,204 ) ​ Property and equipment, net ​ $ 14,020 ​ $ 10,887 ​ ​ 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. ​ 6. Accrued Expenses Accrued expenses consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ ​ December 31, ​ 2020 2019 External research and development expenses ​ $ 12,820 ​ $ 735 Employee related expenses ​ ​ 5,323 ​ ​ 4,971 Intellectual property and patent related fees ​ ​ 4,240 ​ ​ 3,725 Sublicensing expenses ​ ​ 771 ​ ​ 11,416 Professional service expenses ​ ​ 533 ​ ​ 674 Other expenses ​ ​ 359 ​ ​ 599 Total accrued expenses ​ $ 24,046 ​ $ 22,120 ​ ​ 7. Leases ​ The Company has multiple lease agreements for office, laboratory and manufacturing space with varying contractual terms set to expire between 2021 and 2025. Typically, base rent payments commence at the beginning of each lease term and continue through the term of the respective lease. Additionality, base rent is also subject to increases over the term of the lease. The Company has two significant leases for office and laboratory space located in Cambridge, Massachusetts that are summarized below. 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. ​ 137 Table of Contents The Company’s leases are included on its consolidated balance sheet as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ As of ​ December 31, ​ January 1, ​ 2020 2019 Right-of-use assets $ 25,128 ​ $ 19,461 Operating lease liabilities, current $ ( 6,811 ) ​ $ ( 3,848 ) Operating lease liabilities, noncurrent $ ( 19,324 ) ​ $ ( 15,909 ) ​ 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): ​ ​ ​ ​ ​ ​ Year Ended Maturity of lease liabilities: ​ December 31, 2020 2021 $ 8,778 2022 $ 9,342 2023 $ 7,807 2024 $ 3,695 2025 $ 474 Thereafter $ 110 Total minimum lease payments $ 30,206 Less: imputed interest $ ( 4,071 ) Total operating lease liabilities at December 31, 2020 $ 26,135 ​ The weighted-average remaining lease term is 3.4 years and the weighted-average discount rate is 8.8 %. ​ Hurley Street In 2016, the Company entered into a lease agreement for 59,783 square feet of office and laboratory space located on Hurley Street in Cambridge, Massachusetts. The term of the lease began on October 1, 2016 and continues until October 2023. In connection with the lease and as a security deposit, the Company deposited with the landlord a letter of credit in the amount of approximately $ 1.6 million. Subject to the terms of the lease and certain reduction requirements specified therein, the $ 1.6 million security deposit may decrease over time. 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 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 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 commenced in January 2020 and continue through the term of the lease and are subject to increases over 138 Table of Contents the term of the lease. ​ ​ 8. Commitments and Contingencies The Company is a party to a number of license agreements under which the Company licenses patents, patent applications and other intellectual property from third parties. As such, the Company is obligated to reimburse licensors for various costs including upfront licenses fees, annual license fees, certain licensor expense reimbursements, success payments, research funding payments, and milestones triggerable upon certain development, regulatory, and commercial events as well as royalties on future products. These contracts are generally cancellable, with notice, at the Company’s option and do not have significant cancellation penalties. Broad Sponsored Research Agreement In June 2018, the Company entered into a sponsored research agreement (the “Sponsored Research Agreement”) with The Broad Institute, Inc. (“Broad”). The Sponsored Research Agreement provides for Broad to conduct research useful or relevant to genome editing in the field of genomic medicines for the prevention or treatment of human disease with funding from the Company. Under the Sponsored Research Agreement, Broad granted to the Company an exclusive right of first negotiation for licenses from Broad with respect to patentable inventions developed by Broad in the course of the sponsored research, subject to certain limitations and retained rights (“Sponsored Invention Licenses”). Under the Sponsored Research Agreement, the Company is obligated to make Market Cap Research Funding payments in the event the Company’s market capitalization reaches specified thresholds ranging from a mid-nine digit dollar amount to a low-eleven digit dollar amount or Company Sale Research Funding payments in the event of a Company sale for consideration ranging from a mid-nine digit dollar amount to a low-eleven digit dollar amount. In connection with entering into the Sponsored Research Agreement, the Company confirmed that the first two research payments of $ 5.0 million and $ 7.5 million, respectively, were due and payable to Broad. In connection with the Initial Research Payments, the Company issued promissory notes to Broad that it settled in common stock in June 2018. The $ 12.5 million in research funding expense was recorded to research and development expenses during the year ended December 31, 2018. 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”). In the event that the Company, whether directly or through its affiliates or sublicensees, later resumes research, development, or commercialization of an Applicable Product within a specified period of time, any Research Funding Payment that was not paid to Broad as a result of the Funding Exemption shall become payable. Under the Sponsored Research Agreement, the Company is obligated to pay up to $ 125.0 million to Broad in Research Funding, inclusive of the Initial Research Payments, and in no event shall the aggregate amount of all Research Funding Payments exceed such amount. 