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Item 1. Business

2021-03-18 compared with 2020-03-16 · 464 added, 1423 removed, 720 unchanged (72% of the section changed)

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We believe that our approach, which is designed to transform stem cells from patients into therapeutic products, has the potential to provide curative benefit for a range of diseases.

Our initial focus is on a group of rare genetic diseases referred to as lysosomal diseases, some of which today are primarily managed with enzyme replacement therapies, or ERTs.

These lysosomal diseases have well-understood biologies, identified patient populations, established standards of care yet with significant unmet needs, and represent large market opportunities with approximately $4.0 billion in worldwide net sales in 2019.

Our initial pipeline is comprised of four lentiviral-based gene therapy programs, including AVR-RD-01 for the treatment of Fabry disease, AVR-RD-04 for the treatment of cystinosis, AVR-RD-02 for the treatment of Gaucher disease and AVR-RD-03 for the treatment of Pompe disease.

AVR-RD-01 is currently being evaluated in an investigator-sponsored Phase 1 clinical trial and a company-sponsored Phase 2 clinical trial.

Our initial focus is on a group of rare genetic diseases referred to as lysosomal disorders, some of which today are primarily managed with enzyme replacement therapies, or ERTs.

These lysosomal disorders have well-understood biologies, identified patient populations, established standards of care yet with significant unmet needs, and represent large market opportunities with approximately $4.8 billion in worldwide net sales in 2020.

Our initial pipeline is comprised of six lentiviral-based gene therapy programs:

AVR-RD-01 for the treatment of Fabry disease;

AVR-RD-04 for the treatment of cystinosis;

AVR-RD-02 for the treatment of Gaucher disease type 1;

AVR-RD-05 for the treatment of Hunter syndrome;

AVR-RD-06 for the treatment of Gaucher disease type 3;

and AVR-RD-03 for the treatment of Pompe disease.

AVR-RD-01 is currently being evaluated for the treatment of Fabry disease in an investigator-sponsored Phase 1 clinical trial and a Company-sponsored Phase 2 clinical trial.

Five patients have been dosed in the investigator-sponsored Phase 1 clinical trial of AVR-RD-01, and enrollment is complete.

As of March 6, 2020, four patients have been dosed in our company-sponsored Phase 2 clinical trial of AVR-RD-01, and we are actively recruiting additional potential patients for our currently active sites in Australia, Canada and the United States.

AVR-RD-04 is currently being studied by our collaborators at the University of California, San Diego, or UCSD, in a Phase 1/2 investigator-sponsored clinical trial, and as of March 6, 2020 one patient has been dosed.

In January 2020, we announced that we received notice of clearance from the U.S.

Food and Drug Administration, or FDA, regarding an Investigational New Drug, or IND, application for AVR-RD-02, our investigational gene therapy for the treatment of Gaucher disease.

The Phase 1/2 clinical trial for AVR-RD-02 is actively recruiting in Australia and Canada, with additional sites planned in the United States.

Our AVR-RD-03 program for Pompe disease is currently in preclinical development with the first IND-enabling preclinical study initiated in 2019.

Since its first clinical use in 2003, lentiviral-based gene therapy has been observed to be well-tolerated in third parties’ clinical trials for rare diseases such as transfusion-dependent beta thalassemia, cerebral adrenoleukodystrophy, or CALD, metachromatic leukodystrophy, or MLD, and adenosine deaminase severe combined immunodeficiency, or ADA-SCID.

Five patients have been dosed in our Company-sponsored Phase 2 clinical trial of AVR-RD-01, which we refer to as the FAB-GT clinical trial, and we are actively recruiting additional potential patients for our currently active sites in Australia, Canada and the United States.

AVR-RD-04 is currently being studied for the treatment of cystinosis by our collaborators at the University of California, San Diego, or UCSD, in a Phase 1/2 investigator-sponsored clinical trial, and three patients have been dosed.

One patient has been dosed in our Company-sponsored Phase 1/2 clinical trial of AVR-RD-02 for the treatment of Gaucher disease, which we refer to as the Guard1 clinical trial, and we are actively recruiting in Australia and Canada, with additional sites planned in the United States, Israel and Europe.

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

In November 2020, we announced a new preclinical program, AVR-RD-06 for the treatment of Gaucher disease type 3, and we expect to request a meeting with the Food and Drug Administration, or FDA, this year to discuss a potential path to the clinic.

Since its first clinical use in 2003, lentiviral-based gene therapy has been studied in several third parties’ clinical trials for rare diseases such as transfusion-dependent beta thalassemia, cerebral adrenoleukodystrophy, or CALD, metachromatic leukodystrophy, or MLD, and adenosine deaminase severe combined immunodeficiency, or ADA-SCID.

Initially, the use of ex vivo lentiviral-based gene therapies was restricted primarily to the most severe diseases where the risks of the typical requirement for ablating the patients’ bone marrow had a clinically justifiable risk/benefit profile.

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The higher the level of conditioning, the greater the potential risk of more serious complications, such as veno-occlusive disease.

However, we believe the risk of more serious complications can be managed through utilization of therapeutic drug monitoring, or TDM, to enable careful titrating of exposure to the drug to a specific area under the curve, or AuC.

The conditioning regimen utilized as part of our plato platform includes TDM to assess how rapidly the individual patient metabolizes the conditioning agent so physicians can adjust the dose as needed, with a goal of minimizing side effects while maximizing the potential of durable engraftment.

Such an approach could potentially allow the conditioning regimen to be performed during a limited hospital stay or potentially through an outpatient procedure, on a case-by-case basis as may be directed by the patient’s physician.

We believe our approach, utilizing a single myeloablative conditioning agent, busulfan, coupled with TDM designed to titrate to a specific AuC, has the potential to extend the reach of our gene therapies to a broad range of diseases as first-line therapies.

However, we believe the risk of more serious complications can be managed through utilization of a precision busulfan dosing program, which we refer to as Target Concentration Intervention, or TCI.

TCI is designed to enable careful titrating of exposure to the conditioning drug to a specific area under the curve, or AuC.

The conditioning regimen utilized as part of our plato platform includes TCI to assess how rapidly the individual patient metabolizes the conditioning agent so physicians can adjust the dose as needed, with a goal of minimizing side effects while maximizing the potential of durable engraftment.

We believe our approach, utilizing a single myeloablative conditioning agent, busulfan, coupled with TCI designed to titrate to a specific AuC, has the potential to extend the reach of our gene therapies to a broad range of diseases as first-line therapies.

Our goal is to broaden the applicability of lentiviral-based gene therapy by initially targeting monogenic diseases with an identified gene, recognized biology and that could potentially benefit from the sustained systemic delivery of an active protein.

We are initially targeting rare lysosomal diseases in which the current standard of care provides the mechanistic proof that the enzymes or proteins produced endogenously following treatment with our gene therapies can offer benefit to patients.

Typically, in lysosomal diseases, a gene mutation results in the deficiency or malfunctioning of an enzyme or other protein.

Plato is our gene therapy platform designed to provide the foundation for the potential worldwide commercialization of our gene therapies, if approved.

It is an ex vivo gene therapy platform incorporating multiple upgrades including a four-plasmid lentiviral vector designed to optimize vector copy number, transduction efficiency and resulting enzyme activity;

a closed, automated manufacturing system designed to improve consistency and predictability of the drug product;

and a personalized approach to conditioning using TCI .

Two patients in our FAB-GT clinical trial of AVR-RD-01 and one patient in our Guard1 clinical trial of AVR-RD-02 have been dosed with drug product manufactured utilizing the plato platform , and we intend to utilize the plato platform with these process changes for all future patients enrolling in these two clinical trials.

We believe our innovations in viral vector design, cellular manufacturing, cryopreservation, conditioning and other related processes are important steps towards advancing the field of lentiviral-based gene therapy and realizing its full potential to treat a number of diseases.

We plan to continue leveraging advancements in stem cell transplantation with the goal of improving patient tolerability of our lentiviral-based gene therapies.

We are initially targeting rare lysosomal disorders in which the current standard of care provides the mechanistic proof that the enzymes or proteins produced endogenously following treatment with our gene therapies can offer benefit to patients.

Typically, in lysosomal disorders, a gene mutation results in the deficiency or malfunctioning of an enzyme or other protein.

This results in the inability of lysosomes to properly process cellular materials such as damaged organelles.

As a result, substrates and their metabolites accumulate to toxic levels in the body’s cells and, in turn, disrupt the function of multiple tissues and organs.

Fabry disease, Gaucher disease and Pompe disease are currently primarily managed by bi-weekly, multi-hour infusions with ERTs that seek to exogenously replace the missing functional enzyme.

However, given their pharmacokinetics, most ERTs typically remain in the plasma only for a short period of time and thus are not ideal because they are only dosed every two weeks.

Fabry disease, Gaucher disease (types 1 and 3), Hunter syndrome and Pompe disease are currently primarily managed by bi-weekly (or weekly in the case of Hunter syndrome), multi-hour infusions with ERTs that seek to exogenously replace the missing functional enzyme.

However, given their pharmacokinetics, most ERTs typically remain in the plasma only for a short period of time and thus are not ideal because they are only dosed weekly or every two weeks.

Cystinosis is currently treated with two oral formulations of cysteamine that must be taken orally every 12 or six hours, leading to significant pill burden and compliance challenges.

Further, oral cysteamine treatment has no effect on ocular cystine crystals deposits, thus requiring patients to be treated with topical cysteamine eye drops which must be applied each hour the patient is awake.

These existing therapies manage, rather than cure, the underlying diseases and, as a result, patients continue to have disease progression.

Further, the frequent, periodic and life-long dosing schedule required for ERTs results in significant costs for the healthcare system and is burdensome for the patient.

Further, the frequent, periodic and life-long dosing schedule required for ERTs and cysteamine results in significant costs for the healthcare system and is burdensome for the patient.

We believe our gene therapies leverage the well-understood mechanism of ERTs by transforming a patient’s own cells into a drug product that enables the patient to express functional enzyme or other protein and mirror the biology seen in an otherwise healthy individual.

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Our lead product candidate, AVR-RD-01 for the treatment of Fabry disease, is derived from hematopoietic stem cells to which the gene encoding plasma α-galactosidase A, or AGA, is added in an ex vivo process using a lentiviral vector.

In July 2019, we reported that a kidney biopsy taken at 12 months post-treatment for the first patient in the Phase 2 trial showed an 87-percent reduction from baseline in the average number of globotriaosylceramide, or Gb3, inclusions per peritubular capillary.

In addition, in February 2020 we reported data from the first three patients in the Phase 2 trial measured as of 18, 12 and nine months, respectively, indicating sustained increased leukocyte and plasma enzyme activity, suggesting that these patients are now producing an endogenous supply of AGA.

For the first and third Phase 2 patients, data indicate that their decreased plasma lyso-globotriaosylsphingosine, or lyso-Gb3, levels, a key biomarker for monitoring Fabry disease, have been sustained below their baseline at 18 and six months after dosing, respectively.

The second Phase 2 patient, a cardiac variant who does not have classic Fabry disease, did not show a decrease in plasma lyso-Gb3 levels, as expected.

The fourth patient in the Phase 2 clinical trial was dosed in December 2019 with our plato platform.

In February 2021, we reported that a kidney biopsy taken at 12 months post-treatment from the fourth patient in the Phase 2 FAB-GT trial, who was the first in the trial dosed with our plato platform, showed a 100 percent reduction from baseline in the average number of globotriaosylceramide, or Gb3, inclusions per peritubular capillary, or PTC.

These data followed our 2019 announcement that at 12 months post-treatment the first patient in the FAB-GT clinical trial exhibited an 87% reduction in the average number of Gb3 inclusions per PTC as compared to baseline.

In addition, in February 2021 we reported data from the first four patients in the FAB-GT trial measured as of 29, 24, 18 and 12 months, respectively, indicating sustained increased leukocyte and plasma enzyme activity, suggesting that these patients are now producing an endogenous supply of AGA, as well as decreased plasma lyso-globotriaosylsphingosine, or lyso-Gb3, levels in three of four patients, a key biomarker for monitoring Fabry disease.

We have opened two U.S.

sites for our ongoing Phase 2 clinical trial of AVR-RD-01 and are actively recruiting potential patients for our sites in Australia, Canada and the United States.

In an ongoing investigator-sponsored Phase 1 clinical trial of patients with Fabry disease, AVR-RD-01 has been observed to be well-tolerated and has led to the production of active AGA enzyme in all five patients, with data from the first patient exhibiting enzyme activity at 32 months after dosing.

Four of the five patients in the Phase 1 clinical trial have had their plasma lyso-Gb3 levels reduced between 26 and 47 percent compared to their pre-treatment baseline levels.

Data from the other patient in the trial, who discontinued ERT one month prior to receiving AVR-RD-01 and remains off ERT, through month six showed an initial decline and at month 12 showed a 23-percent increase in lyso-Gb3 levels, as compared to pre-treatment levels.

This patient’s lyso-Gb3 levels remain within the range for the Fabry disease patients on ERT observed in the Phase 1 clinical study.

In February 2020, we announced initial clinical data from the first patient dosed in the investigator-sponsored Phase 1/2 trial of AVR-RD-04 , the investigational gene therapy for cystinosis .

As of the safety data cut-off date of Jan uary 27, 2020, which was approximately three months following administration of the investigational gene therapy, there ha d been no reports of safety events attributed to the investigational drug product and no serious adverse events , or SAEs , ha d been reported.

Three months following administration of AVR-RD-04, the first patient exhibited a vector copy number, or VCN, of 2.0.

VCN, which is expressed as VCN per diploid genome, refers to the average number of copies of the lentiviral-vector inserted gene that are integrated into the genome of a cell and is a measure that can be used to help assess the durability of a gene therapy.

Initial data on another biomarker -- the average granulocyte cystine level , which is one of the clinical trial’s primary endpoints -- showed that the first patient’s average granulocyte cystine level decreased from a baseline level of 7.8 nmol half cystine/mg protein to 1.5 nmol half cystine per milligram three months post-treatment with AVR-RD-04 .

The patient’s baseline value was measured two weeks after discontinuation of cysteamine treatment, the current standard of care for cystinosis, and prior to initiating mobilization.

As the Phase 1/2 clinical trial progresses, we expect to identify clinically meaningful measures, such as renal function, polyuria and crystal levels in the cornea and photophobia.

The Phase 1/2 clinical trial for AVR-RD-02 for Gaucher disease is actively recruiting in Australia and Canada, with additional sites planned in the United States .

Patient enrollment has commenced, and we expect to dose the first patient in the second quarter of 2020.

Our AVR-RD-03 program for Pompe disease is currently in preclinical development with the first IND-enabling preclinical study initiated in 2019.

sites for our ongoing FAB-GT clinical trial of AVR-RD-01, and we are actively recruiting potential patients for our sites in Australia, Canada and the United States.

We have submitted a briefing book to the FDA outlining our proposal for a potential accelerated approval strategy for AVR-RD-01, including a proposed randomized confirmatory clinical trial of Fabry patients who are being treated with ERT.

We expect to meet with the FDA in the first quarter of 2021 to discuss our proposal.

In February 2021, we announced initial clinical data from the first three patients dosed in the investigator-sponsored Phase 1/2 trial of AVR-RD-04, our investigational gene therapy for cystinosis.

As of January 20, 2021, all three patients had discontinued cysteamine pills and eye drops and remained cysteamine-independent out as far as 16 months post-treatment.

We also announced in February 2021 clinical data from the first patient dosed in our Phase 1/2 Guard1 clinical trial of AVR-RD-02 for Gaucher disease type 1.

The first patient exhibited a 44% reduction in plasma glucosylsphingosine, or lyso-Gb1, levels six months post-administration of AVR-RD-02 as compared to baseline while on ERT.

Lyso-Gb1 is considered a surrogate marker for disease activity and treatment response for Gaucher disease type 1.

In addition, we announced that at six months post-treatment the first patient exhibited a 49% reduction in chitotriosidase levels as compared to baseline while on ERT.

Chitotriosidase is a biomarker of macrophage activation that is found in high levels in Gaucher patients where the macrophages have accumulated an excess lipid burden.

This clinical trial is actively recruiting in Australia and Canada, with additional sites planned in the United States, Israel and Europe .

We continue to seek opportunities to expand our approach to other rare and non-rare diseases.

We plan to identify and develop future product candidates through our own internal research efforts as well as through collaborations with leading researchers worldwide.

Plato is our gene therapy platform designed to provide the foundation for the potential worldwide commercialization of our gene therapies, if approved.

a closed, automated manufacturing system designed to improve consistency and predictability of the drug product;

and a personalized approach to conditioning using busulfan with TDM, which is designed to optimize safety and engraftment.

These three process changes, or upgrades, were cleared by applicable regulatory bodies in the United States, Canada and Australia for use in the Phase 2 clinical trial of AVR-RD-01 for Fabry disease and the Phase 1/2 clinical trial of AVR-RD-02 for Gaucher disease.

We intend to utilize the plato platform with these process changes for all future patients enrolling in our Phase 2 clinical trial of AVR-RD-01 for Fabry disease and our Phase 1/2 clinical trial for Gaucher disease.

We developed the plato platform to form the backbone of our commercial programs, with the intent of replacing our original academic platform with improved solutions for delivering our gene therapy candidates to patients in multiple disease indications.

We believe improvements from our plato platform may lead to better patient outcomes with our gene therapy candidates.

Included in our process optimization efforts is the development of a detailed plan for the more cost efficient and scalable manufacturing of our product candidates.

We are establishing global manufacturing capabilities to support all aspects of the development and, if approved, the eventual commercialization of our gene therapies, from lentiviral vector production to cell processing.

We also utilize a cryopreservation process that we believe will allow for the global distribution and, if approved, commercialization of our gene therapies.

Key to our strategy is to continuously improve our technology and production processes and to leverage these improvements across our gene therapies.

Our Expertise

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Our team has broad expertise in the clinical, regulatory and commercialization aspects of rare diseases as well as process development and manufacturing for cellular therapies.

Members of our management team have held senior positions at Shire, Genzyme, Novartis, GlaxoSmithKline, Lonza, Spark Therapeutics, Biogen, AveXis and other companies pursuing development, manufacturing and commercialization of gene, cellular and other therapies to treat rare diseases.

Our goal is to develop and commercialize potentially curative lentiviral-based gene therapies for patients and expand the use of this approach to treat a number of diseases potentially addressable by our ex vivo gene therapy platform.

Members of our management team have held senior positions at Amgen, AstraZeneca, AveXis, Biogen, bluebird bio, GlaxoSmithKline, Lonza, Novartis, Sanofi Genzyme, Shire, Spark Therapeutics, and other companies pursuing development, manufacturing and commercialization of gene, cellular and other therapies to treat rare diseases.

Our goal is to develop and commercialize lentiviral-based gene therapies that free patients from a lifetime of genetic disease.