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 139 Table of Contents 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. Cas9-I License Agreement In October 2014, the Company entered into an agreement (the “Cas9-I License Agreement”) with Broad and the President and Fellows of Harvard College (“Harvard”) to license certain patent rights owned or co-owned by, or among, Broad, the Massachusetts Institute of Technology (“MIT”), and Harvard (collectively, the “Institutions”). Consideration for the granting of the license included the payment of an upfront license issuance fee of $ 0.2 million and the issuance of 561,531 shares of the Company’s common stock. The Institutions are collectively entitled to receive clinical and regulatory milestone payments totaling up to $ 14.8 million in the aggregate per licensed product approved in the United States, European Union, and Japan for the treatment of a human disease that afflicts at least a specified number of patients in the aggregate in the United States. If the Company undergoes a change of control during the term of the license agreement, the clinical and regulatory milestone payments will be increased by a certain percentage in the mid-double digits. The Company is also obligated to make additional payments to the Institutions, collectively, of up to an aggregate of $ 54.0 million upon the occurrence of certain sales milestones per licensed product for the treatment of a human disease that afflicts at least a specified number of patients in the aggregate in the United States. The Institutions are collectively entitled to receive clinical and regulatory milestone payments totaling up to $ 4.1 million in the aggregate per licensed product approved in the U.S. and at least one jurisdiction outside the U.S. for the treatment of a human disease based on certain criteria. The Company is also obligated to make additional payments to the Institutions, collectively, of up to an aggregate of $ 36.0 million upon the occurrence of certain sales milestones per licensed product for the treatment of a rare disease meeting certain criteria. The Institutions are entitled to receive from the Company nominal annual license fees and a mid-single digit percentage royalties on net sales of products for the prevention or treatment of human disease and ranging from low single digit to high single digit percentage royalties on net sales of other products and services, made by the Company, its affiliates, or its sublicensees. The royalty percentage depends on the product and service, and whether such licensed product or licensed service is covered by a valid claim within the certain patent rights that the Company licenses from the Institutions. Cpf1 License Agreement In December 2016, the Company entered into the Cpf1 License Agreement with Broad, for specified patent rights (the “Cpf1 Patent Rights”) related primarily to Cas12a (formerly known as Cpf1) compositions of matter and their use for gene editing. Concurrently with entering into the Cpf1 License Agreement, the Company, Broad, and Harvard amended and restated the Cas9-I License Agreement as described below and the Company and Broad entered into the Cas9-II License Agreement for specified patent rights (the “Cas9-II Patent Rights”) related primarily to certain Cas9 compositions of matter and their use for genome editing. The Company paid an upfront fee in aggregate of $ 16.5 million under these agreements which was recorded in research and development expenses during 2016. The upfront fee was fully settled in 2017, partially by issuing 479,270 shares of common stock. Pursuant to the Cpf1 License Agreement, Broad, on behalf of itself, Harvard, MIT, Wageningen, and the University of Tokyo (“UTokyo” and, together with Broad, Harvard, Massachusetts Institute of Technology (“MIT”), and Wageningen University (“Wageningen”), (the “Cpf1 Institutions”) granted the Company an exclusive, worldwide, royalty-bearing, sublicensable license to the Cpf1 Patent Rights, to make, have made, use, have used, sell, offer for sale, have sold, export and import products in the field of the prevention or treatment of human disease using gene therapy, editing of genetic material, or targeting of genetic material, subject to certain limitations and retained rights (collectively, the “Cpf1 Exclusive Field”), as well as a non-exclusive, worldwide, royalty-bearing sublicensable license to the Cpf1 Patent Rights for all other purposes, subject to certain limitations and retained rights. The Company is obligated to use commercially reasonable efforts to research, develop, and commercialize products in the Cpf1 Exclusive Field. The Company is also required to achieve certain development milestones within specified time periods for products covered by the Cpf1 Patent Rights, with Broad having the right to terminate the Cpf1 License Agreement if the Company fails to achieve these milestones within the required time periods. 140 Table of Contents 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. 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”). The Company is also obligated to make additional payments to Broad and Wageningen, collectively, of up to an aggregate of $ 36.0 million upon the occurrence of certain sales milestones per licensed product for the prevention or treatment of an Ultra-Orphan Disease. Broad and Wageningen, collectively, are entitled to receive, on a product-by-product and country-by-country basis, mid single-digit percentage royalty on net sales of licensed products for the prevention or treatment of human disease, and royalties on net sales of other licensed products and licensed services, made by the Company, its affiliates, or its sublicensees. The royalty percentage depends on the product and service, and whether such licensed product or licensed service is covered by a valid claim within the Cpf1 Patent Rights. If the Company is legally required to pay royalties to a third party on net sales of the Company’s products because such third party holds patent rights that cover such licensed product, then the Company can credit up to a specified percentage of the amount paid to such third party against the royalties due to Broad and Wageningen in the same period. Such credit may not exceed 50 % of the applicable royalties paid by the Company to the applicable third party. The Company’s obligation to pay royalties will expire on a product-by-product and country-by-country basis upon the later of the expiration of the last to expire valid claim of the Cpf1 Patent Rights that covers each licensed product or service in each country or the tenth anniversary of the date of the first commercial sale of the licensed product or licensed service. If the Company sublicenses any of the Cpf1 Patent Rights to a third party, Broad and Wageningen, collectively, have the right to receive sublicense income, depending on the stage of development of the products or services in question at the time of the sublicense. Under the Cpf1 License Agreement, Broad and Wageningen are also entitled, collectively, to receive success payments in the event the Company’s market capitalization reaches specified thresholds (the “Cpf1 Market Cap Success Payments”) or a Company sale for consideration in excess of those thresholds (the “Cpf1 Company Sale Success Payments” and, collectively with the Cpf1 Market Cap Success Payments, the “Cpf1 Success Payments”). The Cpf1 Success Payments payable to Broad and Wageningen are triggered when the Company’s market capitalization reaches certain amounts ranging from $ 750.0 million to $ 10.0 billion for a specified period of time, and collectively the Cpf1 Success Payments will not exceed, in aggregate, $ 125.0 million, which maximum amount would be payable only if the Company reaches a market capitalization threshold of $ 10.0 billion and has at least one product candidate covered by a claim of a patent right licensed to the Company under either the Cpf1 License Agreement or the Cas9-I 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 Cpf1 Market Cap Success Payments are payable by the Company in cash or in the form of promissory notes. Following a change in control of the Company, Cpf1 Market Cap Success Payments are required to be made in cash. Cpf1 Company Sale Success Payments are payable solely in cash. The Company triggered the first and second Cpf1 Success Payments during 2017 when the Company’s market capitalization reached $ 750 million and $ 1.0 billion, respectively. 