Key elements of our strategy include:

Rapidly Advance Our Initial Gene Therapies Targeting Lysosomal Diseases.

We are initially targeting lysosomal diseases and are developing a deep pipeline of four gene therapies to treat Fabry disease, Gaucher disease, cystinosis and Pompe disease.

We intend to continue rapidly advancing these gene therapies and obtain efficacy data in patients from these development programs.

Five patients have been dosed in the investigator-sponsored Phase 1 clinical trial of AVR-RD-01 for Fabry disease, and enrollment is complete.

Four patients have been dosed to date in our company-sponsored Phase 2 clinical trial of AVR-RD-01, and we are actively recruiting additional potential patients for our sites in Australia, Canada and the United States.

AVR-RD-04 is currently being studied by our collaborators at UCSD in a Phase 1/2 investigator-sponsored clinical trial, and the first patient was dosed in October 2019.

Enrollment has commenced for the Phase 1/2 clinical trial for AVR-RD-02 for Gaucher disease, and we are actively recruiting potential patients in Australia and Canada, with additional sites planned in the United States.

In addition, we intend to pursue pathways for accelerated review and approval of our product candidates by the FDA and international regulatory authorities through programs such as the Regenerative Medicine Advanced Therapies, or RMAT, program in the United States.

Continue Implementing Our Plato Platform with Refined Approach to Conditioning, Enhanced Vector Technology and Optimized Manufacturing Processes.

Rapidly advance our pipeline targeting lysosomal disorders.

We are initially targeting lysosomal disorders and are developing a deep pipeline of six gene therapies to treat Fabry disease, cystinosis, Gaucher disease type 1, Hunter syndrome, Gaucher disease type 3 and Pompe disease.

We intend to continue rapidly advancing these programs in parallel and to obtain clinical data that could potentially support regulatory filings around the world.

Specifically, we intend to pursue pathways for accelerated review and approval of our product candidates by the FDA and international regulatory authorities through programs such as the Regenerative Medicine Advanced Therapies, or RMAT, program in the United States.

Continue implementing and enhancing our industry-leading plato platform with its personalized approach to conditioning, enhanced vector technology and automated, closed manufacturing processes.

Our end-to-end plato platform is designed to provide the foundation for worldwide commercialization of our gene therapies, if

We believe our innovations in viral vector design, cellular manufacturing, cryopreservation, and other related processes are important steps towards advancing the field of lentiviral-based gene therapy and realizing its full potential to treat a number of diseases.

Our plato platform is designed to provide the foundation for the potential worldwide commercialization of our gene therapies, if approved, and incorporates a four-plasmid lentiviral vector designed to optimize vector copy number, transduction efficiency and resulting enzyme activity.

We have developed a manufacturing process that we believe is both reproducible and scalable, and we believe our closed, automated manufacturing system will enable us to deliver our gene therapies to patients at an industrialized scale.

In addition, we believe our personalized approach to conditioning using busulfan with TDM will enable us to pursue early intervention for the treatment of lysosomal diseases and expand into a wide range of diseases where lentiviral-based gene therapy has not been previously utilized.

We will continue to leverage advancements in stem cell transplantation in order to improve patient safety and tolerability of our lentiviral-based gene therapies.

Plato incorporates a four-plasmid lentiviral vector designed to optimize vector copy number, transduction efficiency and resulting enzyme activity .

In combination with this vector, in some indications we use a number of proprietary peptide tag technologies to enhance uptake of therapeutic protein in key tissues.

W e have also developed a manufacturing process that we believe is both reproducible and scalable , and we believe this technology could enable us to deliver our gene therapies to patients , if approved, in quantities sufficient for global commercial supply .

In addition, we believe our personalized approach to conditioning using busulfan with a precision dosing program called Target Concentration Intervention could enable us to deliver durable, ‘head-to-toe’ treatment of symptoms and early intervention in the treatment of lysosomal disorders.

We will continue to leverage advancements in stem cell transplantation in order to improve patient tolerability of our lentiviral-based gene therapies.

Build global infrastructure to reach patients across the world.

Lysosomal diseases afflict patients globally and we intend to continue building global infrastructure in order to provide treatment to patients around the world.

We are currently conducting clinical trials across multiple geographies, including the United States, Canada and Australia, with plans to potentially expand to other geographies including Japan, Europe and Israel.

We have established a global network of suppliers and contract manufacturing organizations, or CMOs.

Lysosomal disorders afflict patients globally and we intend to continue building global infrastructure in order to provide treatment to patients around the world.

This infrastructure includes clinical sites, specialist physicians and researchers, suppliers and contract manufacturing organizations.

Leverage our approach beyond our initial indications.

We are initially developing gene therapies for the treatment of four different lysosomal diseases and believe that we will gain significant learnings and technical insights from these programs.

We are initially developing gene therapies for the treatment of six different lysosomal disorders and believe that we will gain significant learnings and technical insights from these programs.

We intend to leverage our technology and insights to treat a number of rare and non-rare diseases where we believe our lentiviral approach has transformative potential.

We develop therapies utilizing our ex vivo lentiviral-based gene therapy approach to transform a patient’s own cells into a drug product.

Our gene therapies employ lentiviral vectors that are designed to result in stable integration of the desired genes in the chromosomes of the stem cells such that they are permanently maintained in the cell and can be reproduced as the cell divides.

We develop gene therapies utilizing our ex vivo lentiviral-based approach to transform a patient’s own stem cells into a drug product.

Our investigational gene therapies employ lentiviral vectors that are designed to result in stable integration of the desired genes in the chromosomes of stem cells such that they are permanently maintained in the cell and can be reproduced as the cell divides.

We focus on delivering our lentiviral-based gene therapies to patient-derived hematopoietic stem cells, which are primitive stem cells that develop into all types of blood cells, including white blood cells, red blood cells and platelets.

To accomplish this, we harvest a patient’s hematopoietic stem cells and modify them ex vivo to add the equivalent of a functional copy of the gene that is defective in the target disease.

We then infuse the modified cells back into the patient.

Our gene therapies are designed to be administered to the patient as a one-time therapy following a TDM conditioning regimen.

We are initially focused on employing our approach to treat and potentially cure lysosomal diseases.

These diseases have well-understood biologies, identified patient populations, established standards of care yet with significant unmet medical needs, and represent large markets with approximately $4.0 billion in worldwide net sales in 2019.

We believe our ex vivo lentiviral-based gene therapy approach can be industrialized into a robust, scalable and, if approved, commercially viable process that will allow us to deliver our potentially curative therapies to patients across different geographies with these and other serious monogenic disorders.

Advantages of Our Lentiviral-Based Gene Therapy Approach

We believe lentiviral-based gene therapy provides numerous advantages, including:

We then infuse the genetically modified cells back into the patient.

Our gene therapies are designed to be administered to the patient as a one-time therapy following a TCI conditioning regimen.

We are focused on employing our approach to treat and potentially cure lysosomal disorders.

These disorders have well-understood biologies, identified patient populations, established standards of care that leave many patients with significant unmet medical needs, and represent large markets with approximately $4.8 billion in worldwide net sales in 2020.

Advantages of Ex-Vivo Lentiviral-Based Gene Therapy Approach

We believe ex-vivo lentiviral-based gene therapy provides numerous advantages, including:

Durable benefit.

Lentiviral vectors have the potential to provide life-long benefits with a single dose.

We believe lentiviral vectors have the potential to provide life-long benefits with a single dose.

Lentiviral vectors can integrate stably into the genome of hematopoietic stem cells and, when these cells replicate, they pass the integrated genes on to their progeny cells.

Across the industry, efficacy in patients treated with lentiviral gene therapies has been demonstrated for longer than 12 years.

Systemic therapeutic effect.

Progeny cells circulate systemically and may migrate into tissues and therefore have the ability to provide therapeutic benefit to affected tissues and organs throughout the body.

In addition, we believe that the busulfan conditioning regimen used in our plato platform has the potential to allow our gene therapies to cross the blood-brain barrier, a feature which may yield therapeutic benefit in diseases that have a central nervous system component.

Function cell correction.

Lentiviral-based gene therapy has the potential to restore functional proteins in CD34+ stem cell daughter cells such as macrophages.

History of Safety in Precedent Third Party Clinical Trials.

No instances of insertional oncogenesis or leukemogenesis from lentiviral vectors have been observed in clinical trials in which over 350 total patients have been treated.

In addition, we believe that our personalized busulfan conditioning regimen has the potential to allow the therapeutic benefits of our gene therapies to cross the blood-brain barrier and treat symptoms arising in the central nervous system.

These often severe symptoms are typically unaddressed by the current standards-of-care for lysosomal disorders.

Broad patient applicability.

Lentiviral-based gene therapies have been used to deliver treatments to patients of all ages, including children, and to patients who may be ineligible for other types of gene therapy due to the presence of preexisting antibodies that detect viral vectors and trigger the immune system to destroy the vector and cells infected by the vector.

of preexisting antibodies that detect viral vectors and trigger the immune system to destroy the vector and cells infected by the vector.

Restoration of protein function.

By contrast to the standard-of-care enzyme replacement therapy, which seeks to clear toxic substrate as a key symptom of a non-functioning gene, restoration of gene function may deliver a wide array of additional biochemical benefits throughout the body.

History of tolerability in clinical trials.

To our knowledge, no instances of insertional oncogenesis or leukemogenesis from lentiviral vectors have been documented in clinical trials of lentiviral gene therapies, with more than 350 total patients treated.

To date, we have not seen any unexpected safety events in 14 patients across our four clinical trials, with the longest follow-up more than 3.5 years to date.

Larger and varied payloads.

In contrast to other viral vectors, lentiviruses have the capacity to carry larger gene sequences, which allow them to potentially address a large variety of indications.

In contrast to other viral vectors, lentiviral vectors have the capacity to carry larger gene sequences, which allow them to potentially address a large variety of indications.

Strategic Selection of Our Initial Indications

There are approximately 50 identified lysosomal diseases, which are characterized by an abnormal toxic build-up of substrates and their metabolites in the body’s cells.

We are initially targeting Fabry disease, Gaucher disease, cystinosis and Pompe disease.

Each of these diseases affects a meaningful number of patients, has a suboptimal standard of care with unmet medical need and, we believe, is appropriate for lentiviral-based gene therapy.

We believe our approach addresses the shortcomings of existing therapies where patients’ disease continues to progress despite chronic dosing and that our approach has the potential to halt progression of these diseases.

Clinical proof of concept already exists for allogeneic bone marrow transplant in some lysosomal diseases, supporting the notion that transplantation of cells that produce normal enzyme can have clinical impact on disease.

Experience with allogeneic bone marrow transplant in patients with Gaucher disease provides evidence to support our ex vivo gene therapy approach.

Additionally, in cystinosis, transplant of human bone marrow and hematopoietic stem cells into a mouse model demonstrates proof of concept efficacy for transplant.

Our ex vivo gene therapy approach allows patients to be their own cell donor, eliminating the need to find a matched bone marrow donor, while reducing the risk of complications related to the immunosuppression regimens required in allogeneic cell transplant in order to prevent both rejection and graft versus host disease.

Expanding the Utility of Lentiviral-Based Gene Therapy with TDM-Enabled Conditioning Regimen

A core part of our approach is to expand the use of lentiviral-based gene therapy to treat numerous diseases.

There are approximately 50 identified lysosomal disorders, which are characterized by an abnormal toxic build-up of substrates and their metabolites in the body’s cells.

We are currently targeting Fabry disease, cystinosis, Gaucher disease type 1, Hunter syndrome, Gaucher disease type 3 and Pompe disease.

Each of these disorders affects a meaningful number of patients, has a suboptimal standard of care with unmet medical need and, we believe, is appropriate for lentiviral-based gene therapy.

We believe our approach has the potential to address the shortcomings of existing therapies that, despite chronic dosing, cannot halt or reverse disease progression, restore normal lifespan or adequately address symptoms arising in both the peripheral tissues and the central nervous system.

Expanding the Utility of Lentiviral-Based Gene Therapy with TCI-Enabled Conditioning Regimen

A core part of our approach is to expand the use of lentiviral-based gene therapy to treat numerous lysosomal disorders.

We believe conditioning is an essential step to optimize these treatments as it is designed to clear space in the patient’s bone marrow and central nervous system for cells carrying the therapeutic gene.

This maximizes the potential for their long-term engraftment which may enhance durability of therapeutic effect.

We believe that we will be able to demonstrate durable effects in our targeted diseases utilizing a single myeloablative agent, busulfan, which we have transitioned to as part of implementing our plato platform.

Busulfan is mildly immunosuppressive and is designed to be personalized to each patient using TDM to achieve the desired level of conditioning to allow for gene therapy administration while limiting complications.

We believe our approach to conditioning has the potential for reduced short- and long-term toxicities and effective long-term engraftment.

If realized, we believe these benefits may promote lentiviral-based gene therapy as a therapeutic option for less acutely severe diseases or diseases with approved therapies in which large unmet medical needs remain.

Prior to the reintroduction of ex vivo modified stem cells, a conditioning regimen is generally required to remove existing stem cells from the bone marrow in order to create space for the modified stem cells.

Creating sufficient space in the bone marrow for the lentivirally-modified hematopoietic stem cells is required to enable the cells to engraft long-term and produce their progeny cells.

Ablation requires the use of cytotoxic drugs that can transiently compromise the patient’s immune system, known as neutropenia, and ability to form blood clots, known as thrombocytopenia.

To date, over 350 patients have been treated with lentiviral-based gene therapies in third parties’ and our rare disease clinical trials, and we believe the technology can be developed for other serious conditions based on a rigorous risk/benefit assessment.

The ablation procedure, also known as the conditioning regimen, is typically an essential step in the ex vivo gene therapy treatment procedure and is administered prior to the gene therapy.

We have pioneered precision dosing of busulfan in gene therapy as a single agent in a single treatment cycle, with the goal of enhancing the patient experience.

A body of research has identified an optimal exposure range for busulfan (Bu-90), which we plan to implement for the patients enrolled in our Company-sponsored clinical trials.

Our approach is to personalize conditioning to each patient using TCI, a precision dosing program.

TCI is designed to allow for continually controlled exposure by assessing via simple blood draws how rapidly the individual patient metabolizes busulfan, to inform further administration.

Use of busulfan in a conditioning regimen causes adverse side effects and can transiently compromise the patient’s immune system, known as neutropenia, and ability to form blood clots, known as thrombocytopenia.

The higher the level of conditioning, the greater the potential risk of more serious complications, such as veno-occlusive disease.

However, we believe the risk of the more serious complications can be managed through utilization of TDM to enable careful titrating of exposure to the drug to a specific AuC.

However, we believe our approach to conditioning has the potential for reduced, predictable and manageable short- and long-term toxicities and maximized long-term engraftment.

We believe our approach has the potential to extend the reach of our gene therapies to a broad range of lysosomal disorders as first-line therapies.

Our Commercial-Scale Platform

Since forming our company, we have centered our efforts on developing first-line gene therapies, based on preceding academic approaches.

While we believe these approaches have been adequate for our development programs to date, key to our strategy is to continuously improve our technology and production processes and to leverage these improvements across our gene therapies, if approved.

In addition to developing first-line gene therapies, an important key to our strategy is to continuously improve our technology and production processes and to leverage these improvements across our gene therapies, if approved.

Plato is designed to provide the foundation for the potential worldwide commercialization of our gene therapies.

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a closed, automated manufacturing system designed to improve consistency and predictability of the drug product;

and a personalized approach to conditioning using busulfan with TDM, which is designed to optimize safety and engraftment.

and a personalized approach to conditioning using busulfan with TCI, which is designed to optimize safety and engraftment.

We have submitted data on our upgraded lentiviral vector and

automated manufacturing process to the applicable regulatory authorities in the United States and Canada , which allow s us to incorporat e such elements into our FAB-GT and Guard1 clinical trials in those jurisdictions and Australia .

Plato has been used to dose a total of three patients in our clinical trials, and we intend to utilize the plato platform for all future patients enrolling in the FAB-GT and Guard1 clinical trials .

We believe our plato platform may lead to better patient outcomes and will represent a significant advance in our industry towards achieving the quality and scale required for global commercialization of gene therapies.

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Large scale vector production:

We currently have manufacturing capabilities, through CMOs, at 200-liter bioreactor scale, with vector production capable of treating a substantial number of patients per year.

We currently have manufacturing capabilities, through contract manufacturing organizations, or CMOs, at 200-liter bioreactor scale, with vector production capable of treating a substantial number of patients per year.

Global reach :

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Next Generation Vector Technology

We utilize our core expertise in the development and optimization of lentiviral vectors to continuously improve the vectors used in our gene therapies.

We have utilized our core expertise in the development and optimization of lentiviral vectors to improve the vectors used in our gene therapies.

We have made and expect to continue to make enhancements to our lentiviral vectors to improve safety, efficacy and efficiency.

For example, clinical trials of AVR-RD-01 have primarily utilized our original academic three-plasmid-produced lentiviral vector, which we refer to as LV1.

In December 2019 we dosed the fourth patient in our ongoing Phase 2 clinical trial of AVR-RD-01 using our proprietary four-plasmid lentiviral vector, which we refer to as LV2, and expect to dose all future patients in this trial with LV2.

However, we dosed the fourth and fifth patient in our ongoing FAB-GT clinical trial of AVR-RD-01 and the first patient in our ongoing Guard1 clinical trial of AVR-RD-02 using our proprietary four-plasmid lentiviral vector, which we refer to as LV2, and expect to dose all future patients in these trials with LV2.

Our goal is to employ vectors that are state-of-the-art and that can be produced in a cost-effective and scalable manner.

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In contrast to a number of other gene therapy companies that have not developed their commercial scale plans from the outset, we have executed on our plans to move to a closed suspension bioreactor system for vector production, as well as a closed, automated system for manufacturing our gene therapy product.

Our move to a closed, automated manufacturing system was completed in 2019 as part of implementing upgrades from our plato platform, and in December 2019 the fourth patient in our ongoing Phase 2 clinical trial of AVR-RD-01 was dosed using the closed, automated manufacturing system.

Our move to a closed, automated manufacturing system was completed in 2019 as part of implementing upgrades from our plato platform, and the fourth and fifth patients in our ongoing FAB-GT clinical trial of AVR-RD-01 and the first patient in our ongoing Guard1 clinical trial of AVR-RD-02 were each dosed using this system.

We believe our plato platform features the first automated, closed manufacturing system in CD34+ gene therapy.

Our manufacturing approach is intended to allow for the production of drug product using relatively small, self-contained devices, which may reduce our reliance on large traditional clean rooms that are expensive to establish and maintain.

We believe our manufacturing approach may result in greater flexibility in the location of manufacture and help to control costs associated with traditional manufacturing.