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 141 Table of Contents 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 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. Cas9-II License Agreement Pursuant to the Cas9-II License Agreement, Broad, on behalf of itself, MIT, Harvard, and the University of Iowa Research Foundation, granted the Company an exclusive, worldwide, royalty bearing sublicensable license to certain of the Cas9-II Patent Rights as well as a non-exclusive, worldwide, royalty-bearing sublicensable license to all of the Cas9-II Patent Rights, in each case on terms substantially similar to the licenses granted to the Company under the Cpf1 License Agreement except, among other things, for the following commitment amounts. Under the Cas9-II License Agreement, the Company will pay an upfront license fee in a low seven digit dollar amount and will have to pay an annual license maintenance fee. The Company is obligated to pay clinical and regulatory milestone payments 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 totaling up to $ 3.7 million in the aggregate, and sales milestone payments for any such licensed product totaling up to $ 13.5 million in the aggregate. In addition, the Company is obligated to pay clinical and regulatory milestone payments totaling up to $ 1.1 million in the aggregate per licensed product approved in the United States and the European Union or Japan for the prevention or treatment of a human disease that afflicts fewer than a specified number of patients in the United States, plus sales milestone payments of up to $ 9.0 million for any such licensed product. Consistent with the Cpf1 License Agreement, the licensors are entitled to royalties on net sales of products for the prevention or treatment of human disease and other products and services made by the Company, its affiliates, or its sublicensees. Royalties due under other license agreements are creditable against these royalties up to a specified amount in the same period. Lastly, Broad is entitled to receive success payments if the Company’s market capitalization reaches specified thresholds ascending from $ 1.0 billion to $ 9.0 billion or upon a sale of the Company for consideration in excess of those thresholds. 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 142 Table of Contents 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. The Company incurred an aggregate of $ 13.1 million, $ 13.5 million, and $ 14.2 million in expense during the years ended December 31, 2020, 2019 and 2018, respectively, for such reimbursement. Litigation The Company is not a party to any litigation and did not have contingency reserves established for any litigation liabilities as of December 31, 2020 or 2019. ​ 9. Collaboration and Profit-Sharing Agreements The Company has entered into multiple collaboration and strategic alliances with third parties that typically involve research and development services in exchange for upfront fees, option payments, milestone payments and royalty payments to or from the Company. Collaboration Revenue 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2020 Balance at December 31, 2019 ​ Additions ​ Deductions ​ Balance at December 31, 2020 Accounts receivable $ 418 ​ $ 6,097 ​ $ ( 467 ) ​ $ 6,048 Contract liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred revenue $ 186,721 ​ $ 508 ​ $ ( 92,302 ) ​ $ 94,927 ​ During the three and twelve months ended December 31, 2020, the Company recognized the following collaboration revenue (in thousands): ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Year Ended Revenue recognized in the period from: December 31, 2020 Amounts included in deferred revenue at the beginning of the period $ 5,767 ​ $ 92,302 Performance obligations satisfied in previous periods $ — ​ $ 60 ​ Juno Therapeutics Collaboration Agreement 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 143 Table of Contents 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. The 2018 Amended Collaboration Agreement increased the scope of the research plan from three to four research areas. The Company’s research and development responsibilities under the research plan were related to generating genome editing reagents that modify gene targets selected by Juno Therapeutics. Except with respect to the Company’s obligations under the mutually agreed upon research plan, Juno Therapeutics had sole responsibility, at its own cost, for the worldwide research, development, manufacturing and commercialization of products within each of the four research areas for the diagnosis, treatment or prevention of any cancer in humans through the use of engineered T-cells, excluding the diagnosis, treatment or prevention of medullary cystic kidney disease 1 (the “Exclusive Field”). The initial term of the research program commenced on May 26, 2015 and continued for five years ending on May 26, 2020 (the “Initial Research Program Term”). Under the terms of the Collaboration Agreement, the Company granted to Juno Therapeutics during the Initial Research Program Term a nonexclusive research license solely for the purpose of conducting specific research related activities as defined by the research plan. Pursuant to the terms of the 2018 Amended Collaboration Agreement, the license rights granted to Juno Therapeutics were expanded to incorporate the fourth research area (together, the initial research license granted per the terms of the Collaboration Agreement and the incremental research license granted per the terms of the 2018 Amended Collaboration Agreement, the “Research License”). The Company granted to Juno Therapeutics exclusive worldwide development and commercialization