In addition, we believe our automated manufacturing process may reduce operator error and yield greater consistency and less variability in the manufactured drug product.

We currently have a CMO partner for the production of our cellular drug product in Australia and we have established two CMO partners in the United States who are currently preparing for production with cGMP-readiness for AVR-RD-01 and AVR-RD-02.

We currently have one CMO partner in the United States and two partners in Australia for the production of AVR-RD-01 and AVR-RD-02 drug product.

We also are in the process of establishing a CMO partnership in Europe.

Optimization of Conditioning Regimen

The conditioning regimen that we have historically employed utilizes melphalan, a common chemotherapy drug, to ablate the patient’s bone marrow.

As part of the upgrades to our plato platform, we have transitioned to utilizing busulfan, another chemotherapy drug, that has been in use since the 1950’s.

The conditioning regimen that we first employed utilized melphalan, a common chemotherapy drug, to ablate the patient’s bone marrow.

As part of the upgrades to our plato platform, we transitioned to utilizing busulfan, another chemotherapy drug, that has been in use since the 1950’s.

Busulfan is indicated for use in combination with cyclophosphamide as a conditioning regimen prior to allogeneic stem cell transplantation for chronic myeloid leukemia.

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We believe that the transition to busulfan for our conditioning regimen may confer several advantages.

For example, busulfan will permit utilization of TDM in our conditioning regimen, thereby enabling physicians to personalize the dosing to each patient by titrating over four days to enhance patient tolerability to the conditioning procedure and promote cell engraftment.

By contrast, melphalan is administered once with no TDM, and may cause concern of conditioning-related toxicity across patients due to individual differences in metabolism of the drug.

In addition, we believe that the utilization of busulfan in our single-agent myeloablative conditioning regimen may have the potential to allow our gene therapies to cross the blood-brain barrier, a feature which may yield therapeutic benefit in diseases that have a central nervous system component, such as Fabry disease, Gaucher disease, Pompe disease and other rare and non-rare diseases.

For example, busulfan will permit utilization of TCI in our conditioning regimen, thereby enabling physicians to personalize the dosing to each patient by titrating over four days to potentially enhance patient tolerability to the conditioning procedure and promote cell engraftment.

By contrast, melphalan is administered once with no TCI, and may cause concern of conditioning-related toxicity across patients due to individual differences in metabolism of the drug.

In addition, we believe that the utilization of busulfan in our single-agent myeloablative conditioning regimen has the potential to allow our gene therapies to cross the blood-brain barrier, a feature which may yield therapeutic benefit in diseases that have a central nervous system component, such as Fabry disease, Gaucher disease type 3, Hunter syndrome, Pompe disease and other rare and non-rare diseases.

Finally, our busulfan conditioning regimen is designed to create more space in the ablated bone marrow compared to melphalan and may increase the average VCN of the patient bone marrow following treatment with the drug product, which are features that we believe will promote better cell engraftment and durability of the gene therapy.

We are aware that there have been cases of therapy-related myelodysplastic syndrome, or t-MDS, a type of blood disorder that is a potential precursor to acute myeloid leukemia, in patients with pre-existing cancer where busulfan treatment was posited to be a contributing factor to this secondary malignancy.

We are aware that there have been cases of therapy-related myelodysplastic syndrome, or t-MDS, a type of blood disorder that is a potential precursor to acute myeloid leukemia, in patients with preexisting cancer where busulfan treatment was posited to be a contributing factor to this secondary malignancy.

However, we have reviewed over 700 published cases of busulfan exposure preceding bone marrow transplant, hematopoietic cell transplant, or ex-vivo gene therapy for non-malignant indications, of which 649 were from peer-reviewed literature.

Of the 648 busulfan exposures reported in peer-reviewed literature, none of the cases reported t-MDS.

Of the 67 exposures reported in non-peer-reviewed published abstracts, 66 reported no cases of t-MDS resulting from busulfan exposure, and in one case it was reported that a patient developed t-MDS.

In that case, which has not yet been peer-reviewed, busulfan treatment was posited to be a contributing factor.

Based on our review of these cases, we found only one case of t-MDS, which involved a report from December 2018 that a patient with preexisting sickle cell disease developed t-MDS.

In that case, busulfan treatment was posited to be a contributing factor.

We believe that due to the presence of other confounding factors in the patient, the cause of that patient’s t-MDS has not been conclusively determined.

In the future we may also utilize molecular cytogenetic screening to further reduce such risks to patients.

While the busulfan conditioning regimen is more intensive than the original conditioning regimen that utilizes melphalan, we believe it is still milder than some of the more aggressive conditioning regimens associated with gene therapies for other diseases, such as when busulfan is used in combination with cyclophosphamide, used at a higher dose, or when TDM is not applied.

Furthermore, we believe our conditioning regimen may produce the desired effect while potentially allowing for a limited hospital stay or potentially for an outpatient procedure, on a case-by-case basis as may be directed by the patient’s physician.

The fourth patient in our Phase 2 trial of AVR-RD-01 for Fabry disease received a precision dosing conditioning regimen with busulfan as part of the plato platform, while the first patient in the Phase 1/2 trial of AVR-RD-04 for cystinosis received busulfan but not as part of the plato platform.

In February 2020 we announced that these two patients both had rapid neutrophil and platelet count recovery, with a trajectory that was similar to the patients who enrolled earlier in the trials of AVR-RD-01 and who received a melphalan conditioning regimen.

Side effects, which included nausea, mucositis, fever, rash and hair loss, developed eight to 10 days after dosing with busulfan and then resolved quickly.

Initial plato Data

In December 2019, we announced that the first patient had been dosed using our plato platform, who is the fourth patient dosed in our ongoing Phase 2 clinical trial of AVR-RD-01.

The figures below, which we presented in February 2020, summarize the enzyme activity, VCN and transduction efficiency measurements of the drug product produced with our plato platform for the fourth patient in the Phase 2 trial of AVR-RD-01 for Fabry disease, as compared to the same individual values and mean of such values observed in the drug product for the first three patients in the same trial, each of whom were dosed prior to our implementation of the plato platform.

We refer to the Phase 2 trial of AVR-RD-01 as FAB-201.

0.1 VCN is indicative of approx.

5-10% of all nucleated circulating blood cells having an average of 1-2 copies of the transgene

The figure below summarizes the in vivo plasma enzyme activity for all four patients in our Phase 2 clinical trial of AVR-RD-01, measured as of one - month post-treatment.

The investigational drug product used to dose the first patient in the AVR-RD-04 program for cystinosis, which was produced at the University of California, Los Angeles and included a four-plasmid vector but not our proprietary LV2 vector or plato’s automated manufacturing process, exhibited a drug product VCN of 2.1 and a transduction efficiency of 76.0%.

The investigational drug product and VCN assay are different for each trial.

In response to these potential risks, we are investigating a plan to potentially implement molecular cytogenetic screening.

Furthermore, we believe our conditioning regimen may produce the desired effect while potentially allowing for a limited hospital stay.

In February 2021, we announced data from the fourth patient dosed in our ongoing FAB-GT clinical trial of AVR-RD-01, who was the first patient dosed using our plato platform.

At 12-months post-gene therapy, this patient exhibited plasma and leukocyte AGA enzyme levels that were 4.2x and 6.3x higher, respectively, than the mean plasma and leukocyte AGA activity levels of the other three dosed patients in the FAB-GT clinical trial measured as of 12-months post-gene therapy.

Additionally, the fourth patient’s kidney biopsy taken at 12 months post-treatment showed a 100% clearance of Gb3 substrate.

Advantages of Our Approach over Existing Therapies

We believe our gene therapy solutions offer several potential advantages over existing therapies for lysosomal diseases, including:

We believe our gene therapy solutions offer several potential advantages over existing therapies for lysosomal disorders, including:

Curative impact that has the potential to halt or reverse disease progression.

Existing ERTs for Fabry, Gaucher and Pompe and oral therapies for cystinosis provide some therapeutic benefit to patients.

Existing ERTs for Fabry, Gaucher, Hunter and Pompe, and oral therapies for cystinosis, provide some therapeutic benefit to patients.

However, because of their suboptimal pharmacokinetics, these ERTs only transiently increase plasma enzyme levels and the therapies for cystinosis require multiple doses throughout the day.

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Existing ERTs and oral therapies can cost millions of dollars over a patient’s lifetime because these therapies require frequent doses of expensive treatments to manage symptoms.

Our single-dose gene therapies are designed to replace the costly chronic intravenous and oral therapies that are the current standard of care for patients with lysosomal diseases.

Our single-dose gene therapies are designed to replace the costly chronic intravenous and oral therapies that are the current standard of care for patients with lysosomal disorders.

AVR-RD-01, Our Gene Therapy for Fabry Disease

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AVR-RD-01 is currently being evaluated in an investigator-sponsored Phase 1 clinical trial and a Company-sponsored Phase 2 clinical trial.

A total of nine patients have been dosed across both trials as of March 6, 2020.

A total of 10 patients have been dosed across both trials as of March 1, 2021.

Disease Overview

Fabry disease is a rare lysosomal disease associated with significant morbidity and early mortality.

Fabry disease is a rare lysosomal disorder associated with significant morbidity and early mortality.

It is caused by a gene defect that causes a deficiency of AGA, which breaks down a particular type of fat in the body’s cells known as globotriaosylceramide, or Gb3.

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In 2020, Fabrazyme and Replagal generated worldwide net sales of approximately €817 million euros and ¥51.6 billion Japanese yen, respectively.

The annual average cost to the healthcare system per patient prescribed Fabrazyme in the United States is approximately $320,000.

We estimate that the average five-year cost to the healthcare system per Fabry patient prescribed standard of care treatment in the United States is approximately $1.7 million.

In addition, because ERTs are not curative and only slow, but do not halt, the progression of disease, patients deteriorate and the healthcare system incurs significant costs associated with recurring medical interventions.

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Galafold (migalastat), an oral therapy marketed by Amicus, was approved by the European Medicines Agency, or EMA, in May 2016, and by the FDA in August 2018.

Amicus reports that only 35% to 50% of the gene mutations associated with Fabry disease are amenable to migalastat.

We are developing AVR-RD-01 to halt or reverse disease progression and potentially cure patients with Fabry disease with a single dose of the patient’s own hematopoietic stem cells modified in an ex vivo procedure.

Amicus has reported that only 35% to 50% of the gene mutations associated with Fabry disease are amenable to migalastat.

We are developing AVR-RD-01 to halt or reverse disease progression and potentially provide a functional cure to patients with Fabry disease with a single dose of the patient’s own hematopoietic stem cells modified in an ex vivo procedure.

AVR-RD-01 is a lentiviral-based gene therapy that contains a codon-optimized human gene and is designed to maximize the likelihood of sustained AGA production by hematopoietic stem cells and their progeny.

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A wide range of levels of plasma AGA activity has been demonstrated to be both safe and effective in preclinical studies, reducing the need for precise regulation of enzyme expression levels and reinforcing that overexpression of AGA is not associated with increased safety risks.

Mutation Independent.

Mutation i ndependent.

AVR-RD-01 is designed to increase plasma and leukocyte AGA levels in a patient’s cells, regardless of which of the more than 1,000 specific mutations underlie the patient’s disease.

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The trial protocol was subsequently amended to allow the investigator team, at their discretion, to discontinue ERT six months after treatment with AVR-RD-01.

Three of the five patients in the clinical trial have discontinued the regular bi-weekly treatments with ERT and all three remain off ERT as of March 6, 2020.

Three of the five patients in the clinical trial have discontinued the regular bi-weekly treatments with ERT and all three remain off ERT as of January 11, 2021.

The primary goal for this clinical trial is to assess the safety and toxicity of AVR-RD-01 as measured by the frequency or severity of clinically notable abnormal vital signs and laboratory values and the frequency or severity of treatment-related adverse events.

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In addition, in all five patients, all of whom are males with classic Fabry disease, the level of plasma and leukocyte AGA enzyme activity began to rise after infusion.

In each of the patients for whom data is available up to 12 months or later, plasma and leukocyte AGA enzyme activity was observed to increase from nearly undetectable levels before treatment to a peak within six months after treatment, followed by a decline and trending to stabilize to levels above the range for males with classical Fabry disease, defined as less than 1 nmol/hr/ml.

In each of the patients, plasma and leukocyte AGA enzyme activity was observed to increase from nearly undetectable levels before treatment to a peak within approximately three to six months after treatment, followed by a decline and trending to stabilize to levels above the range for males with classical Fabry disease, defined as less than 1 nmol/hr/ml.

We believe that the steep initial increase reflects AGA enzyme activity from the early progeny of the transduced stem cells, while the subsequent decline and stabilization in AGA enzyme levels reflect a shift from short term progenitor cells towards the gradual secretion of AGA enzyme by long-term engraftment cells that become more predominant over time.

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Based on the level of endogenously produced enzyme activity, at the 18-month follow-up visit for this patient, the investigator team for the trial made a clinical decision to discontinue the bi-weekly ERT and the patient remains off ERT as of 42 months post-treatment with AVR-RD-01.

Additionally, the third and fourth patients in this clinical trial discontinued ERT one month prior to receiving AVR-RD-01 and voluntarily elected not to resume ERT.

These patients remain off ERT as of 15 and 12 months post-treatment with AVR-RD-01, respectively.

Additionally, the third and fourth patients in this clinical trial discontinued ERT and both remain off ERT as of 24 months post-treatment with AVR-RD-01.

The second and fifth patients have elected to continue receiving concurrent ERT.

Plasma and leukocyte AGA enzyme activity levels in all five patients remained above the range for males with classical Fabry disease, defined as less than 1 nmol/hr/ml, as of 32 months, 24 months, 15 months, 12 months and six months after treatment, respectively.

Plasma and leukocyte AGA enzyme activity levels in all five patients remained above the range for males with classical Fabry disease, defined as less than 1 nmol/hr/ml, as of 42 months, 36 months, 24 months, 24 months and 18 months after treatment, respectively.

We believe these results, particularly from the patients in the trial with longer-term AGA data points reported, support the potential of AVR-RD-01 to drive functional enzyme production for long durations.

The following graphs present the plasma and leukocyte AGA activity data following AVR-RD-01 treatment in all five patients over various points in time.

Leukocyte and Plasma AGA activity* post-AVR-RD-01 treatment

For patients on ERT, enzyme activity is measured at trough, where applicable.

Dotted line illustrative only.

Lyso-Gb3 Levels

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We define baseline ERT for these Phase 1 patients as the mean of the plasma lyso-Gb3 values reported prior to initiating mobilization.

Based on the latest available efficacy data, these four Phase 1 patients exhibited reductions in plasma lyso-Gb3 levels ranging between 26% and 47% compared to their baseline ERT levels.

With respect to the fourth patient, who discontinued ERT six months following administration of AVR-RD-01, we observed an initial decline in plasma lyso-Gb3 levels through six months post-treatment compared to baseline ERT, and a 23% increase in plasma lyso-Gb3 levels at twelve months post-treatment compared to baseline ERT.

Based on the latest interim data we presented in February 2021, these four Phase 1 patients exhibited reductions in plasma lyso-Gb3 levels ranging between 25% and 48% compared to

their baseline ERT levels.

With respect to the fourth patient, who discontinued ERT six months following administration of AVR-RD-01, we observed an initial decline in plasma lyso-Gb3 levels through six months post-treatment compared to baseline ERT, and a 35 % increase in plasma lyso-Gb3 levels at 24 months post-treatment compared to baseline ERT.

This patient’s plasma lyso-Gb3 levels remain within the range for the Fabry disease patients on ERT observed in this Phase 1 clinical trial.

The following graphs present the plasma lyso-Gb3 data following AVR-RD-01 treatment in all five patients over various points in time, as well as each patient’s ERT status and the change in plasma lyso-Gb3 levels from baseline.

Plasma lyso-Gb3 levels and ERT status post-AVR-RD-01 treatment

Vector Copy Number

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We believe that different diseases may require varying levels of VCN based on the underlying condition, and therefore VCN measurements across different diseases should be assessed separately.

For example, a VCN of 0.1 may represent 5% to 10% of all nucleated circulating blood cells carrying one to two copies of the inserted gene, which we believe may be sufficient to result in clinically meaningful AGA enzyme activity in the case of Fabry disease, as suggested by our preliminary interim data from our ongoing clinical trials of AVR-RD-01.

The following graph presents the VCN data following AVR-RD-01 treatment in all five patients over various points in time, as well as the VCN of the drug product produced for each patient.

Average VCN* in Nucleated Blood Cells post-AVR-RD-01 treatment

Average VCN refers to the average number of copies of the lentiviral-vector inserted gene that are integrated into the genome of a cell, for a given cell population.

Preliminary safety data indicate AVR-RD-01 was generally well-tolerated with no SAEs related to the study drug.

For example, a VCN of 0.1 may represent 5% to 10% of all nucleated circulating blood cells carrying one to two copies of the inserted gene, which we believe may be sufficient to result in clinically meaningful AGA enzyme activity in the case of Fabry disease, as suggested by our interim data from our ongoing clinical trials of AVR-RD-01.

Based on the latest interim data we presented in February 2021, these five Phase 1 patients exhibited VCN levels of 0.04, 0.16, 0.24, 0.12 and 0.86 at 42 months, 36 months, 24 months, 24 months and 18 months after treatment, respectively .

Preliminary interim safety data indicate AVR-RD-01 has been generally well-tolerated with no SAEs related to the study drug.

Adverse events, or AEs, were consistent with expectations for the melphalan conditioning regimen prescribed by the study protocol.

As of the most recent safety cut-off date of November 26, 2019, there were 130 AEs reported, 115 of which were assessed by the investigator as being possibly, probably or definitely related to protocol treatment or procedures (which includes apheresis, stem cell transplant procedure, blood draws, insertion of central catheters, drugs used for mobilization of stem cells and/or conditioning, and the drug product).

Two SAEs were reported through the safety data cut-off date of November 26, 2019, which included one report of Grade 3 febrile neutropenia and one report of Grade 2 thrombophlebitis, each occurring following the conditioning regimen and treatment with AVR-RD-01.

Both SAEs have subsequently resolved.

As of the most recent safety cut-off date of November 26, 2020, there were 94 AEs reported, 14 of which were Grade 3 or 4.

The remainder of the AEs were Grade 2 or Grade 1.

Two SAEs were reported through the safety data cut-off date of November 26, 2020, which included one report of AE Grade 3 febrile neutropenia and one report of AE Grade 2 thrombophlebitis, each occurring following the conditioning regimen and treatment with AVR-RD-01.

Both SAEs have subsequently resolved without clinical sequelae.

One event, the development of a left thigh mass, was originally reported as an SAE but has now been considered by the study investigator as not serious and has resolved in the patient.

No new AEs have been reported for the first patient since January 17, 2018, the second patient since May 9, 2018, the third patient since August 6, 2018, the fourth patient since August 6, 2018 or the fifth patient since August 2019.