licenses in the Exclusive Field, specifically as it relates to certain targets or products selected by Juno Therapeutics in each of the four research areas. Furthermore, for two of the original research areas under the terms of the Collaboration Agreement, the Company granted to Juno Therapeutics a non-exclusive worldwide license to use certain genome editing reagents that were created under the agreement in all fields outside the Exclusive Field (“the Non-Exclusive Field”) specifically as it relates to certain targets selected by Juno Therapeutics, if the genome editing reagents were previously incorporated into an investigational new drug application filed by Juno Therapeutics in the Exclusive Field (together, the license in the Exclusive Field and the license in the Non-Exclusive Field are referred to as the “Development and Commercialization License” for each particular research area). Under the terms of the Collaboration Agreement, the Company received a $ 25.0 million up-front, non-refundable, non-creditable cash payment. In connection with the entry into the 2018 Amended Collaboration Agreement, the Company received an additional $ 5.0 million up-front, non-refundable, non-creditable cash payment. In addition, Juno Therapeutics was obligated to pay to the Company research and development funding over the Initial Research Program Term across the four research areas consisting primarily of funding for up to a specified maximum number of full-time equivalents personnel each year. Consistent with the terms of the Collaboration Agreement, under the terms of the 2018 Amended Collaboration Agreement, there was no incremental compensation due to the Company with respect to the Development and Commercialization License granted to Juno Therapeutics associated with the first target or product, as applicable, designated by Juno Therapeutics within each of the four research areas. However, for two of the research areas Juno Therapeutics had the option to purchase up to three additional Development and Commercialization Licenses associated with other gene targets for an additional fee of $ 2.5 million per target. In addition, Juno Therapeutics would have been required to make certain milestone payments to the Company upon the achievement of specified development, regulatory and commercial events. 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 144 Table of Contents 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. The Company evaluated the 2018 Amended Collaboration Agreement in accordance with the provisions of ASC 606. The Company accounted for the amendment resulting from the 2018 Amended Collaboration Agreement as a modification to the original contract and not as a separate contract. 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”). 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; therefore, control is deemed to be transferred upon the designation by Juno Therapeutics of the specific target or product, as applicable, whereupon the license becomes effective upon Juno Therapeutics exercising their option. Through the date of the 2018 Amended Collaboration Agreement, the Company had recognized approximately $ 12.3 million of revenue associated with the Research License and Related Services which was excluded from the modification date transaction price. The total transaction price associated with the remaining consideration based on the 2018 Amended Collaboration Agreement was determined to be $ 40.7 million, consisting of: (i) $ 30.0 million in upfront payments (ii) $ 2.9 million of remaining research and development funding and (iii) $ 7.7 million of milestones payments received by the Company that were not yet recognized as revenue. The Company utilized the most likely amount method to determine the amount of research and development funding to be received. The outstanding milestones payments were fully constrained. The transaction price was allocated to the performance obligations based on the relative estimated standalone selling prices of each performance obligation or, in the case of certain variable consideration, to one or more performance obligations. The transaction price allocated to the Research License and Related Services was $ 10.7 million. The Company recognized revenue related to amounts allocated to the Research License and Related Services as the underlying services were performed using a proportional performance model. The Company measured proportional performance based on full time employee hours relative to projected full time employee hours to complete the research services which best reflects the progress towards satisfaction of the performance obligation. The remaining transaction price of $ 30.0 million was allocated to the material rights. Revenue related to each of the material rights would have been recognized upon the earlier of when the respective options were exercised or when the respective options lapse. None of the options associated with the material rights had been exercised or had lapsed prior to the execution of the 2019 Amended Collaboration Agreement . 2019 Amended Collaboration Agreement ​ The 2019 Amended Collaboration Agreement replaced the 2018 Amended Collaboration Agreement and, at the Company’s discretion, it may develop non-alpha-beta T-cell therapies, while expanding Juno Therapeutics’ permitted uses of gene edited alpha-beta T-cells beyond oncology. Pursuant to the 2019 Amended Collaboration Agreement, the Company may develop genome editing tools that, following the exercise of its option and the Company’s grant of a license, Juno Therapeutics may use in its development of gene edited alpha-beta T-cell therapies and certain other T-cells derived from pluripotent stem cells or any other precursor cells for the treatment of all diseases, subject to certain exceptions (the “Juno Field”). The initial term of the 2019 Amended Collaboration Agreement is five years , which is subject to two one-year extension periods. During the term, including the extension periods, the Company may not alone, or with a third party, research, develop, manufacture, or commercialize a product in the Juno Field. ​ At the Company’s discretion it can develop genome editing tools specific to a gene target and enzyme combination (or a “Program”). 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 145 Table of Contents 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. If Juno Therapeutics fails to exercise its option during the contractually defined option period, the Company will retain all rights to such Program. Upon exercising an option, Juno Therapeutics has sole responsibility, at its own cost, for the worldwide research, development, manufacturing and commercialization of its products. 