No new AEs have been reported for the first patient since January 2018, the second patient since May 2018, the third patient since August 2018, the fourth patient since March 2019 or the fifth patient since August 2019.

In addition, investigators observed a temporary suppression of absolute neutrophil counts and platelets, which is an expected consequence of the conditioning regimen.

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Neutrophil and platelet counts recovered after dosing.

Because this clinical trial is ongoing, safety data are preliminary and subject to change.

Subsequent to November 26, 2019, we have not been notified by the investigators in this clinical trial of any suspected SAEs related to the study drug.

Pre-existing low anti-AGA antibody titers have been detected in four patients in the Phase 1 trial.

We believe none of these are of clinical relevance.

Phase 2 Multinational Clinical Trial

We are sponsoring an open label, multinational Phase 2 clinical trial of AVR-RD-01.

Because this clinical trial is ongoing, safety and efficacy data are preliminary and subject to change.

As is typical in open-label studies in which interim reports are provided, the data are regularly reviewed and validated.

As a result, certain data may change over time, including reductions or increases in the number of reported safety events, until the database is locked at the end of the study.

Ongoing Phase 2 Multinational Clinical Trial (FAB-GT)

We are sponsoring an open label, multinational Phase 2 clinical trial of AVR-RD-01, which we refer to as the FAB-GT clinical trial.

This study was initiated in June 2018 in Australia and enrollment in this Phase 2 clinical trial is ongoing.

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We have opened two U.S.

sites for our ongoing Phase 2 clinical trial and are actively recruiting potential patients for our sites in Australia, Canada and the United States.

sites for our ongoing FAB-GT clinical trial and are actively recruiting potential patients for our sites in Australia, Canada and the United States.

We are also engaged in discussions with the Pharmaceuticals and Medical Devices Agency, or PMDA, regarding potential future clinical development of AVR-RD-01 in Japan.

As of March 6, 2020, four patients have been dosed in the Phase 2 clinical trial.

For the fourth patient, we transitioned the lentiviral vector from LV1 to our optimized proprietary LV2 from our plato platform.

As of March 1 , 2021 , five patients have been dosed in the FAB-GT clinical trial.

For the fourth and fifth patient s , we transitioned the lentiviral vector from LV1 to our optimized proprietary LV2 from our plato platform.

All future patients in this clinical trial will be dosed using the plato platform, which we believe will further improve the efficacy and further enhance the safety of our lentiviral-based gene therapy.

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Kidney Biopsy

The primary efficacy endpoint of our Phase 2 clinical trial is the change from baseline in the average number of Gb3 inclusions per peritubular capillary, or PTC, as measured in a patient kidney biopsy one year (48 weeks) after treatment with AVR-RD-01.

The primary efficacy endpoint of our FAB-GT clinical trial is the change from baseline in the average number of Gb3 inclusions per peritubular capillary, or PTC, as measured in a patient kidney biopsy one year (48 weeks) after treatment with AVR-RD-01.

Gb3, also referred to as GL-3, is a type of fatty substrate that builds in the cells of Fabry patients, resulting in damage to organs such as kidneys and heart.

PTCs, also referred to as kidney interstitial capillaries, or KICs, in Fabry clinical trials, convey blood after filtration in the glomeruli, enabling the blood to eventually exit the kidney and return to the circulatory system.

In July 2019, we announced that the first patient in our Phase 2 clinical trial, who had not previously received ERT, exhibited a reduction from an average of 3.55 Gb3 inclusions per PTC at baseline to an average of 0.47 inclusions per PTC one year after administration of AVR-RD-01, representing an 87% reduction and a numerical decrease of 3.08.

The following figure illustrates this decrease in average Gb3 inclusions per PTC for this patient.

Patient 1 exhibited 87% substrate reduction in kidney biopsy

In February 2021, we announced that the fourth patient in our FAB-GT clinical trial exhibited a reduction from an average of 4.02 Gb3 inclusions per PTC at baseline to zero inclusions per PTC one year after administration of AVR-RD-01, representing a 100% clearance of Gb3 substrate.

These data followed our 2019 announcement that the first patient in the FAB-GT clinical trial exhibited a reduction from an average of 3.55 Gb3 inclusions per PTC at baseline to an average of 0.47 inclusions per PTC one year after administration of AVR-RD-01, representing an 87% reduction and a numerical decrease of 3.08.

The assessments for these two patients were each made by two blinded pathologists who independently scored digital images of the sectioned kidneys from the 12-month biopsies.

The second patient in the FAB-GT clinical trial has an N215S genotype, which is associated with a late-onset cardiac variant phenotype.

This patient’s cardiac variant phenotype does not typically result in Gb3 accumulation in the kidney, and accordingly this patient’s kidney biopsy had low levels of Gb3 and lyso-Gb3 at all measurements, including at baseline.

Although we expect that data obtained from this patient will not provide meaningful insight on the primary efficacy endpoint in our FAB-GT clinical trial, including kidney biopsies, other important efficacy and safety measures continue to be derived from data collected from this patient.

A kidney biopsy was conducted on the third patient in the FAB-GT clinical trial, but due to human error in processing the biopsy sample at the external laboratory vendor, the kidney Gb3 inclusions could not be evaluated and will not be available.

The fifth patient in this clinical trial was dosed in February 2021 and we expect to have kidney biopsy data available for that patient in the first half of 2022.

The following figure illustrates the decrease in average Gb3 inclusions per PTC for the first and fourth patients in the Phase 2 FAB-GT clinical trial.

Phase 2 FAB-GT :

Patients 1 and 4 substrate reduction in kidney biopsy

The last available, non-missing observation prior to AVR-RD-01 infusion

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Lyso-Gb3 Levels

The first patient in our Phase 2 trial had an 87% reduction in plasma lyso-Gb3 levels as of eighteen months post-treatment with AVR-RD-01, and the third patient had a plasma lyso-Gb3 reduction of 52% as of six months post-treatment with AVR-RD-01.

Plasma lyso-Gb3 data are also available for the second patient in the Phase 2 trial, up to twelve months post-treatment with AVR-RD-01.

This patient has an N215S genotype, which is associated with a late-onset cardiac variant phenotype and does not typically result in Gb3 accumulation in the kidney or skin.

Accordingly, this patient’s skin and kidney biopsy had low levels of plasma Gb3 and lyso-Gb3 at all measurements, including at baseline.

Although we expect that data obtained from this patient will not provide meaningful insight on the efficacy endpoints in our Phase 2 clinical trial, including kidney and skin biopsies, there may be other important insights derived from data collected from this patient in the Phase 2 clinical trial.

The following table presents the plasma lyso-Gb3 data following AVR-RD-01 treatment in the first and third patients of the Phase 2 trial.

Patient 1 Plasma lyso-Gb3 reductions post-AVR-RD-01 treatment

Patient 3 Plasma lyso-Gb3 reductions post-AVR-RD-01 treatment

The first patient in our FAB-GT trial had an 86% reduction in plasma lyso-Gb3 levels as of 29 months post-treatment with AVR-RD-01, the third patient had a plasma lyso-Gb3 reduction of 55% as of 19 months post-treatment, and the fourth patient had a plasma lyso-Gb3 reduction of 69% as of 12 months post-treatment with AVR-RD-01, in each case as compared to baseline.

The second patient has an N215S genotype, which is associated with a late-onset cardiac variant phenotype and does not typically result in Gb3 accumulation in the kidney or skin.

AGA Enzyme Activity

In the first two patients in our Phase 2 clinical trial, for whom data is available out to 18 and 12 months, respectively, plasma and leukocyte AGA enzyme activity was observed to increase from nearly undetectable levels before treatment to a peak within three months after treatment, followed by a decline and trending to stabilize to levels above the range for males with Fabry disease, defined as less than 1 nmol/hr/ml.

The third patient in the Phase 2 trial exhibited a rapid increase in plasma and leukocyte AGA enzyme activity from nearly undetectable levels before treatment to a peak within the first seven days after treatment in the case of plasma enzyme activity and within the first 14 days after treatment in the case of leukocyte enzyme activity, followed by a decline and subsequent increase observed at month six.

In the first two patients in our FAB-GT clinical trial, for whom we have presented data out to 29 and 24 months, respectively, plasma and leukocyte AGA enzyme activity was observed to increase from nearly undetectable levels before treatment to a peak within three months after treatment, followed by a decline and trending to stabilize to levels above the range for males with Fabry disease, defined as less than 1 nmol/hr/ml.

The third patient in the FAB-GT trial exhibited a rapid increase in plasma and leukocyte AGA enzyme activity from nearly undetectable levels before treatment to a peak within the first seven days after treatment in the case of plasma enzyme activity and within the first 14 days after treatment in the case of leukocyte enzyme activity, followed by a decline and subsequent increase which is trending toward a stable level above the range for males with Fabry disease at 18 months after treatment.

The fourth patient in the FAB-GT trial, who was dosed with the plato platform, exhibited a rapid increase in AGA enzyme activity post-treatment and had not exhibited a substantial decline in AGA levels at 12 months after treatment.

Similar to the results observed in the investigator-led Phase 1 trial of AVR-RD-01, we believe that the steep initial increase reflects AGA enzyme activity from the early progeny of the transduced stem cells, while the subsequent decline and stabilization in AGA enzyme levels reflect a shift from short-term progenitor cells towards the gradual secretion of AGA enzyme by long-term engraftment cells that become more predominant over time.

The following graphs present the plasma and leukocyte AGA activity data following AVR-RD-01 treatment in the first, second and third patients of the Phase 2 trial.

Patient 1 Leukocyte and Plasma AGA activity post-AVR-RD-01 treatment

Patient 2 Leukocyte and Plasma AGA activity post-AVR-RD-01 treatment

Patient 3 Leukocyte and Plasma AGA activity post-AVR-RD-01 treatment

Skin biopsies have been performed on the first three patients in the Phase 2 trial and evaluated by two independent blinded readers using a standard scoring system for Gb3 accumulation and clearance.

The scoring system has a range of zero to 3, with a score of zero representing none or trace accumulation, and a score of 3 representing severe accumulation.

At six and 12 months post-treatment with AVR-RD-01, skin biopsy assessment revealed that the first patient achieved a substantial reduction in substrate inclusions in capillary endothelium of the skin.

This patient scored a 3 at baseline, a 2 at six months after treatment with AVR-RD-01 and a one at 12 months post-treatment with AVR-RD-01.

The second patient in the Phase 2 trial, whose cardiac variant phenotype does not typically result in Gb3 accumulation in the kidney and skin, scored a zero at baseline and at six months post-treatment with AVR-RD-01 .

The third patient in the Phase 2 trial scored a 2 at baseline and a 2 at six months post-treatment with AVR-RD-01.

Skin biopsies have been performed in the FAB-GT trial and evaluated by two independent blinded readers using a standard scoring system for Gb3 accumulation and clearance.

The scoring system has a range of zero to three, with a score of zero representing none or trace accumulation, and a score of three representing severe accumulation.

The first patient scored a three at baseline, a two at six months after treatment with AVR-RD-01 and a one at 12 months post-treatment with AVR-RD-01.

The second patient in the FAB-GT trial, whose cardiac variant phenotype does not typically result in Gb3 accumulation in the kidney and skin, scored a zero at baseline and at six months post-treatment with AVR-RD-01 .

The third patient scored a two at baseline and a two at six months post-treatment with AVR-RD-01.

After consideration of the clinical relevance of substrate inclusion in the skin of Fabry patients and the lack of direct, strong correlation with substrate in the kidney, we have changed this trial’s exclusion criteria so that patients with no or minimal substrate in their skin at screening will still be eligible to participate in the clinical trial.

We expect to continue collecting skin biopsy data as an exploratory measurement.

Vector Copy Number

The first three patients in our Phase 2 clinical trial have exhibited consistent VCN trends following administration of AVR-RD-01.

The graph below presents the VCN data in the first three patients of our Phase 2 clinical trial following dosing and at subsequent measurement points.

For the fourth patient in our Phase 2 clinical trial of AVR-RD-01, who was dosed in December 2019 with our plato platform, nucleated blood cell VCN is not yet available.

However, the VCN measurement of the drug product produced for this patient was 1.6.

Patient 1 Average VCN* in Nucleated Blood Cells post-AVR-RD-01 treatment

Patient 2 Average VCN* in Nucleated Blood Cells post-AVR-RD-01 treatment

Patient 3 Average VCN* in Nucleated Blood Cells post-AVR-RD-01 treatment

Average VCN refers to the average number of copies of the lentiviral-vector inserted gene that are integrated into the genome of a cell, for a given cell population.

The first four patients in our FAB-GT clinical trial have exhibited consistent VCN trends following administration of AVR-RD-01.

Based on the latest interim data we presented in February 2021, these four FAB-GT patients exhibited VCN levels of 0.04, 0.06, 0.19 and 0.95 at 29 months, 18 months, 19 months and 12 months after treatment, respectively .

Kidney and Cardiac Function

Secondary endpoints of our Phase 2 trial include measurements of kidney function, as measured by estimated glomerular filtration rate, or eGFR, and measured glomerular filtration rate, or mGFR, as well as measures of cardiac function, as assessed by Left Ventricular Mass Index, or LVMI.

Secondary endpoints of our FAB-GT trial include measurements of kidney function, as measured by estimated glomerular filtration rate, or eGFR, and measured glomerular filtration rate, or mGFR, as well as measures of cardiac function, as assessed by Left Ventricular Mass Index, or LVMI.

eGFR is determined using the Chronic Kidney Disease Epidemiology Collaboration, or CKD-EPI, formula and mGFR is determined using plasma clearance of iohexol.

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Improving patient outcomes by slowing or halting the progression of organ damage is a key mission of our Company and our investigational gene therapy programs.

Interim data-to-date in the first two patients in our Phase 2 trial indicates kidney and cardiac functions have been stable and in the normal range at one year following administration of AVR-RD-01 investigational gene therapy.

In the case of the first patient in our Phase 2 clinical trial, a 9.9% reduction in LVM was observed from baseline to one year post-treatment with AVR-RD-01.

In the case of the second patient, a 1.7% increase in LVM was observed from baseline to one-year post-treatment.

Preliminary safety data from the ongoing Phase 2 study indicates that AVR-RD-01 was generally well-tolerated in all patients enrolled in the study.

As of the safety cut-off date of November 26, 2019, there were 98 non-serious AEs reported, none of which were deemed by the investigator to be possibly, probably, or definitely related to drug product.

In February 2021, we presented eGFR data for all five patients in the Phase 1 clinical trial of AVR-RD-01 and the first four patients in our FAB-GT clinical trial.

We believe these data suggest that eight out of nine patients are exhibiting stable kidney function, with the first patient from the Phase 1 clinical trial out 42 months post-treatment.

One patient, who remains

on ERT as of January 11, 2021, entered the Phase 1 clinical trial with advanced kidney disease and a baseline eGFR level of less than 50 mL/min/1.73m 2 .

As expected, this patient’s kidney function has not stabilized.

Also in February 2021, we presented mean average data on measures of cardiac function and structure in all four patients in the FAB-GT clinical trial at 12-months post-treatment as compared to mean baseline.

The mean measurements of ejection fraction, end diastolic volume, cardiac output and LVMI at 12-months post-treatment showed an average percent change from baseline of 2.2%, 0.2%, 0.8% and 9.8%, respectively.

Preliminary interim safety data from the ongoing FAB-GT study indicate that AVR-RD-01 has been generally well-tolerated in the first four patients enrolled in the study.

As of the safety cut-off date of December 7, 2020, there were 111 AEs reported, 22 of which were Grade 3 or 4.

The remainder of the AEs were Grade 2 or Grade 1.

No AEs were deemed by the investigator to be possibly, probably, or definitely related to drug product.

AEs in this study can be assigned to more than one causality assessment.

As of November 26, 2019, of the non-serious AEs, nine were related to study procedures, 50 were related to the medication used in the conditioning regimen, one was related to G-CSF/plerixafor, 16 were related to an underlying disease, and 22 were related to other causes.

As of November 26, 2019, four SAEs were reported, one pre-treatment and three post-treatment.

No events were related to AVR-RD-01, and two events were related to the conditioning regimen.

A fifth SAE, which was not related to AVR-RD-01, was reported for the fourth patient in the Phase 2 clinical trial, who was dosed after the safety cut-off date of November 26, 2019.

Because this clinical trial is ongoing, safety data are preliminary and subject to change.

After beginning stem cell mobilization but prior to undergoing the conditioning regimen and treatment with AVR-RD-01, the first patient experienced a seizure, which is categorized as an SAE but unrelated to the study drug, conditioning regimen or stem cell mobilization.

This event has resolved in the patient.

In addition, during a scheduled protocol visit seven days after dosing, the same patient reported nausea and vomiting and was admitted to hospital for fluid hydration.

Because the nausea and vomiting warranted hospital admission, the event was categorized as an SAE, possibly related to the conditioning regimen;

nausea and vomiting have resolved in the patient.

The treating physician decided to monitor the patient in hospital until the patient’s neutrophil count increased.

As of December 7, 2020, six SAEs were reported, one pre-treatment and five post-treatment.

No events were related to AVR-RD-01 and five events were related to the conditioning regimen.

All six SAEs subsequently resolved without clinical sequelae.

After beginning stem cell mobilization but prior to undergoing the conditioning regimen and treatment with AVR‑RD‑01, the first patient experienced a seizure.

In addition, during a scheduled protocol visit after dosing, the same patient experienced nausea and vomiting, dehydration and was admitted to the hospital for fluid hydration.

Because this event warranted hospital admission, the event was categorized as an SAE.

An additional SAE of febrile neutropenia was reported in each of the second and third patient post-treatment.

The fourth patient experienced two post-treatment SAEs of culture negative fevers and mucositis Grade 2.

In addition to the above, each of the FAB-GT patients experienced a temporary suppression of absolute neutrophil counts and platelets, which is an expected consequence of the conditioning regimen.

These decreases were transient and not associated with any negative long-term impact on the patients.

Neutrophil and platelet counts recovered after dosing.

On June 20, 2018, the patient was discharged from the hospital six days after admission and 13 days after transplant.

Nausea, vomiting and dehydration resolved as of June 15, 2018.

In the opinion of the investigator, the event was unrelated to the study drug or stem cell mobilization, but was deemed probably related to the conditioning regimen.

The second patient experienced a post-treatment SAE of drug-induced dermatosis seven days post-dosing.

The rash was described as small, raised red bumps and were not painful.

The patient was treated with hydrocortisone cream, and the rash resolved as of December 26, 2018.

The patient was discharged from the hospital in less than 24 hours.

In the opinion of the investigator, the relationship of the SAE to the procedure was not applicable and the relationship to stem cell mobilization, conditioning regimen and AVR-RD-01 was unknown.

An additional SAE of culture negative sepsis was reported in the second patient nine days after treatment on December 22, 2018.

The patient was admitted to the hospital with a mild sore throat.

His urine cultures were negative and his blood cultures were negative for both aerobic and anaerobic organisms.

The patient was discharged from the hospital on the fourteenth day after transplant.

In the opinion of the investigator, the relationship of the SAE to the conditioning regimen was definite and the relationship to stem cell mobilization and AVR-RD-01 was unrelated.

The fourth patient experienced a post-treatment SAE of non-neutropenic fever on January 25, 2020, 17 days post-dosing.

T he patient was admitted to the hospital with a sore throat, erythematous tonsillar pillars with slight exudate, and a temperature of 38.0°C.

The patient was seen at the clinical site with improvement of mucositis and a normal temperature on January 13, 2020, twenty-five days post-treatment.

In the opinion of the investigator, the relationship of the SAE to the conditioning regimen was possible and the relationship to stem cell mobilization and AVR-RD-01 was unrelated.

In addition to the above, each of the Phase 2 patients experienced a temporary suppression of absolute neutrophil counts and platelets, which is an expected consequence of the conditioning regimen.

Because this clinical trial is ongoing, safety and efficacy data are preliminary and subject to change.

As is typical in open-label studies in which interim reports are provided, the data are regularly reviewed and validated.

As a result, certain data may change over time, including reductions or increases in the number of reported safety events, until the database is locked at the end of the study.

AVR-RD-04, Our Gene Therapy for Cystinosis

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AVR-RD-04 is currently being studied by our collaborators at UCSD in a Phase 1/2 investigator-sponsored clinical trial.

In October 2019 we announced that the first patient had been dosed with AVR-RD-04, and in February 2020 we announced initial clinical data for that patient.

As of March 1, 2021 three patients have been dosed with AVR-RD-04 and as of January 20, 2021 all three remained off cysteamine pills and eye drops.

Disease Overview

Cystinosis is a rare, genetic, autosomal recessive, lysosomal disease caused by the accumulation of the amino acid cystine that is produced in the lysosomes of cells as the result of protein degradation.

Cystinosis is a rare, genetic, autosomal recessive, lysosomal disorder caused by the accumulation of the amino acid cystine that is produced in the lysosomes of cells as the result of protein degradation.

Cystine is normally transported through the lysosomal membrane to the cytosol where it is reutilized after its transformation to cysteine.

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By the time the patient is approximately two years old, cystine crystals may be present in the cornea, and the buildup of these crystals in the eye causes pain and an increased sensitivity to light.

Untreated children with cystinosis may experience complete kidney failure by the age of ten.

children with cystinosis may experience complete kidney failure by the age of ten.

Other signs and symptoms that may occur in untreated patients, especially after adolescence, include muscle deterioration, blindness, inability to swallow, diabetes, thyroid and nervous system problems.

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Limitations of Current Therapies

Cystinosis is currently treated with two oral formulations of cysteamine that enter the lysosome and stimulate the breakdown of cystine into products that do not require the cystinosin protein to be transported.

Cystinosis is currently treated with oral formulations of cysteamine that enter the lysosome and stimulate the breakdown of cystine into products that do not require the cystinosin protein to be transported.

Oral treatment can delay the development of kidney failure by six to ten years if it is started at a very early age, however it cannot prevent kidney failure or the development of other complications, such as the formation of cystine crystals in the cornea.

The approved oral therapies for cystinosis are Procysbi (delayed release cysteamine bitartrate), marketed by Horizon Orphan and Cystagon (cysteamine bitartrate) marketed by Mylan and Recordati S.p.A.

The most commonly prescribed oral therapies for cystinosis are Procysbi (delayed release cysteamine bitartrate), marketed by Horizon Orphan, and Cystagon (cysteamine bitartrate), marketed by Mylan and Recordati S.p.A.

In 2020, Procysbi generated worldwide net sales of approximately $170 million.

The annual average cost to the healthcare system per patient prescribed Procysbi in the United States is between approximately $625,000 and $750,000.

We estimate that the average five-year cost to the healthcare system per cystinosis patient prescribed standard of care treatment in the United States is approximately $4.3 million.

Procysbi and Cystagon must be taken orally every 12 or six hours, respectively, leading to significant pill burden and compliance challenges.

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We are developing AVR-RD-04 to potentially cure patients with cystinosis with a single dose of the patient’s own hematopoietic stem cells modified in an ex vivo procedure.

We are developing AVR-RD-04 to potentially provide a functional cure to patients with cystinosis with a single dose of the patient’s own hematopoietic stem cells modified in an ex vivo procedure.

AVR-RD-04 is a lentiviral-based gene therapy containing a human gene for cystinosin designed to maximize the likelihood of sustained cystinosin production in hematopoietic stem cells and their progeny.

Ongoing Phase 1/2 Clinical Trial

Ongoing Phase 1/2 Investigator-Sponsored Clinical Trial

In the Phase 1/2 clinical trial of AVR-RD-04 that is being conducted by our collaborators at UCSD, six patients with cystinosis who are currently being treated with cysteamine will be enrolled.

The clinical trial’s primary endpoints are safety and tolerability, assessed for up to two years after treatment, as well as preliminary efficacy as measured by changes in cystine levels in granulocytes.

Secondary endpoints to assess preliminary efficacy include change from baseline in cystine levels in rectal mucosa as well as cystine crystal counts in the cornea and skin.

The clinical trial’s primary endpoints are safety and tolerability, assessed for up to two years after treatment.

Secondary endpoints to assess preliminary efficacy include change from baseline in cystine levels in rectal mucosa and granulocytes, as well as cystine crystal counts in the cornea and skin.

These secondary efficacy endpoints will also be evaluated through clinical tests of kidney function, ophthalmologic measures, muscle strength, pulmonary function and neurological and psychometric function, as well as through patient-reported outcomes and assessments of health-related quality of life.

The study drug utilized in this trial will not be manufactured using our plato platform, and neither the automated, closed manufacturing system nor LV2 will be used in connection with this investigator-sponsored clinical trial.

In February 2020, we announced initial clinical data for the first patient in the clinical trial of AVR-RD-04.

Vector Copy Number and Granulocyte Cystine Levels

The first patient in the Phase 1/2 clinical trial exhibited a VCN of 2.0 three months post-treatment with AVR-RD-04.

VCN, which is expressed as VCN per diploid genome, refers to the average number of copies of the lentiviral-vector inserted gene that are integrated into the genome of a cell and is another measure that can be used to help assess the durability of a gene therapy.

We believe that different diseases may require varying levels of VCN based on the underlying condition, and therefore VCN measurements across different diseases should be assessed separately.

One of the primary endpoints of the Phase 1/2 clinical trial is the change in the average level of cystine in granulocytes from baseline to up to two years post-treatment with AVR-RD-04.

The first patient in the Phase 1/2 clinical trial exhibited granulocyte cystine levels of 1.5 nmol half cystine per milligram three months post-treatment with AVR-RD-04 as compared to the baseline value of 7.8.

The patient’s baseline value was measured two weeks after discontinuation of cysteamine treatment and prior to initiating mobilization.

As the Phase 1/2 clinical trial progresses, we expect to identify clinically meaningful measures, such as renal function, polyuria and crystal levels in the cornea and photophobia.

Secondary Endpoints

Secondary endpoints of the Phase 1/2 clinical trial include measurements of kidney function and levels of cystine in the skin.

These endpoints are not a comprehensive set of the secondary endpoints in the Phase 1/2 clinical trial and only reflect the data available to us as of three months following treatment with AVR-RD-04.

Mixed leukocyte and granulocyte cystine concentration measures have been part of cystinosis standard of care treatment for the past two decades, and changes in the average level of cystine in granulocytes from baseline was originally a primary endpoint of the clinical trial of AVR-RD-04.

However, we and our collaborators at UCSD determined that cystine concentration in leukocytes and granulocytes, which is used to monitor small molecule therapies, is not appropriate to represent the mechanism of action of a gene therapy.

As a result, the protocol for this clinical trial was amended in 2020 to retain safety and tolerability as the primary endpoint, as is appropriate for this stage of development, and shift measurement of cystine in granulocytes to a secondary endpoint.

Because this is an investigator-sponsored clinical, the study drug will not be manufactured using our plato platform, and neither the automated, closed manufacturing system nor LV2 will be used in connection with this clinical trial.

Kidney Function

Assessment of kidney function includes measurements of eGFR and serum creatinine, or sCR.

eGFR is determined using the CKD-EPI formula and sCR is measured as part of the comprehensive metabolic panel.

The first patient in the Phase 1/2 clinical trial exhibited an sCR value of 2.1 mg/dL three months post-treatment with AVR-RD-04 as compared to a baseline value of 2.2 mg/dL, and an eGFR value of 40 mL/min/1.73m 2 three months post-treatment as compared to a baseline value of 38 mL/min/1.73m 2 .

The first patient in the Phase 1/2 clinical trial exhibited an eGFR value of 42 mL/min/1.73m 2 16 months post-treatment as compared to a baseline value of 55 mL/min/1.73m 2 .

This patient’s eGFR values had been trending downward in the three years prior to administration of

However, at three and 16 months post-treatment the patient’s eGFR values were 43 mL/min/1.73m 2 and 42 mL/min/1.73m 2 , respectively .

While these data suggest potential kidney function stabilization after years of pathological decline, this patient’s eGFR levels could resume declining at an accelerated rate due to the irreversible nature of end-stage renal disease.

A t six months post-treatment the second patient in the clinical trial , who has received two kidney transplants, exhibited an eGFR value of 81 mL/min/1.73m 2 as compared to a baseline value of 71 mL/min/1.73m 2 .

Cystine Crystals in Skin and Rectal Biopsy Tissues

Skin and rectal biopsies were performed on the first patient at baseline and 12-months post-treatment with AVR-RD-04.

The data from the biopsies are intended to show the average skin intracytoplasmic crystals per cell, which is a measurement of the number of toxic crystals in each cell, as well as the occupancy of cytoplasmic volume with crystals.

In November 2020, we announced that at 12-months post-treatment the first patient’s skin and rectal biopsies exhibited a 44% and 76% reduction, respectively, in average intracytoplasmic crystals per cell, and a 72% and 87% reduction, respectively, in occupancy of cytoplasmic volume, in each case as compared to the patient’s baseline levels.

We believe these data suggest that the patient is now producing an endogenous supply of functional cystinosin that is reducing the accumulation of toxic cystine crystals.

Levels of Cystine in Skin

Levels of cystine in the skin are measured with in vivo confocal microscopy, or IVCM, on two separate areas of the skin:

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The two measurements are analyzed and quantified with 3D Image-Pro software and averaged.

The firs t patient in the Phase 1/2 clinical trial exhibited a 32% reduction from baseline in skin cystine levels measured three months post-treatment with AVR-RD-04.

The baseline measurement and three month data w ere obtained using IVCM.

In addition, levels of cystine crystals in the skin will be measured using optical coherence tomography.

These various skin measurements are considered experimental methodologies and will require additional study to determine their validity and significance.

Other Measurements

24-hour urine volume is measured by the total volume of urine produced in a 24-hour period as compared to a baseline 24-hour measurement taken prior to administration of AVR-RD-04.

We believe this measurement may be suggestive of change in kidney function.

At three months post-treatment with AVR-RD-04, the first patient in the Phase 1/2 clinical trial exhibited a 37% reduction from baseline in 24-hour urine volume.

As of the safety cut-off date of January 27, 2020, interim clinical data for the first patient dosed in the Phase 1/2 clinical trial appear to indicate that the AVR-RD-04 investigational gene therapy has been generally well tolerated with no unexpected safety events identified.

No SAEs were reported as of the safety data cut-off date of January 27, 2020.

A total of 22 AEs were reported as of the safety cut-off date of January 27, 2020, nine of which were moderate and 13 of which were mild.

All reported AEs were consistent with expectations for the underlying disease and conditioning regimen prescribed by the study protocol.

The first patient in the Phase 1/2 clinical trial exhibited a 56% reduction from baseline in skin cystine levels measured 12 months post-treatment with AVR-RD-04.

These skin measurements are considered experimental methodologies and will require additional study to determine their validity and significance.

Levels of Cystine in Cornea

Levels of corneal cystine crystals are being assessed in this clinical trial using IVCM.

In November 2020, we presented one set of images of the first patient’s cornea measured at baseline and 12-months post-administration of AVR-RD-04, and another set of images measured at baseline, seven-, nine- and 12-months post-administration.

The baseline IVCM images were taken using a Nidek ConfoScan microscope and the subsequent images were taken using a Heidelberg (HRT3) with Rostock Cornea Module microscope.

Each of the post-treatment images showed a noticeable decline in the presence of corneal crystals.

Granulocyte Cystine Levels

The first patient in the Phase 1/2 clinical trial exhibited granulocyte cystine levels of 4.2 nmol half cystine per milligram 12 months post-treatment with AVR-RD-04 as compared to the baseline value of 7.8.

This patient’s baseline value was measured two weeks after discontinuation of cysteamine treatment and prior to initiating mobilization.

Vector Copy Number

In February 2021 we presented interim VCN data for the first three patients dosed in the Phase 1/2 clinical trial.

At 12 months post-treatment with AVR-RD-04 the first patient exhibited VCN level of 0.9;

at six months post-treatment the second patient exhibited VCN level of 1.7;

and at one month post-treatment the third patient exhibited VCN level of 2.55.

Photophobia, or light intolerance, is a symptom of cystinosis that is caused by the buildup of cystine crystals in the cornea, inflammatory cell infiltration and corneal nerve damage.

In the Phase 1/2 clinical trial, photophobia is being assessed on a grade of zero to five.

The first patient in the clinical trial scored a three at baseline and a one at 12-months post-treatment.

Exploratory Measurement – Skin and Hair Melanin

Photographs of the first patient in this clinical trial taken at four-, six- and nine-months post-treatment suggest that the patient’s complexion, eyebrows and hair color have darkened following administration of AVR-RD-04.

As is typical of many

people with cystinosis, this patient had fair hair color and skin tone prior to dosing.

Cystinosin has been demonstrated to impact the regulation of melanin synthesis, and the protocol for this trial has been amended to prospectively assess changes in melanin.

As of the safety cut-off date of January 27, 2021, preliminary interim clinical data for the first three patients dosed in the Phase 1/2 clinical trial appear to indicate that the AVR-RD-04 investigational gene therapy has been generally well tolerated with no unexpected safety events identified.

There have been no reports of safety events attributed to the AVR-RD-04 drug product.

AVR-RD-02, Our Gene Therapy for Gaucher Disease

We are developing AVR-RD-02 for the treatment of Type 1 Gaucher disease.

As of the safety data cut-off date of January 27, 2021 one SAE of appendicitis was reported, which occurred post-treatment and was deemed by the investigator to be unrelated to AVR-RD-04 or the treatment procedures.

A total of 48 AEs were reported as of the safety cut-off date of January 27, 2021, a majority of which were reported by the investigator to be moderate or mild.

All reported AEs were consistent with expectations for the underlying disease and conditioning regimen prescribed by the study protocol.

Because this clinical trial is ongoing, safety and efficacy data are preliminary and subject to change.

As is typical in open-label studies in which interim reports are provided, the data are regularly reviewed and validated.

As a result, certain data may change over time, including reductions or increases in the number of reported safety events, until the database is locked at the end of the study.

AVR-RD-02, Our Gene Therapy for Gaucher Disease type 1

We are developing AVR-RD-02 for the treatment of Gaucher disease type 1.

We plan to manufacture AVR-RD-02 from hematopoietic stem cells that are first harvested from the patient, modified to add the gene that encodes for glucocerebrosidase, or GCase, and then infused into the patient.

Patient enrollment has commenced for the Phase 1/2 clinical trial of AVR-RD-02 in patients with Type 1 Gaucher disease, and we expect to dose the first patient in the second quarter of 2020.

In January 2020, we announced that we received notice of clearance from the FDA regarding an IND application for AVR-RD-02.

This announcement followed receipt of FDA orphan drug designation status for AVR-RD-02 and enables us to expand the Phase 1/2 clinical trial in Gaucher disease to the United States, supported by our plato platform.

The Phase 1/2 clinical trial for AVR-RD-02 is actively recruiting in Australia and Canada, with additional sites planned in the United States .

Patient enrollment has commenced for the Phase 1/2 Guard1 clinical trial of AVR-RD-02 in patients with Gaucher disease type 1, and we dosed the first patient in the second quarter of 2020.

The Guard1 trial is actively recruiting in Australia and Canada, with additional sites planned in the United States, Israel and Europe .

As of March 1, 2021 one patient has been dosed.

Disease Overview

Gaucher disease is a rare, autosomal recessive, lysosomal disease caused by a hereditary deficiency of functional GCase, an enzyme responsible for degrading glucocerebroside, a cell membrane building block, into glucose and lipids within lysosomes of cells.

In patients with Gaucher disease, the recycling of glucocerebroside from the breakdown of old red and white blood cells is inhibited, leading to its accumulation in macrophages.

Gaucher disease type 1 is the non-neuronopathic form of Gaucher disease, a rare, autosomal recessive, lysosomal disorder caused by a hereditary deficiency of functional GCase, an enzyme responsible for degrading glucocerebroside, a cell membrane building block, into glucose and lipids within lysosomes of cells.

In patients with Gaucher disease type 1, the recycling of glucocerebroside from the breakdown of old red and white blood cells is inhibited, leading to its accumulation in macrophages.

These abnormal macrophages, known as Gaucher cells, accumulate in multiple organs, particularly the liver, spleen and bone marrow.

Gaucher disease is one of the most common lysosomal diseases.

Gaucher disease type 1 is one of the most common lysosomal disorders.

It is diagnosed in approximately one in 44,000 births worldwide and is more prevalent in certain ethnic groups, such as people of Ashkenazi Jewish heritage.

Approximately 90% of patients suffering from Gaucher disease in western countries have Type 1 Gaucher disease, which manifests as multiple morbidities including enlargement of the spleen and liver, low red blood cells, or anemia, low platelet count, or thrombocytopenia, and bone abnormalities including bone pain, fractures and arthritis.

Approximately 90% of patients suffering from Gaucher disease in western countries have Gaucher disease type 1, which manifests as multiple morbidities including enlargement of the spleen and liver, low red blood cells, or anemia, low platelet count, or thrombocytopenia, and bone abnormalities including bone pain, fractures and arthritis.

Bruising, risk of bleeding and fatigue are common due to the thrombocytopenia and anemia.

Compared with the general population, patients with Type 1 Gaucher disease have an approximately 20-fold increased risk of developing Parkinson’s disease.

Type 1 Gaucher disease does not have manifestations of central nervous system symptoms.

Compared with the general population, patients with Gaucher disease type 1 have an approximately 20-fold increased risk of developing Parkinson’s disease.