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. Pursuant to the license agreement, Juno Therapeutics must use commercially reasonable efforts and meet certain regulatory and commercial diligence requirements. The license agreement provided that the Company would manufacture clinical grade materials through a Phase 1 clinical trial if requested by Juno Therapeutics at an incremental cost to be negotiated by the parties. Per the termination provisions of the license agreement, Juno Therapeutics has the right to terminate the agreement either on a licensed product-by-product basis or in its entirety for any reason at any time upon ninety days prior written notice. If Juno Therapeutics terminates the license agreement without cause, the exclusive licenses granted to Juno Therapeutics automatically revert back to the Company. ​ On a product-by-product basis, the Company is eligible to receive up to $ 27.5 million in development milestones and $ 107.5 million in regulatory milestones. The Company is also eligible to receive up to an aggregate of $ 60.0 million for the first two licensed products to reach certain sales milestones. The Company is entitled to a high-single digit to low double-digit percentage of royalties on net sales of licensed products, subject to reductions in certain circumstances, through the later of the expiration of the patent(s) related to the licensed products or six years post-first commercial sale of such licensed products. ​ The Company received a $ 70.0 million up-front, non-refundable, non-creditable cash payment in connection with the execution of the 2019 Amended Collaboration Agreement. The Company also received an additional $ 0.5 million for the first development and commercialization license (the “First 2019 Development and Commercialization License”) which was delivered to Juno Therapeutics at the onset of the arrangement. ​ The Company evaluated the 2019 Amended Collaboration Agreement and concluded that the collaboration agreement and licensing agreement qualify as a contract with a customer under ASC 606 as one combined arrangement. 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 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. The Company also evaluated the (i) the research license, (ii) contract term extensions, (iii) clinical supply arrangement, (iv) participation by employees on the oversight committee, alliance and technology transfer teams and (v) certain intellectual property rights and concluded that none of these met the definition of a performance obligation as a result of the promise being quantitively and qualitatively immaterial in the context of the arrangement or the promise did not convey a material right to Juno Therapeutics. The Company also concluded that there was not an implicit promise to perform research and development services. ​ As of Amendment Date and December 31, 2019, the total transaction price was approximately $ 102.5 million comprised of the following: (i) $ 70.0 million amendment fee, (ii) $ 0.5 million related to the exercise fee for the First 2019 Development and Commercialization License and (iii) $ 32.0 million in remaining deferred revenue balance that was not recognized pursuant to the 2018 Amended Collaboration Agreement. The Company utilizes the most likely amount method to estimate any development and regulatory milestone payments to be received as well as extension term fees. As of December 31, 2019, there were no milestones or extension term fees included in the transaction price. 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, 146 Table of Contents 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. The Company reevaluates the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur. ​ The Company concluded that rights and attributes of each of the development and commercialization licenses are identical for both the license granted at inception and the licenses that may be issued in the future upon exercise of the associated option. 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. In addition, each Program is multi-functional, and a combination of Programs can be utilized in the development of a product candidate. As such, the Company concluded that the standalone selling price of each material right is the same. 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, 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, 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”). 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 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. 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”). 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 147 Table of Contents 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. in May 2020. 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 148 Table of Contents 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 In May 2018, the Company entered into a license agreement with Beam Therapeutics Inc. (“Beam,” and such agreement, the “Beam License Agreement”). Beam is a biotechnology company focused on developing precision genetic medicines using technology that converts a single nucleobase into a different nucleobase (“Base Editing”). Pursuant to the Beam License Agreement, the Company granted to Beam licenses and options to acquire licenses to certain intellectual property rights owned or controlled by the Company, for specified uses. More specifically, the Company granted to Beam a worldwide, exclusive (subject to certain exceptions), sublicensable (subject to certain conditions), license under certain intellectual property controlled by the Company for the use of Base Editing therapies for the treatment of any field of human diseases and conditions, subject to certain exceptions (the “Beam Field,” and the licenses granted or to be granted under the Beam License Agreement, the “Beam Development and Commercialization License”). 