Gaucher disease type 1 does not have manifestations of central nervous system symptoms.

Limitations of Current Therapies

Type 1 Gaucher disease is currently treated with bi-weekly infusions of ERT consisting of recombinant GCase over a patient’s lifetime.

Gaucher disease type 1 is currently treated with bi-weekly infusions of ERT consisting of recombinant GCase over a patient’s lifetime.

The most commonly prescribed ERTs for Gaucher disease are Cerezyme, marketed by Sanofi Genzyme, and VPRIV, marketed by Shire.

Although long-term ERT for Gaucher disease results in some therapeutic benefit, ERTs leave patients with significant unmet needs.

Although long-term ERT for Gaucher disease type 1 results in some therapeutic benefit, ERTs leave patients with significant unmet needs.

Twenty-five percent of patients with Gaucher disease continue to experience physical limitations following two years of ERT, and a clinically significant percentage of patients continue to experience bone pain, thrombocytopenia and enlargement of spleen following ten years of ERT.

In a published study of ERT therapy for Gaucher disease, six target goals were evaluated, including parameters for hemoglobin and platelet levels, spleen and liver volumes, and general bone pain and severe disabling bone pain known as bone crisis.

In a published study of ERT therapy for Gaucher disease type 1, six target goals were evaluated, including parameters for hemoglobin and platelet levels, spleen and liver

volumes, and general bone pain and severe disabling bone pain known as bone crisis.

Following at least four years of ERT in this study, approximately 60% of patients failed to achieve one or more of these six target goals.

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Cerdelga is not approved for use in children, has highly variable metabolism due to patient-to-patient genetic variations and is highly susceptible to interactions with other drugs.

Both ERTs and oral therapies for Gaucher impose significant costs on the healthcare system.

In the United States, the annual average cost to the healthcare system per patient prescribed Cerezyme or VPRIV is between approximately $325,000 and $400,000.

The annual average cost to the healthcare system per patient prescribed Cerdelga is approximately $262,500.

In 2019, Sanofi Genzyme’s Cerezyme and Cerdelga together generated worldwide net sales of €914 million euros and Takeda’s VPRIV generated worldwide net sales of approximately ¥37.1 billion Japanese yen.

We are developing AVR-RD-02 to potentially cure patients with Type 1 Gaucher disease with a single dose of the patient’s own hematopoietic stem cells modified in an ex vivo procedure.

Both ERTs and oral therapies for Gaucher type 1 impose significant costs on the healthcare system.

We estimate that the average five-year cost to the healthcare system per Gaucher patient (all types) prescribed standard of care treatment in the United States is approximately $2.3 million.

In 2020, Sanofi Genzyme’s Cerezyme and Cerdelga together generated worldwide net sales of approximately €924 million euros and Takeda’s VPRIV generated worldwide net sales of approximately ¥38.5 billion Japanese yen.

We are developing AVR-RD-02 to potentially provide a functional cure to patients with Gaucher disease type 1 with a single dose of the patient’s own hematopoietic stem cells modified in an ex vivo procedure.

AVR-RD-02 is a lentiviral-based gene therapy that contains a codon-optimized human gene and is designed to maximize the likelihood of sustained GCase production in hematopoietic stem cells and their progeny.

Phase 1/2 Clinical Trial

We have initiated a Phase 1/2 clinical trial of AVR-RD-02 in patients with Type 1 Gaucher disease.

Patient enrollment has commenced in the Phase 1/2 clinical trial, and we expect to dose the first patient in the second quarter of 2020.

This clinical trial is actively recruiting in Australia and Canada, with additional sites planned in the United States .

Ongoing Phase 1/2 Clinical Trial (Guard1)

We have initiated our Guard1 Phase 1/2 clinical trial of AVR-RD-02 in patients with Gaucher disease type 1.

Patient enrollment has commenced, and as of March 1, 2021 one patient has been dosed.

This clinical trial is actively recruiting in Australia and Canada, with additional sites planned in the United States, Israel and Europe .

Our initial clinical trial will be an adaptive trial that will include both treatment-naïve patients and patients that are currently stable on ERT.

We intend to enroll eight to 16 patients, between the ages of 16 and 35, with Type 1 Gaucher disease.

We intend to enroll eight to 16 patients, between the ages of 16 and 35, with Gaucher disease type 1.

Patients currently prescribed ERT will cease treatment throughout the clinical trial.

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We intend to utilize our plato platform for all patients enrolling in our Phase 1/2 clinical trial of AVR-RD-02.

Our efficacy endpoints for this clinical trial will include measures of clinical efficacy, such as liver and spleen volumes, hemoglobin, platelet counts, bone pain and bone density measures along with other blood markers used in Gaucher disease.

In February 2021 we presented data on the first patient in the Guard1 clinical trial, who discontinued ERT one month prior to dosing of AVR-RD-02 and remains off ERT as of February 8, 2021.

Plasma Lyso-Gb1 Reductions

Glucosylsphingosine, or lyso-Gb1, is considered a surrogate marker for disease activity and treatment response for Gaucher disease type 1.

In the case of ERT-naïve patients and patients who have discontinued ERT, we believe that reductions in lyso-Gb1 levels following treatment with gene therapy are likely driven by the therapeutic effect of gene therapy.

In February 2021, we announced that the first patient in our Guard1 clinical trial exhibited a 44% reduction in plasma lyso-Gb1 levels six months post-administration of AVR-RD-02 as compared to baseline while on ERT.

In this study baseline ERT is the measurement of a single plasma lyso-Gb1 value observed prior to initiating mobilization.

Plasma Chitotriosidase Reductions

Chitotriosidase is a biomarker of macrophage activation that is found in high levels in Gaucher patients where the macrophages have accumulated an excess lipid burden.

In February 2021, we announced that at six months post-treatment with AVR-RD-02 the first patient in the Guard1 clinical trial exhibited a 49% reduction in chitotriosidase levels as compared to baseline while on ERT.

In this study baseline ERT is the measurement of a single chitotriosidase value observed prior to initiating mobilization.

Hemoglobin Concentration and Platelet Counts

Gaucher disease type 1 typically causes patients to have low levels of hemoglobin and platelets.

In February 2021, we presented data on the hemoglobin and platelet levels of the first patient dosed in the Guard1 clinical trial at screening, baseline and six months post-administration of AVR-RD-02.

The baseline measurement was taken one month prior to discontinuation of ERT.

At screening, baseline and six months post-treatment, the patient’s platelet counts were 455x10 9 /L, 432x10 9 /L and 351 x10 9 /L, respectively, and the patient’s hemoglobin concentration was 12.5 g/dL, 11.2 g/dL and 12.2 g/dL, respectively.

Both six-month measurements are within the normal range for a healthy individual.

Vector Copy Number

In February 2021 we presented VCN data for the first patient dosed in the Guard1 trial.

At six months post-treatment, the patient exhibited a VCN of 0.6.

In addition, at three months post-treatment an exploratory assessment of VCN in specific cell populations showed a VCN ≥ 0.7 in the myeloid cell lines, which we believe could be indicative of transgene presence in the macrophages, the essential cell impacted in Gaucher patients.

As of the safety cut-off date of January 4, 2021, preliminary interim clinical data for the first patient dosed in the Guard1 clinical trial appear to indicate that the AVR-RD-02 investigational gene therapy has been generally well tolerated with no unexpected safety events identified.

There have been no reports of safety events attributed to the AVR-RD-02 drug product, and no SAEs were reported as of the safety data cut-off date.

A total of 29 AEs were reported as of the safety cut-off date, two of which were Grade 4 and seven of which were Grade 3.

The remainder of the AEs were Grade 2 or Grade 1.

All reported AEs were consistent with expectations for the underlying disease and conditioning regimen prescribed by the study protocol and have resolved.

Because this clinical trial is ongoing, safety and efficacy data are preliminary and subject to change.

As is typical in open-label studies in which interim reports are provided, the data are regularly reviewed and validated.

As a result, certain data may change over time, including reductions or increases in the number of reported safety events, until the database is locked at the end of the study.

AVR-RD-05, Our Gene Therapy for Hunter Syndrome

We are developing AVR-RD-05 for the treatment of mucopolysaccharidosis type II (MPSII), or Hunter syndrome.

AVR-RD-05 involves ex vivo transduction of the patient’s own hematopoietic stem cells with a therapeutic transgene, in-licensed from the University of Manchester, or UoM, designed to express functional iduronate 2-sulfatase, or IDS, which is the enzyme the patient needs to maintain cellular health, coupled to a proprietary ApoE2 protein tag that is designed to improve stability of the enzyme in the bloodstream and facilitate uptake by tissues.

AVR-RD-05 will be studied by our collaborators at UoM and a Phase 1/2 investigator-sponsored clinical trial of AVR-RD-05 is expected to commence in the first half of 2022.

Disease Overview

Hunter syndrome disease is a rare, recessive lysosomal disorder caused by a mutation in the gene that encodes for IDS that results in accumulation of the glycosaminoglycans heparan and dermatan sulfate.

Hunter syndrome affects a multitude of organs and is a chronic and progressive multi‐system disorder.

Clinical manifestations in Hunter syndrome include skeletal abnormalities, known as dysostosis multiplex, short stature, joint stiffness, and hepatosplenomegaly, accompanied by cardiorespiratory symptoms.

Severe cases of Hunter syndrome, which are most common, also feature progressive neurodegeneration, typically followed by death in teenage years due to obstructive airway disease and cardiac failure.

Hunter syndrome is an X-linked disorder, meaning the gene that is responsible is located on the X chromosome.

Because males have only one X chromosome, an abnormal copy of the gene that causes Hunter syndrome disease is sufficient to cause the disease.

The overall diagnosed incidence of Hunter syndrome is estimated to be approximately one in 100,000 to one in 170,000 males worldwide.

Limitations of Current Therapies

Hunter syndrome is currently treated with ERT delivered by weekly intravenous infusion.

The only approved therapy for Hunter syndrome is Elaprase, marketed by Shire, which generated worldwide net sales of approximately ¥67 billion Japanese yen in 2020.

We estimate that the average five-year cost to the healthcare system per Hunter patient prescribed standard of care treatment in the United States is approximately $2.4 million.

Two-thirds of patients experience developmental and neurological decline, which is often noted by approximately age two.

Due to lack of newborn screening, diagnosis usually occurs much later in patient’s lives, around five years of age and can be as late as eight years.

Although patients typically begin ERT treatment almost immediately after diagnosis, often the disease symptoms are far advanced and ERT is insufficient to halt the disease progression.

ERT does not treat the neurological symptoms of the disease, and therefore a significant unmet need remains in a majority of patients with Hunter syndrome.

Furthermore, anti-ERT antibodies are a limitation for a significant part of the entire patient population.

We, together with our collaborators at UoM, are developing AVR-RD-05 to potentially provide a functional cure to patients with Hunter syndrome.

AVR-RD-05 is intended to be a gene therapy product containing a codon-optimized human gene for IDS attached to a ApoE2 protein tag designed to increase the cells’ secretion of IDS to potentially restore healthy cellular function, stabilize the secreted IDS so it has a longer half-life, and facilitate uptake of IDS into the brain.

In addition, we believe that the utilization of busulfan in our conditioning regimen may have the potential to allow AVR-RD-05 to cross the blood-brain barrier, a feature which may yield therapeutic benefit.

Preclinical Data

AVR-RD-02 is based on extensive preclinical work from our collaborators at Lund University and leverages findings published in 2015 in Molecular Therapy which concluded that, in a Gaucher disease mouse model, a lentiviral-based gene therapy containing the gene for GCase could prevent the development and reverse clinically relevant signs of the disease.

In preclinical studies, a mouse model of Type I Gaucher disease exhibited increased glucocerebroside levels in the clinically-relevant tissues, the bone marrow, spleen and liver, and mimicked many of the same symptoms seen in patients such as an enlarged spleen.

These preclinical studies assessed glucocerebroside levels, Gaucher cell infiltration, and spleen volume in the mouse model over 20 weeks following treatment with mouse bone marrow cells transduced with the clinical vector, which we refer to as mAVR-RD-02.

The vector used in this preclinical study of mAVR-RD-02 was an academic vector of similar design to LV2, but also included a marker gene to enable tracking of the transduced cells in vivo .

This marker gene was removed as it is not required in the clinic, and the transgene encoding functional glucocerebrosidase was inserted into the LV2 backbone.

When mice with established disease were treated with m AVR-RD-02, glucocerebroside levels decreased and symptoms such as an enlarged spleen were reversed within 20 weeks.

Over this period, increased enzyme levels were observed in the bone marrow, spleen and liver in the mouse model.

In addition, the mice that were treated with mAVR-RD-02 prior to manifesting symptoms did not develop symptoms of the disease.

We believe t hese data support the potential efficacy of AVR-RD-02 to prevent, as well as reverse, symptoms in patients with Gaucher disease.

mAVR-RD-02 Leads to a Significant Reduction in Glucocerebroside Levels

Across Multiple Clinically-relevant Tissues

Ex Vivo Lentiviral-based Gene Therapy Leads to a Significant Reduction in

Spleen Volume in a Mouse Model of Gaucher Disease

In November 2020, we presented previously published preclinical data on AVR-RD-05.

The study presented data from normal study mice, mice affected with the equivalent of Hunter syndrome, mice treated with AVR-RD-05 modified to not incorporate the ApoE2 protein tag, and mice treated with AVR-RD-05 incorporating the proprietary ApoE2 tag.

These data demonstrated the effect of AVR-RD-05 on levels and composition of heparan sulfate in the brain, neuro-inflammatory pathologies, facial and skeletal abnormalities, as well as cognitive performance and sensorimotor coordination and balance.

We believe these data support the potential of AVR-RD-05 to treat this progressive disease, and potentially prevent the onset of severe symptoms if treated early.

Planned Phase 1/2 Investigator-Sponsored Clinical Trial

Our collaborators at UoM plan to initiate a Phase 1/2 clinical trial in the first half of 2022.

The Phase 1/2 clinical trial is expected to enroll five male patients, age three months to 24 months, with an early progressive form of the disease.

The clinical trial is expected to be open to treatment-naïve patients as well as patients currently on ERT.

The clinical trial’s primary endpoints are expected to be safety and tolerability.

Secondary endpoints to assess preliminary efficacy are expected to include measurements of IDS levels and its activity as well as levels of glycosaminoglycans .

Neurocognitive evaluations will also be conducted to evaluate therapeutic activity in the brain.

AVR-RD-06, Our Gene Therapy for Gaucher disease type 3

In November 2020, we announced an expansion of our lysosomal disorder pipeline with a new preclinical product candidate, AVR-RD-06, our investigational gene therapy for Gaucher disease type 3.

Gaucher disease type 3 is the subacute neurological form of Gaucher disease characterized by progressive encephalopathy and associated with the systemic manifestations of Gaucher type 1.

As with Gaucher type 1, Gaucher type 3 disease is caused by a gene that codes for the enzyme glucocerebrosidase.

The deficiency in glucocerebrosidase leads to the accumulation of Gb1 and its toxic metabolite, lyso-Gb1.

AVR-RD-06 is expected to use the same vector and drug product that we use in AVR-RD-02, our investigational gene therapy for Gaucher disease type 1.

We currently expect to request a meeting with the FDA this year to discuss a potential path to the clinic for AVR-RD-06.

Disease Overview

Gaucher disease type 3 is the subacute, chronic neurological form of Gaucher disease, a rare, autosomal recessive, lysosomal disorder caused by a hereditary deficiency of functional GCase, an enzyme responsible for degrading glucocerebroside, a cell membrane building block, into glucose and lipids within lysosomes of cells.

In patients with Gaucher type 3 disease, the recycling of glucocerebroside from the breakdown of old red and white blood cells is inhibited, leading to its accumulation in macrophages.

These abnormal macrophages, known as Gaucher cells, accumulate in multiple organs, particularly the liver, spleen and bone marrow.

In addition, glucosylceramide accumulates in perivascular macrophages and brain glial cells and neurons leading to neuronal death.

Clinically, central nervous system manifestations of Gaucher disease type 3 appear in childhood or adolescence, typically within the latter part of the first decade for the majority of patients, although the course of disease is markedly heterogenous.

Gaucher disease type 3 is estimated to occur in one in 100,000-300,00 births and is more prevalent in certain ethnic groups, such as people of Swedish Norrbottnian descent.

Systemic manifestations of Gaucher disease type 3 may include enlargement of the spleen and liver, low red blood cells, or anemia, low platelet count, or thrombocytopenia, and bone abnormalities including bone pain, fractures and arthritis.

Bruising, risk of bleeding and fatigue are common due to the thrombocytopenia and anemia.

Variable other features of Gaucher disease type 3 include pulmonary infiltrates and esophageal varices associated with liver cirrhosis.

Presentation of diverse neurologic features may begin at any time during infancy and early childhood with the most prevalent finding of horizontal supranuclear gaze palsy.

Other manifestations of neurological disease include generalized seizures, myoclonus, ataxia, and/or dementia.

Limitations of Current Therapies

Current therapies used to treat Gaucher disease type 1, namely, ERT and substrate reduction therapy, or SRT, do not penetrate the brain and therefore have no effect on the neurological aspects of Gaucher disease type 3.

The most commonly prescribed ERTs for Gaucher disease are Cerezyme, marketed by Sanofi Genzyme, and VPRIV, marketed by Shire.

Patients with Gaucher disease type 3 may exhibit wide variation of disease progression with the severity of systemic disease and neurological deficits differing considerably between patients.

In a published study of SRT therapy for Gaucher disease type 3, no significant benefits were demonstrated on the neurological manifestations of Gaucher disease type 3.

Although long-term ERT for Gaucher disease type 3 results in some therapeutic benefit on visceral, hematological and bone manifestations, ERTs leave patients with significant unmet needs owing to persisting accumulation of substrate within the central nervous system.

Following 10 years of ERT, two patients’ epilepsy had worsened while a third patient developed epilepsy around eight years after treatment initiation.

Another published study on ERT showed that enzyme infusions had no effect on patients with myoclonus and approximately 40% of patients deteriorated neurologically during a median 3.5 year follow-up period.

We are developing AVR-RD-06 to potentially provide a functional cure to patients with Gaucher disease type 3 with a single dose of the patient’s own hematopoietic stem cells modified in an ex vivo procedure.

AVR-RD-06 is a lentiviral-based gene therapy that contains a codon-optimized human gene and is designed to maximize the likelihood of sustained GCase production in hematopoietic stem cells and their progeny.

Preclinical Data

In November 2020, we presented preclinical data from a mouse study which we believe demonstrate the potential of lentiviral gene therapy to repopulate the microglia compartment of the brain with microglia cells carrying the therapeutic gene.

We also presented preclinical data demonstrating a technique that potentially allows us to examine individual cells in the brain to determine which cell types contain the therapeutic gene.