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. As consideration for the license and option rights granted to Beam, the Company received a nominal one-time, non-refundable, non-creditable upfront cash payment. The Company also received non-cash consideration, consisting of a low to mid-single digit million number of shares of Beam Series A-1 and A-2 preferred stock, having an aggregate fair value of approximately $ 3.6 million. The Company is eligible to receive additional consideration if Beam elects to exercise its option to obtain a Beam Development and Commercialization License to the three categories of intellectual property underlying the Research License, for a fee ranging from a mid-teen million dollar amount to a low to mid-eight digit dollar amount per group, depending on the timing of the option exercise. Additionally, Beam is required to reimburse the Company for certain payments the Company may be obligated to make under the Company’s existing license agreements related to the intellectual property being licensed to Beam, including (i) development, regulatory and commercial milestone payments and certain sublicense income payments due as a result of the Beam License Agreement and (ii) a percentage of the annual maintenance fees and patent fees due to certain of the Company’s licensors. In addition, to the extent any products are commercialized under a Beam Development and Commercialization License, the Company would be entitled to receive royalty payments equivalent to the royalties that would be due from the Company to any applicable licensors of the Company related to the sales of such licensed products, plus an additional low single-digit percentage royalty. Additionally, if Beam exercises its right to obtain a Beam Development and Commercialization License to one of the categories of optioned intellectual property comprising Company-owned intellectual property and any related licensed products that are commercialized, the Company would be entitled to tiered low single-digit royalty payments related to sales of such licensed products. 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 149 Table of Contents 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. Upon termination of the Beam License Agreement, all rights and licenses granted by the Company to Beam (including the rights to exercise options and obtain such licenses) will immediately terminate and patents within a group of patents will no longer be deemed licensed patents. Expiration or termination of the Beam License Agreement for any reason does not release either party of any obligation or liability which had accrued or which is attributable to a period prior to such expiration or termination. The Company has identified the following performance obligations (i) the Beam Development and Commercialization License and (ii) the Beam Research License. In addition, the Company has concluded the option to obtain additional Beam Development and Commercialization Licenses to up to three additional groups of patents in the future 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 December 31, 2019, the total transaction price at the inception of the arrangement was determined to be approximately $ 3.8 million, consisting of the upfront cash payment and non-cash consideration related to the shares of Beam preferred stock. The Company determined the fair value based on the price paid by other unrelated investors for such shares. The consideration associated with the exercise of the option(s) will be accounted for if and when Beam elects to purchase the additional licenses. The other forms of consideration, including the development and regulatory milestone reimbursement, the sublicense income reimbursement, the maintenance fee reimbursement and the patent costs reimbursement were estimated based on the most-likely amount and were excluded from the initial transaction price as the most-likely amount was estimated to be zero or the amount was otherwise fully constrained due to the significant uncertainties surrounding such payments. The commercial-based milestone reimbursement and the sales-based royalty payments will be recognized when the related sales occur as they were determined to relate predominantly to the licenses granted and therefore have also been excluded from the transaction price. The total transaction price at the inception of the arrangement was allocated to the performance obligations in the aggregate, as the Beam Development and Commercialization License and the Beam Research License were delivered simultaneously with one another, at inception of the arrangement, when the licenses were made available for Beam’s use and benefit. 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. ​ 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. 10. Preferred Stock 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. ​ 11. Common Stock The voting, dividend, and liquidation rights of the holders of the common stock are subject to and qualified by the rights, powers, and preferences of holders of the preferred stock that may be issued from time to time. The common stock had the following characteristics as of December 31, 2020: 150 Table of Contents Voting The holders of shares of common stock are entitled to one vote for each share of common stock held at any meeting of stockholders and at the time of any written action in lieu of a meeting. Dividends The holders of shares of common stock are entitled to receive dividends, if and when declared by the Company’s board of directors. Cash dividends may not be declared or paid to holders of shares of common stock until all unpaid dividends on the redeemable convertible preferred stock have been paid in accordance with their terms. No dividends have been declared or paid by the Company since its inception. 2013 Stock Incentive Plan In September 2013, the board of directors adopted the 2013 Stock Incentive Plan, which was subsequently amended (as amended, the “2013 Plan”), which provides for the grant of incentive stock options and nonqualified stock options or other awards including restricted stock awards, unrestricted stock awards, and restricted stock units to the Company’s employees, officers, directors, advisors, and consultants for the purchase of up to 1,057,692 shares of the Company’s common stock, which has been amended several times, and as of July 2015, a total of 6,317,769 shares were reserved. The terms of stock awards agreements, including vesting requirements, are determined by the board of directors and are subject to the provisions of the 2013 Plan. The stock options granted to employees generally vest over a four-year period and expire ten years from the date of grant. Certain awards contain performance based vesting criteria. There has only been one such award to date. 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 . 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”). 