Finally, we presented data comparing the genetically modified microglia and endogenous microglia, which we believe suggest that even though the modified cells are not native to the brain, they do not act as “invaders” and thus could be expected to carry out normal physiological functions.

AVR-RD-03, Our Gene Therapy for Pompe Disease

We are developing AVR-RD-03 for the treatment of Pompe disease.

We will manufacture AVR-RD-03 from hematopoietic stem cells that are first harvested from the patient, modified to add the gene that encodes for acid alpha glucosidase A, or GAA, attached to a peptide sequence known as a glycosylation-independent lysosomal targeting, or GILT, tag and then infused into the patient.

tag and then infused into the patient.

AVR-RD-03 will incorporate a GILT tag because the GILT tag has been found to increase the uptake of GAA into cells, especially in muscle cells by a multiple of 25, which is a particularly important target tissue for patients with Pompe disease and a target tissue that is considered difficult to access for ERT.

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Disease Overview

Pompe disease is a rare, autosomal recessive lysosomal disease caused by a mutation in the gene that encodes for GAA that results in the buildup of glycogen, a complex sugar, in the body’s cells.

Pompe disease is a rare, autosomal recessive lysosomal disorder caused by a mutation in the gene that encodes for GAA that results in the buildup of glycogen, a complex sugar, in the body’s cells.

The accumulation of glycogen in certain organs and tissues, especially muscles, impairs normal tissue and organ function.

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Pompe disease is currently treated with ERT delivered by bi-weekly intravenous infusion.

The only approved therapy for Pompe disease is Lumizyme (known as Myozyme outside of the United States), marketed by Sanofi Genzyme, which generated worldwide net sales of €918 million euros in 2019.

The annual average cost to the healthcare system per patient prescribed Lumizyme in the United States is approximately $500,000.

The only approved therapy for Pompe disease is Lumizyme (known as Myozyme outside of the United States), marketed by Sanofi Genzyme, which generated worldwide net sales of approximately €948 million euros in 2020.

We estimate that the average five-year cost to the healthcare system per Pompe patient prescribed standard of care treatment in the United States is approximately $3.2 million.

Though patients treated with ERT for Pompe disease have improved survival and respiratory function, ERT is not curative, and patients in long-term observational studies continue to have increased risk of heart failure and have residual muscle weakness including difficulties swallowing with risk of aspiration.

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The FDA approval of Lumizyme carries a black box warning related to the risk of severe allergic and immune mediated reactions, including life-threatening anaphylaxis.

We are currently conducting IND-enabling preclinical studies of AVR-RD-03 to potentially cure patients with late-onset Pompe disease.

We are developing AVR-RD-03 to be a gene therapy product containing a codon-optimized human gene for GAA attached to a GILT tag designed to increase uptake of GAA in muscle cells.

Our AVR-RD-03 program for Pompe disease is currently in preclinical development, and in 2020 we completed IND-enabling proof-of-concept preclinical studies, with toxicology studies expected to be completed in 2021.We are developing AVR-RD-03 to be a gene therapy product containing a codon-optimized human gene for GAA attached to a GILT tag designed to increase uptake of GAA in muscle cells.

AVR-RD-03 will target patients with late onset Pompe disease, which represent the majority of patients with this disease.

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Preclinical Data

Published preclinical results from a mouse model of Pompe disease support the potential of lentiviral-based gene expression of GAA to prevent some of the symptoms of GAA deficiency.

In November 2020 we presented data from a study in which mice with the equivalent of classic infantile-onset Pompe disease were treated with AVR-RD-03.

We these data believe support the potential of lentiviral-based gene expression of

GAA to prevent some of the symptoms of GAA deficiency.

These results also demonstrated the need to further increase the uptake of GAA into muscle cells to treat patients, which is a known challenge for ERTs and leads to the use of large quantities of enzyme to attempt to deliver effective treatment levels.

In these published preclinical results from a mouse model of Pompe disease, treatment utilizing a lentiviral vector encoding GAA led to increased levels of active enzyme across multiple organs and tissues, including clinically relevant tissues such as the heart and diaphragm.

This enzyme activity was correlated with reductions in glycogen storage in these tissues.

While reduction in left ventricular mass and normalization of heart rate were observed in the mouse models seven to eight months following treatment with this lentiviral-based gene expression of GAA, only lesser improvements in other muscles, such as skeletal muscle strength, were observed.

We believe we can use a GILT tag to address the known challenges of skeletal muscle uptake in patients with Pompe disease.

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We licensed GILT tag technology from BioMarin and are incorporating a GILT tag into our lentiviral vector with the goal of the patient producing GILT-tagged GAA following treatment with AVR-RD-03.

GILT-tag Version of Recombinant Human (rh)GAA Impact on Levels of Stored Glycogen

Compared to non GILT-tagged Recombinant Human (rh)GAA

GAA Enzyme Production

Our preclinical study measured the levels of GAA observed in normal mice, mice with the equivalent of infantile-onset Pompe disease, mice treated with AVR-RD-03 modified to not incorporate our proprietary GILT tag, and mice treated with AVR-RD-03 including our GILT tag, in each case measured 16 weeks post-treatment.

These data showed significant overexpression of GAA in bone marrow, white blood cells and plasma in mice treated with AVR-RD-03 without our GILT tag as well as AVR-RD-03 incorporating our GILT tag.

Glycogen Reduction

Our preclinical study also measured glycogen levels in the heart and brain at four months post-treatment with our GILT-tagged version of AVR-RD-03, which showed a 99% and 100% reduction, respectively, in glycogen levels.

In addition, our study measured glycogen levels in various organs of the study mice at eight months post-treatment.

The data showed an average of greater than 99% reduction in glycogen levels in the heart, greater than 97% reduction in the diaphragm, greater than 85% reduction in skeletal muscle, greater than 95% reduction in the brain, and greater than 99% reduction in the spinal cord.

Manufacturing

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The cryopreservation allows us to conduct a number of tests to validate the modified cells prior to introducing them into the patient.

We believe cryopreservation will also enable us to supply our products globally, as well as significantly increase the convenience of infusion scheduling for clinicians and patients, compared to fresh ex vivo gene therapy products that may have shelf-lives of only 24 hours.

We believe cryopreservation will also enable us to supply our products globally, as well as significantly increase the convenience of

infusion scheduling for clinicians and patients, compared to fresh ex vivo gene therapy products that may have shelf-lives of only 24 hours.

Prior to infusion of the gene therapy-modified cells into the patient, the patients undergo a conditioning regimen to remove some of the patient’s unmodified cells from the bone marrow to create sufficient space for the modified hematopoietic stem cells to engraft and produce their progeny.

The conditioning regimen used in our approach for AVR-RD-01, AVR-RD-02 and AVR-RD-03 may be administered in either an inpatient or an outpatient treatment setting on a case-by-case basis as may be directed by the patient’s physician.

After the conditioning regimen is complete, the lentivirally-modified stem cells are infused into the patient by intravenous administration in an outpatient setting.

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We are developing therapies to treat rare diseases and expect to pursue orphan-drug designation in the United States and similar protection outside of the United States.

To date, we have received from the FDA orphan-drug designation for AVR-RD-01 for the treatment of Fabry disease, AVR-RD-04 for the treatment of cystinosis, and AVR-RD-02 for the treatment of Gaucher disease.

To date, the FDA and the European Commission have each granted orphan drug designation to AVR-RD-01 for the treatment of Fabry disease, AVR-RD-04 for the treatment of cystinosis, and AVR-RD-02 for the treatment of Gaucher disease type 1.

These and other regulatory exclusivities, if granted or applicable, can prevent competitors, during the exclusivity period, from obtaining regulatory approval of the same drug or biological product for the same indication.

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We currently in-license, and we expect to file our own, patents and patent applications relating to certain of our product candidates.

We have in-licensed patents and patent applications from BioMarin Pharmaceutical Inc.

and GenStem Therapeutics, Inc.

directed to compositions and methods related to the manufacture and use of certain of our gene therapies.

We have in-licensed patents and patent applications from BioMarin Pharmaceutical Inc., GenStem Therapeutics, Inc.

and The University of Manchester directed to compositions and methods related to the manufacture and use of certain of our gene therapies.

In addition, we have in-licensed certain intellectual property rights and know-how from the University Health Network and affiliates of Lund University.

For example, we have in-licensed know-how and data related to AVR-RD-01, including certain information about the vector and its use, from University Health Network, and we have in-licensed know-how and data related to AVR-RD-02, including certain information about the vector and its use, from certain academic scientists affiliated with Lund University.

Each of our licenses are limited to particular fields, such as Fabry disease, Gaucher disease, Pompe disease, or cystinosis, and are subject to certain retained rights.

Each of our licenses are limited to particular fields, such as Fabry disease, Gaucher disease type 1, Pompe disease, cystinosis, or Hunter syndrome, and are subject to certain retained rights.

We do not control the prosecution and maintenance of all of our in-licensed patents and patent applications, and our rights to enforce the patents are limited in certain ways.

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As of March 1 , 2021 , our in-licensed patent portfolio relating to certain of our gene therapies included the following:

AVR-RD-03 (Pompe program) :

patents, projected to expire in 2022 and 2023, and two U.S.

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These patents and patent applications are licensed to us by BioMarin and relate to the GILT tag.

AVR-RD-04 (cystinosis program) :

patent application, which, if granted, would be projected to expire in 2038, as well as corresponding patents and patent applications in certain foreign jurisdictions, containing claims directed to hematopoietic stem cells expressing cystinosin and methods of using the same for the treatment of cystinosis.

These patent applications are licensed to us by GenStem Therapeutics, and GenStem obtained its rights from the University of California, San Diego.

AVR-RD-05 (Hunter program) :

patent application, which, if granted, would be projected to expire in 2038, as well as corresponding patents and patent applications in certain foreign jurisdictions, containing claims directed to gene therapy vectors encoding iduronate-2-sulfatase and methods of using the same for the treatment of Hunter syndrome.

These patent applications are licensed to us by the University of Manchester.

The term of any given patent depends upon the legal term of patents in the countries in which they are obtained.

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The actual protection afforded by a patent varies on a claim by claim and country by country basis for each applicable product and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent.

Currently, we do not own or license patents or patent applications related to our AVR-RD-01 or AVR-RD-02 product candidates.

Currently, we do not own or license patents or patent applications related to our AVR-RD-01, AVR-RD-02 or AVR-RD-06 product candidates.

We rely, in some circumstances, on trade secrets and unpatented know-how that is either owned by or licensed to us to protect our technology.

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License Agreements

License Agreement with The University of Manchester

In September 2020, we entered into an agreement, or the MPSII License Agreement, with The University of Manchester, England, or UoM, whereby UoM granted us an exclusive worldwide license under certain patent and other intellectual property rights, subject to certain retained rights, to develop, commercialize and sell an ex vivo lentiviral gene therapy for use in the treatment of Hunter syndrome, or mucopolysaccharidosis type II .

As consideration for the MPSII License Agreement, we agreed to pay UoM an upfront, one-time fee of $8.0 million.

As part of the agreement, we are obligated to make milestone payments of up to an aggregate of $80.0 million upon the achievement of specified development and regulatory milestones, to pay royalties, on a product-by-product and country-by-country basis, of a mid-single digit percentage based on net sales of products licensed under the agreement and to pay a low double-digit percentage of any sublicense fees received by us.

The next anticipated payment milestones under the MPSII License Agreement include $2.0 million, which would become due following the date of regulatory approval of the clinical trial application for the investigator-sponsored Phase 1/2 clinical trial sponsored by UoM, and $4.0 million, upon the dosing of the first patient in the investigator-sponsored Phase 1/2 clinical trial sponsored by UoM.

Unless terminated earlier, the agreement expires upon the later of 15 years from the effective date or the expiration of the last valid claim of the licensed patents, subject to certain surviving rights and obligations.

We and UoM can each terminate the agreement in the event of the bankruptcy or insolvency of the other party, or a material breach by the other party and failure to cure such breach within a certain period of time.

UoM has the right to terminate the agreement in the event of certain actions relating to challenge or opposition to the licensed intellectual property brought us or its affiliates or sublicensees.

Concurrently with the MPSII License Agreement, we entered into a collaborative research funding agreement with UoM , or the CRFA.

Under the CRFA, we have agreed to fund the budgeted costs of an investigator-sponsored Phase 1/2 clinical trial to be sponsored by UoM in connection with the development activities under the MPSII License Agreement, which are currently estimated to equal approximately £9.1 million in the aggregate .

Exclusive License Agreement with University Health Network

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Our royalty obligation expires on a licensed product-by-licensed product and country-by-country basis upon the latest to occur of the expiration or termination of the last valid claim under the licensed patent rights in such country (if and when any such patent rights come into existence under the license agreement in the future), the tenth anniversary of the first commercial sale of such licensed product in such country and the expiration of any applicable regulatory exclusivity in such country.

In addition, under this agreement we made a philanthropic commitment to donate funds to organizations for the benefit of the Canadian Fabry community in an amount equal to a low double-digit percentage of our royalty payments and regulatory milestone payments, up to a maximum amount of C$500,000 in any calendar year.

Unless terminated earlier, this exclusive license agreement with UHN will expire upon the expiration of our royalty obligation for all licensed products.

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Intellectual property licensed to us under this agreement relates to our Gaucher program.

As consideration for the license, we are required to make payments in connection with the achievement of certain milestones up to an aggregate of $550,000.

As consideration for the license, we are required to make payments in connection with the achievement of certain milestones up to an aggregate of $0.55 million.

Our license agreement with the rights holders expires on the latest of (i) the twentieth anniversary of the end of a certain research project we are funding pursuant to an agreement with Lund University, (ii) the expiration of the term of any patent filed on the licensed rights that covers a licensed product, (iii) the expiration of any applicable marketing exclusivity right and (iv) such time that neither we nor any of our sublicensees or partners or contractors are commercializing a licensed product.

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In addition, we are required to initiate an IND-enabling pharmacology/toxicology study of a licensed product within a specified period of time.

As consideration for the license, we paid an initial license fee in the amount of $500,000 and issued 233,765 shares of our Series B preferred stock to BioMarin at the time of our Series B financing.

As consideration for the license, we paid an initial license fee in the amount of $0.5 million and issued 233,765 shares of our Series B preferred stock to BioMarin at the time of our Series B financing.

We are also obligated to make payments to BioMarin upon achievement of certain milestones up to an aggregate of $13.0 million and pay to BioMarin a low single digit royalty percentage on net sales of licensed products covered by patent rights in a relevant country.

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Our industry is highly competitive and subject to rapid and significant technological change.

Our potential competitors include larger pharmaceutical, specialty pharmaceutical and biotechnology companies, as well as academic institutions, government agencies and private and public research institutions.

Our potential competitors include larger pharmaceutical, specialty pharmaceutical and biotechnology companies, as well as academic institutions,

government agencies and private and public research institutions.

Key competitive factors affecting the commercial success of our gene therapies are likely to be efficacy, safety and tolerability profile, reliability, convenience, price and reimbursement.

The market for treatment of lysosomal diseases is especially large and competitive.

The market for treatment of lysosomal disorders is especially large and competitive.

The gene therapies we are currently developing, if approved, will face competition.

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In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin.

In addition to the submission of an IND to the FDA before initiation of a clinical trial in the United States, certain human clinical trials involving recombinant or synthetic

nucleic acid molecules had historically been subject to review by the Recombinant DNA Advisory Committee, or RAC, of the National Institutes of Health, or NIH, Office of Biotechnology Activities, or the OBA, pursuant to the NIH Guidelines for Research Involving Recombinant DNA Molecules, or NIH Guidelines.

In addition to the submission of an IND to the FDA before initiation of a clinical trial in the United States, certain human clinical trials involving recombinant or synthetic nucleic acid molecules had historically been subject to review by the Recombinant DNA Advisory Committee, or RAC, of the National Institutes of Health, or NIH, Office of Biotechnology Activities, or the OBA, pursuant to the NIH Guidelines for Research Involving Recombinant DNA Molecules, or NIH Guidelines.

On August 17, 2018, the NIH issued a notice in the Federal Register and issued a public statement proposing changes to the oversight framework for gene therapy trials, including changes to the applicable NIH Guidelines to modify the roles and responsibilities of the RAC with respect to human clinical trials of gene therapy products, and requesting public comment on its proposed modifications.

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Concurrent with clinical studies, companies usually complete additional animal studies and also must develop additional information about the physical characteristics of the biological product as well as finalize a process for manufacturing the product in commercial quantities in accordance with CGMP requirements.

To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHS Act emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined.

To help r educe the risk of the introduction of adventitious agents with use of biological products, the PHS Act emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined.

The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final biological product.

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Fast Track designation applies to the combination of the product and the specific indication for which it is being studied.

The sponsor of a new drug or biologic may request the FDA to designate the drug or biologic as a Fast Track product at any time during the clinical development of the product.

The sponsor of a new drug or biologic

may request the FDA to designate the drug or biologic as a Fast Track product at any time during the clinical development of the product.

One benefit of fast track designation, for example, is that the FDA may consider for review sections of the marketing application for a product that has received Fast Track designation on a rolling basis before the complete application is submitted.

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Manufacturers of our products are required to comply with applicable requirements in the CGMP regulations, including quality control and quality assurance and maintenance of records and documentation.

Other post-approval requirements applicable to biological products, include reporting of CGMP deviations that may affect the identity, potency, purity and overall safety of a distributed product, record-keeping requirements, reporting of adverse effects, reporting updated safety and efficacy information, and complying with electronic record and signature requirements.

Other post-approval requirements applicable to biological

products, include reporting of CGMP deviations that may affect the identity, potency, purity and overall safety of a distributed product, record-keeping requirements, reporting of adverse effects, reporting updated safety and efficacy information, and complying with electronic record and signature requirements.

After a BLA is approved, the product also may be subject to official lot release.

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The ACA, signed into law on March 23, 2010, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009 which created an abbreviated approval pathway for biological products shown to be similar to, or interchangeable with, an FDA-licensed reference biological product.

This amendment to the PHS Act attempts to minimize duplicative testing.

This amendment to the PHS Act attempts to minimize

duplicative testing.

Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical study or studies.

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However, complexities associated with the larger, and often more complex, structure of biological products, as well as the process by which such products are manufactured, pose significant hurdles to implementation that are still being worked out by the FDA.

A reference biological product is granted four and twelve year exclusivity periods from the time of first licensure of the product.

A reference biological product is granted four and 12 year exclusivity periods from the time of first licensure of the product.

FDA will not accept an application for a biosimilar or interchangeable product based on the reference biological product until four years after the date of first licensure of the reference product, and FDA will not approve an application for a biosimilar or interchangeable product based on the reference biological product until twelve years after the date of first licensure of the reference product.

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There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution.

On December 2, 2020, HHS published a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law.