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. The Company’s employees, officers, directors and consultants and advisors are eligible to receive awards under the 2015 Plan. The number of shares reserved for issuance under the 2015 Plan is subject to further increases for (a) any additional shares of the Company’s common stock subject to outstanding awards under the 2013 Plan that expire, terminate, or are otherwise surrendered, cancelled, forfeited, or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right and (b) annual increases, to be added as of the first day of each fiscal year, from January 1, 2017 until, and including, January 1, 2026, equal to the lowest of 2,923,076 shares of common stock, 4 % of the number of shares of common stock outstanding on such first day of the fiscal year in question and an amount determined by the Company’s board of directors. In January 2021, the shares under the 2015 Plan were increased by 2,507,552 shares pursuant to the annual increase described in the prior sentence. 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”). 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. The first offering under the 2015 ESPP opened on December 1, 2017. In January 2021, the shares under the 2015 ESPP Plan were increased by 626,888 shares pursuant to the annual increase described in the prior sentence. 151 Table of Contents Inducement Awards From time to time the Company’s board of directors approves inducement awards to certain employees outside of the existing equity compensation plans in connection with such employees commencing employment with the Company. 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 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 ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ 2020 2019 Shares reserved for outstanding stock option awards under the 2013 Stock Incentive Plan, as amended 174,362 312,342 Shares reserved for outstanding stock option awards and restricted stock units under the 2015 Stock Incentive Plan 3,839,345 4,254,357 Shares reserved for outstanding inducement stock option award 280,000 175,000 Remaining shares reserved, but unissued, for future awards under the 2015 Stock Incentive Plan 5,599,450 4,061,357 Remaining shares reserved, but unissued, for future awards under the 2015 Employee Stock Purchase Plan 2,137,127 ​ 1,630,199 ​ ​ 12,030,284 10,433,255 ​ ​ ​ ​ ​ 12. Stock-Based Compensation Total compensation cost recognized for all stock-based compensation awards in the consolidated statements of operations was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ ​ 2020 ​ 2019 Research and development ​ ​ $ 11,580 ​ $ 13,538 General and administrative ​ ​ 11,576 ​ 13,705 Total stock-based compensation expense ​ ​ $ 23,156 ​ $ 27,243 ​ 152 Table of Contents Restricted Stock and Restricted Stock Unit Awards ​ The following table summarizes restricted stock and restricted stock unit awards activity for the instruments discussed above as of December 31, 2019 and 2020 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ ​ ​ Grant Date ​ ​ ​ ​ Fair Value ​ ​ Shares ​ Per Share Unvested restricted stock and restricted stock unit awards as of December 31, 2019 581,408 ​ $ 24.03 Issued 364,549 ​ $ 29.57 Vested ( 304,638 ) ​ $ 23.37 Forfeited ​ ( 133,869 ) ​ $ 24.72 Unvested restricted stock and restricted stock unit awards as of December 31, 2020 507,450 ​ $ 27.35 ​ The expense related to restricted stock and restricted stock unit awards granted to employees and non-employees was $ 2.8 million and $ 1.6 million, respectively, for the year ended December 31, 2020. 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 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 The following is a summary of stock option activity for the year ended December 31, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average Remaining Aggregate Intrinsic ​ ​ Shares ​ Exercise Price ​ Contractual Life (years) ​ Value (in thousands) Outstanding at December 31, 2019 4,358,291 ​ $ 25.40 ​ 7.4 ​ $ 26,060 Granted ​ 1,721,748 ​ $ 30.44 ​ ​ ​ ​ ​ Exercised ​ ( 964,412 ) ​ $ 20.22 ​ ​ ​ ​ ​ Cancelled ​ ( 1,203,370 ) ​ $ 30.72 ​ ​ ​ ​ ​ Outstanding at December 31, 2020 3,912,257 ​ $ 27.26 ​ 7.9 ​ $ 167,640 Exercisable at December 31, 2020 1,463,668 ​ $ 24.05 ​ 6.8 ​ $ 67,413 ​ 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. Using the Black-Scholes option pricing model, the weighted average fair value of options containing service-based vesting granted to employees and directors during the years ended December 31, 2020, 2019, and 2018 was $ 16.60 , $ 15.67 , and $ 24.91 , respectively. The expense related to options containing service-based vesting granted to employees and directors was $ 16.1 million, $ 18.1 million, and $ 19.9 million for the years ended December 31, 2020, 2019, and 2018, respectively. The fair value of each service-based vesting option issued to employees and directors was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: ​ 153 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ ​ 2020 ​ 2019 2018 Expected volatility 60.0 % ​ 73.8 % ​ 77.5 % Expected option term (in years) 6.25 ​ ​ 6.25 ​ ​ 6.25 ​ Risk free interest rate 1.5 % ​ 2.0 % ​ 2.9 % Expected dividend yield — ​ ​ — ​ ​ — ​ ​ 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. ​ ​ 13. 401(k) Savings Plan The Company has a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “401(k) Plan”). The 401(k) Plan covers all employees who meet defined minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pretax basis. Effective in 2017, the Company will provide a 200 % match of employee contributions up to a limit on the Company’s contributions of the lesser of $ 6,000 and 3 % of the employee’s salary. The Company made $ 1.1 million, $ 0.8 million, and $ 0.7 million in contributions to the 401(k) Plan for the years ended December 31, 2020, 2019 and 2018, respectively. ​ 14. Income Taxes The Company had no income tax expense due to operating losses incurred for the years ended December 31, 2020, 2019 and 2018. A reconciliation of the income tax expense computed using the federal statutory income tax rate to the Company’s effective income tax rate is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2020 ​ 2019 2018 Income tax computed at federal statutory tax rate 21 % 21 % 21 % State taxes, net of federal benefit 5.20 % 5.20 % 6.4 % General business credit carryovers 4.80 % 2.80 % 4.4 % Stock Options ( 1.8 ) % ( 2.2 ) % 0.7 % Non-deductible expenses ( 0.1 ) % ( 0.1 ) % ( 0.1 ) % Change in valuation allowance ( 29.10 ) % ( 26.70 ) % ( 32.4 ) % ​ — % — % — % ​ ​ ​ 154 Table of Contents The principal components of the Company’s deferred tax assets and liabilities consist of the following at December 31, 2020 and 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2020 ​ 2019 Deferred tax assets: ​ ​ ​ ​ ​ ​ Net operating loss carryforwards ​ $ 70,751 ​ $ 50,511 Tax credit carryforwards ​ 19,353 ​ 13,767 Accrued expenses ​ 11,372 ​ 2,219 Capitalized patent costs ​ 46,197 ​ 39,070 Lease Liabilities ​ 7,083 ​ 7,879 Deferred revenue ​ 25,724 ​ 31,880 Construction financing lease obligation ​ — ​ — Other ​ 5,204 ​ 7,865 Total deferred tax assets ​ ​ 185,684 ​ ​ 153,191 Less valuation allowance ​ ​ ( 178,307 ) ​ ​ ( 144,540 ) Net deferred tax assets ​ ​ 7,377 ​ ​ 8,651 Deferred tax liabilities ​ ​ ( 7,377 ) ​ ​ ( 8,651 ) Depreciation and amortization ​ ​ ( 567 ) ​ ​ ( 859 ) Right-of-use assets ​ ​ ( 6,810 ) ​ ​ ( 7,792 ) Net deferred taxes ​ $ — ​ $ — ​ The Company has incurred net operating losses (“NOL”) since inception. At December 31, 2020 and 2019, the Company had federal net operating loss carryforwards of $ 261.9 million and $ 185.4 million, respectively. Of the amount as of December 31, 2020, $ 186.4 million will carryforward indefinitely while $ 75.5 million will expire beginning in 2033 and will continue to expire through 2037. 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. NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Code, respectively, as well as other similar state provisions. The Company conducted an analysis under Section 382 to determine if historical changes in ownership through December 31, 2019 would limit or otherwise restrict its ability to utilize its NOL and research and development credit carryforwards. As a result of this analysis, the Company does not believe there are any significant limitations on its ability to utilize these carryforwards. However, future changes in ownership occurring after December 31, 2019 could affect the limitation in future years, and any limitation may result in expiration of a portion of the NOL or research and development credit carryforwards before utilization. Management has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which principally comprise of NOL carryforwards, research and development credit carryforwards and capitalized license and patent costs. The Company’s management has determined that it is more likely than not that the Company will not recognize the benefits of its federal and state deferred tax assets, and as a result, a valuation allowance of $ 178.3 million and $ 144.5 million has been established at December 31, 2020 and 2019, respectively. The increase in the valuation allowance of $ 33.8 million for the year ended December 31, 2020 was primarily due to current period pre-tax losses incurred and research tax credits generated. 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 155 Table of Contents present related to the tax benefit. At December 31, 2020 and 2019, the Company had no unrecognized tax benefits. Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as income tax expense in the accompanying statements of operations. The Company has not as yet conducted a study of its research and development credit carry forwards. This study may result in an adjustment to the Company’s research and development credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s research and development credits, and if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the consolidated balance sheets or statements of operations if an adjustment were required. The Company files income tax returns in the U.S. federal tax jurisdiction, the Massachusetts state jurisdiction, the California state jurisdiction and the Colorado state jurisdiction. Since the Company is in a loss carryforward position, the Company is generally subject to examination by the U.S. federal, state and local income tax authorities for all tax years in which a loss carryforward is available. The Company did not have any international operations as of December 31, 2020. There is a 2018 IRS audit in process. ​ 15. Net Loss per Share Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock and potentially dilutive securities outstanding for the period determined using the treasury stock and if converted methods. Contingently issuable shares are included in the calculation of basic loss per share as of the beginning of the period in which all the necessary conditions have been satisfied. 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. The following common stock equivalents were excluded from the calculation of diluted net loss per share allocable to common stockholders because their inclusion would have been anti-dilutive: ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ 2020 ​ 2019 Unvested restricted stock and restricted stock unit awards 507,450 ​ 581,408 Outstanding stock options 3,912,257 ​ 4,358,291 Estimated number of shares issuable for convertible notes (1) ​ 392,240 ​ — Total 4,811,947 ​ 4,939,699 (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. ​ ​ 156 Table of Contents 16. Related-Party Transactions 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. ​ 17. Selected Quarterly Financial Data (unaudited) – The following table contains selected quarterly financial information from 2020 and 2019. The Company believes that the following information reflects all normal recurring adjustments necessary for a fair statement of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ ​ ​ March 31, 2020 ​ June 30, 2020 ​ September 30, 2020 ​ December 31, 2020 ​ ​ ​ ​ (in thousands, except per share data) ​ Total collaboration and other research and development revenues ​ $ 5,723 ​ $ 10,749 ​ $ 62,841 ​ $ 11,419 ​ Total operating expenses ​ ​ 52,339 ​ ​ 42,088 ​ ​ 53,852 ​ ​ 77,293 ​ Total other income (expense), net ​ ​ 8,892 ​ ​ 7,767 ​ ​ ( 1,170 ) ​ ​ 3,375 ​ Net (loss) income ​ $ ( 37,724 ) ​ $ ( 23,572 ) ​ $ 7,819 ​ $ ( 62,499 ) ​ Net (loss) income applicable to common stockholders ​ $ ( 37,724 ) ​ $ ( 23,572 ) ​ $ 7,819 ​ $ ( 62,499 ) ​ Net (loss) income per share attributable to common shareholders: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ ( 0.69 ) ​ $ ( 0.43 ) ​ $ 0.13 ​ $ ( 1.00 ) ​ Diluted ​ $ ( 0.69 ) ​ $ ( 0.43 ) ​ $ 0.12 ​ $ ( 1.00 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ ​ ​ March 31, 2019 ​ June 30, 2019 ​ September 30, 2019 ​ December 31, 2019 ​ ​ ​ ​ (in thousands, except per share data) ​ Total collaboration and other research and development revenues ​ $ 2,069 ​ $ 2,330 ​ $ 3,848 ​ $ 12,284 ​ Total operating expenses ​ ​ 33,331 ​ ​ 37,979 ​ ​ 38,436 ​ ​ 51,707 ​ Total other income (expense), net ​ ​ 2,013 ​ ​ 1,863 ​ ​ 1,647 ​ ​ 1,653 ​ Net loss ​ $ ( 29,249 ) ​ $ ( 33,786 ) ​ $ ( 32,941 ) ​ $ ( 37,770 ) ​ Net loss applicable to common stockholders ​ $ ( 29,249 ) ​ $ ( 33,786 ) ​ $ ( 32,941 ) ​ $ ( 37,770 ) ​ Net loss per share applicable to common stockholders — basic and diluted ​ $ ( 0.60 ) ​ $ ( 0.69 ) ​ $ ( 0.66 ) ​ $ ( 0.74 ) ​ ​ ​ ​ 157 Table of Contents 18. 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. ​ ​ ​ Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. ​