The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers.

Pursuant to an order entered by the U.S.

District Court for the District of Columbia, the portion of the rule eliminating safe harbor protection for certain rebates related to the sale or purchase of a pharmaceutical product from a manufacturer to a plan sponsor under Medicare Part D has been delayed to January 1, 2023.

Further, implementation of this change and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and pharmacy benefit manager service fees are currently under review by the Biden administration and may be amended or repealed;

federal civil and criminal false claims laws and civil monetary penalty laws, including the FCA, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, false or fraudulent claims for payment to, or approval by Medicare, Medicaid, or other federal healthcare programs, knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim or an obligation to pay or transmit money to the federal government, or knowingly concealing or knowingly and improperly avoiding or decreasing or concealing an obligation to pay money to the federal government.

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the federal transparency requirements under the ACA, including the provision commonly referred to as the Physician Payments Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the U.S.

Department of Health and Human Services information related to payments or other transfers of value made to physicians (currently defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members.

Effective January 1, 2022, these reporting obligations will extend to include transfers of value made to certain non-physician providers such as physician assistants and nurse practitioners;

Department of Health and Human Services information related to payments or other transfers of value made to physicians (currently defined to include doctors, dentists, optometrists, podiatrists and chiropractors), physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members.

federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate and timely manner to government programs;

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The GDPR applies to any company established in the European Union as well as to those outside the European Union if they collect and use personal data in connection with the offering of goods or services to individuals in the European Union or the monitoring of their behavior.

The GDPR enhances data protection obligations for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification

requirements and onerous new obligations on services providers.

Non-compliance with the GDPR may result in monetary penalties of up to €20 million or 4% of worldwide revenue, whichever is higher.

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Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future.

For example, various portions of the ACA are currently undergoing legal and constitutional challenges in the Fifth Circuit Court and the United States Supreme Court, and the Trump Administration has issued various Executive Orders that eliminated cost sharing subsidies and various provisions that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.

Additionally, Congress has introduced several pieces of legislation aimed at significantly revising or repealing the ACA.

It is unclear whether the ACA will be overturned, repealed, replaced, or further amended.

We cannot predict what affect further changes to the ACA would have on our business.

Various portions of the ACA are currently undergoing legal and constitutional challenges in the United States Supreme Court and members of Congress have introduced several pieces of legislation aimed at significantly revising or repealing the ACA.

The United States Supreme Court is expected to rule on a legal challenge to the constitutionality of the ACA in early 2021.

The implementation of the ACA is ongoing, the law appears likely to continue the downward pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.

Litigation and legislation related to the ACA are likely to continue, with unpredictable and uncertain results.

In addition, the Budget Control Act of 2011 and the Bipartisan Budget Act of 2015 led to aggregate reductions of Medicare payments to providers of up to 2% per fiscal year that will remain in effect through 2030 unless additional Congressional action is taken.

Pursuant to the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, as well as subsequent legislation, these reductions have been suspended from May 1, 2020 through March 31, 2021 due to the COVID-19 pandemic.

Proposed legislation, if passed, would extend this suspension until the end of the pandemic.

Further, on January 2, 2013, the American Taxpayer Relief Act was signed into law, which, among other things, reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

More recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which have resulted in several recent Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for pharmaceutical products.

Individual states in the United States have also become increasingly active in proposing and passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Individual states in the United States have also become increasingly active in proposing and passing legislation and implementing regulations designed to control pharmaceutical

product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Finally, on May 30, 2018, the Right to Try Act, was signed into law.

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There is no obligation for a drug manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act, but the manufacturer must develop an internal policy and respond to patient requests according to that policy.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We expect that additional foreign, federal and state healthcare reform measures will be adopted in the future, any of which could limit the amounts that foreign federal and state governments will pay for healthcare products and services, which could result in limited coverage and reimbursement and reduced demand for our products, if approved, or additional pricing pressures.

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If third-party payors do not consider a product to be cost-effective compared to other available therapies, they may not cover the product as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company to sell its products at a profit.

Factors payors consider in determining reimbursement are based on whether the product is:

a covered benefit under its health plan;

safe, effective and medically necessary;

appropriate for the specific patient;

cost-effective;

neither experimental nor investigational.

Outside of the United States, the pricing of pharmaceutical products is subject to governmental control in many countries.

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You may access, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.

Ris k Factors

Investing in our common stock involves a high degree of risk.

You should carefully consider the following risks and uncertainties, together with all other information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as our other filings with the Securities and Exchange Commission, or the SEC, before investing in our common stock.

Any of the risk factors we describe below could adversely affect our business, financial condition or results of operations.

The market price of our common stock could decline if one or more of these risks or uncertainties were to occur, which may cause you to lose all or part of the money you paid to buy our common stock.

Additional risks that are currently unknown to us or that we currently believe to be immaterial may also impair our business.

Certain statements below are forward-looking statements.

See “Forward-Looking Information” in this Annual Report on Form 10-K.

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

We have incurred net losses since inception.

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

Since inception, we have incurred net losses.

We incurred net losses of $73.0 million and $46.4 million for the years ended December 31, 2019 and 2018, respectively.

We historically financed our operations primarily through private placements of our preferred stock and, more recently, our initial public offering and follow-on public offerings of our common stock.

We have devoted substantially all of our efforts to research and development, including clinical and preclinical development of our product candidates, as well as assembling our team.

We expect that it will be several years, if ever, before we have commercialized any product candidates.

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future.

We anticipate that our expenses will increase substantially if, and as, we:

continue our development of our product candidates, including continuing enrollment in our ongoing Phase 2 clinical trial for AVR-RD-01, the investigator-sponsored Phase 1/2 clinical trial for AVR-RD-04 and our Phase 1/2 clinical trial for AVR-RD-02;

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

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

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

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

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

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

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

continue to incur additional public company-related costs.

To become and remain profitable, we must develop and eventually commercialize product candidates with significant market potential.

This will require us to be successful in a range of challenging activities, and our expenses will increase substantially as we seek to complete preclinical and clinical trials of our product candidates, and manufacture, market and sell these or any future product candidates for which we may obtain marketing approval, if any, and satisfy any post-marketing requirements.

We may never succeed in any or all of these activities and, even if we do, we may never generate revenues that are significant or large enough to achieve profitability.

If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations.

A decline in the value of our company also could cause you to lose all or part of your investment.

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

Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or with collaborative partners, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize, our product candidates.

We do not anticipate generating revenues from product sales for the next several years, if ever.

Our ability to generate future revenues from product sales depends heavily on our, or our collaborators’, success in:

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

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

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

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

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

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

addressing any competing technological and market developments;

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

attracting, hiring and retaining qualified personnel.

Even if one or more of the product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate.

Our expenses could increase beyond expectations if we are required by the FDA or other foreign regulatory authorities to perform clinical and other studies in addition to those that we currently anticipate.

Even if we are able to generate revenues from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations.

We will need additional funding, which may not be available on acceptable terms, or at all.

Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.

As of December 31, 2019, we had cash and cash equivalents of $187.0 million.

We believe that our existing cash and cash equivalents as of December 31, 2019, together with the estimated net proceeds of $93.5 million from the follow-on offering of common stock we completed in February 2020, will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2022.

This forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of our expenses could vary materially and adversely as a result of a number of factors.

We have based our estimates on assumptions that may prove to be wrong, and our expenses could prove to be significantly higher than we currently anticipate.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, initiate further clinical trials of and seek marketing approval for, our product candidates and continue to enhance and optimize our vector technology and manufacturing processes.

In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant expenses related to product sales, medical affairs, marketing, manufacturing and distribution.

Furthermore, we expect to continue to incur additional costs associated with operating as a public company.

Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

If we are unable to raise capital when needed or on reasonable terms, we would be forced to delay, reduce or eliminate certain of our research and development programs.

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

the scope, progress, results and costs of drug discovery, laboratory testing, preclinical development and clinical trials for our other product candidates;

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

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

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

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

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

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

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

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales.

In addition, our product candidates, if approved, may not achieve commercial success.

Our product revenues, if any, will be derived from or based on sales of products that may not be commercially available for many years, if at all.

Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.

Adequate additional financing may not be available to us on acceptable terms, or at all.

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

We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements.

To the extent that we raise additional capital through the sale of equity, convertible debt securities or other equity-based derivative securities, your ownership interest will be diluted and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder.

Any additional indebtedness we incur would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

Furthermore, the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings.

If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, or our product candidates, or grant licenses on terms unfavorable to us.

Adequate additional financing may not be available to us on acceptable terms, or at all.

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

We are a clinical-stage company founded in November 2015.

Our operations to date have been limited to corporate organization, recruiting key personnel, business planning, raising capital, acquiring rights to our technology, identifying potential product candidates, undertaking preclinical studies and planning and supporting clinical trials of our product candidates and establishing research and development and manufacturing capabilities.

Although we initiated our ongoing Phase 2 clinical trial for AVR-RD-01 in June 2018, the first patient in the ongoing investigator-sponsored clinical trial of AVR-RD-04 was dosed in October 2019, and patient enrollment has commenced for our ongoing Phase 1/2 clinical trial of AVR-RD-02, we have not yet demonstrated the ability to complete clinical trials of our product candidates, obtain marketing approvals, manufacture products on a clinical or commercial scale or conduct sales and marketing activities necessary for successful commercialization.

Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.

In addition, as an early-stage company, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors.

Risks related to the discovery and development of our product candidates

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

We have concentrated our research and development efforts on our lentiviral-based gene therapy approach, and our future success depends on our successful development of viable gene therapy product candidates.

There can be no assurance that we will not experience problems or delays in developing new product candidates and that such problems or delays will not cause unanticipated costs, or that any such development problems can be solved.

For example, the implementation of our plato platform and upgrades, including our transition to TDM conditioning using busulfan for our single-agent conditioning regimen, may result in delays or setbacks in our research and development activities, and we may not realize the intended benefits of these efforts.

In addition, we may also experience delays in developing a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us from completing our clinical studies or commercializing our products on a timely or profitable basis, if at all.

For example, as of March 6, 2020 we have only dosed one patient using our plato platform, which we plan to utilize for the majority of patients in our ongoing Phase 2 clinical trial for AVR-RD-01 and all patients in the Phase 1/2 clinical trial of AVR-RD-02.

Our implementation of the LV2 lentiviral vector or of our cell processing to an industrialized, automated closed system using disposable supplies may not be successful or may experience unforeseen delays, which may cause shortages or delays in the supply of our products available for clinical trials and future commercial sales, if any, or impair our research and development efforts, including those in our ongoing and future clinical trials.

In addition, there is no assurance that products using our proprietary LV2 lentiviral vector or manufactured using this automated system will ultimately achieve the same favorable preliminary results observed to date in the Phase 1 and Phase 2 clinical trials of AVR-RD-01.

In addition, the clinical trial requirements of the FDA and other foreign regulatory authorities and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of such product candidates.

The regulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known or more extensively studied product candidates.

To date, only a limited number of gene therapies have received marketing authorization from the FDA or foreign regulatory authorities.

It is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates in the United States, Canada or other major markets or how long it will take to commercialize our product candidates, if any are approved.

Approvals by foreign regulatory authorities may not be indicative of what the FDA may require for approval, and vice versa.

Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future.

The FDA has established the Office of Tissues and Advanced Therapies within its Center for Biologics Evaluation and Research, or CBER, to consolidate the review of gene therapy and related products, and has established the Cellular, Tissue and Gene Therapies Advisory Committee to advise the CBER in its review.

Gene therapy clinical trials conducted at institutions that receive funding for recombinant DNA research from the United States National Institutes of Health, or NIH, also are subject to the NIH Guidelines, under which supervision of human gene transfer trials includes evaluation and assessment by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution.

The IBC assesses the safety of the research and identifies any potential risk to public health or the environment, and such review may result in some delay before initiation of a clinical trial.

If we were to engage an NIH-funded institution to conduct a clinical trial, that institution’s IBC as well as its institutional review board, or IRB, would need to review the proposed clinical trial to assess the safety of the trial.

In addition, adverse developments in clinical trials of gene therapy products conducted by others may cause the FDA or other oversight bodies to change the requirements for approval of any of our product candidates.

Similarly, foreign regulatory authorities may issue new guidelines concerning the development and marketing authorization for gene therapy medicinal products and require that we comply with these new guidelines.

The FDA, NIH and the European Medicines Agency, or EMA, have each expressed interest in further regulating biotechnology, including gene therapy and genetic testing.

For example, the EMA advocates a risk-based approach to the development of a gene therapy product.

Agencies at both the federal and state level in the United States, as well as the U.S.

congressional committees and other governments or governing agencies, have also expressed interest in further regulating the biotechnology industry.

Such action may delay or prevent commercialization of some or all of our product candidates.

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

As we advance our product candidates, we will be required to consult with these regulatory and advisory groups, and comply with applicable guidelines.

If we fail to do so, we may be required to delay or discontinue development of certain of our product candidates.

These additional processes may result in a review and approval process that is longer than we otherwise would have expected.

Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generate sufficient product revenue, and our business, financial condition, results of operations and prospects would be materially and adversely affected.

The FDA continues to develop its approach to assessing gene and cell therapy products.

For example, the agency has released a series of draft guidance documents relating to, among other topics, various aspects of gene therapy product development, review, and approval, including aspects relating to clinical and manufacturing issues related to gene therapy products.

We cannot be certain whether such guidance will be relevant to or have an impact on our gene therapy candidates or the duration or expense of any applicable regulatory development and review processes.

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

During the conduct of clinical trials, patients may experience changes in their health, including illnesses, injuries, discomforts or a fatal outcome.

It is possible that as we test AVR-RD-01, AVR-RD-04, AVR-RD-02 or other product candidates in larger, longer and more extensive clinical programs, or as use of our product candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier clinical trials, as well as conditions that did not occur or went undetected in previous clinical trials, will be reported by patients.

Gene therapies are also subject to the potential risk that occurrence of adverse events will be delayed following administration of the gene therapy due to persistent biological activity of the genetic material or other components of the vectors used to carry the genetic material.

Many times, side effects are only detectable after investigational products are tested in larger scale, pivotal clinical trials or, in some cases, after they are made available to patients on a commercial scale after approval.

If additional clinical experience indicates that any of our product candidates have side effects or causes serious or life-threatening side effects, the development of the product candidate may fail or be delayed, or, if the product candidate has received regulatory approval, such approval may be revoked or limited.

There have been several significant adverse side effects in gene therapy treatments in the past, including multiple reported cases of leukemia, myelodysplastic syndrome and death seen in other clinical trials.

Gene therapy is still a relatively new approach to disease treatment and additional adverse side effects could develop.

Possible adverse side effects that may occur with treatment with gene therapy products include an immunologic reaction early after administration that could substantially limit the effectiveness of the treatment or represent safety risks for patients.

Another traditional safety concern for gene therapies using viral vectors has been the possibility of insertional mutagenesis by the vectors, leading to malignant transformation of transduced cells.

While our lentiviral gene therapy approach is designed to avoid immunogenicity against the vector after administration, there can be no assurance that patients would not create antibodies that may impair treatment.

If any of our gene therapy product candidates demonstrates adverse side effects at unacceptable rates or degrees of severity, we may decide or be required to halt or delay clinical development of such product candidates.

In addition to side effects caused by our product candidates, the conditioning, administration process or related procedures, which we evaluate from time to time as part of our process improvement and optimization efforts, also can cause adverse side effects.

A gene therapy patient is generally administered one or more myeloablative drugs to remove stem cells from the bone marrow to create sufficient space in the bone marrow for the modified gene-corrected stem cells to engraft and produce their progeny.

This procedure transiently compromises the patient’s immune system, known as neutropenia, and ability to form blood clots, known as thrombocytopenia.

In 2019 we began transitioning, in connection with our company-sponsored clinical trials, towards a new conditioning regimen for our product candidates utilizing busulfan as the myeloablative conditioning agent instead of the melphalan that we previously used.

The use of this conditioning regimen is designed to utilize therapeutic drug monitoring, or TDM, to achieve a balance between the removal of a sufficient amount of bone marrow cells from a patient against potential risks such as toxicity or graft failure.

While we anticipate that the conditioning regimen may be performed during a limited hospital stay or potentially through an outpatient procedure, on a case-by-case basis as directed by a patient’s physician, we cannot guarantee that the conditioning will not require a lengthier hospitalization.

Our conditioning regimens may not be successful or may nevertheless result in adverse side effects.

For example, in the ongoing investigator-sponsored Phase 1 clinical trial and our ongoing company-sponsored Phase 2 clinical trial of AVR-RD-01, as well as the investigator-sponsored Phase 1/2 clinical trial of AVR-RD-04, several adverse events, including suppression of neutrophils and platelet counts following the conditioning process, were observed.

While such adverse events in connection with conditioning is expected, if in the future any such adverse events caused by the conditioning process or related procedures continue at unacceptable rates or degrees of severity, the FDA or other foreign regulatory authorities could order us to cease development of, or deny approval of, AVR-RD-01 or our other product candidates for any or all targeted indications.

In addition, although in the future we may implement new procedures to screen for certain pre-cancerous genetic mutations prior to commencement of the conditioning regimen as an additional risk reduction measure, there can be no guarantees that these procedures, if implemented, would be successful.

Even if we are able to demonstrate that adverse events are not product-related, such occurrences could adversely affect patient recruitment or the ability of enrolled patients to complete the clinical trial.

Additionally, if any of our product candidates receives marketing approval, the FDA could require us to adopt a Risk Evaluation and Mitigation Strategy, or REMS, to ensure that the benefits outweigh its risks, which may include, among other things, a medication guide outlining the risks of the product for distribution to patients, a communication plan to health care practitioners, and restrictions on how or where the product can be distributed, dispensed or used.

Furthermore, if we or others later identify undesirable side effects caused by AVR-RD-01, AVR-RD-04, AVR-RD-02 or our other product candidates, several potentially significant negative consequences could result, including:

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

regulatory authorities may require additional warnings on the label;

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

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

our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates and could significantly harm our business, prospects, financial condition and results of operations.

We have never completed a pivotal clinical trial, and may be unable to do so for any product candidates we may develop, including AVR-RD-01, AVR-RD-04 and AVR-RD-02.

We are at an early stage of development for all of our product candidates including AVR-RD-01, AVR-RD-04 and AVR-RD-02.

As of March 6, 2020, our product candidate AVR-RD-01 has been administered to only five patients in an ongoing investigator-sponsored Phase 1 clinical trial and to four patients in our ongoing Phase 2 clinical trial, and AVR-RD-04 has been administered to only one patient in the ongoing investigator-sponsored Phase 1/2 clinical.

Although patient enrollment has commenced for our Phase 1/2 clinical trial of AVR-RD-02, we do not expect to dose the first patient until the second quarter of 2020.

These ongoing clinical trials must be completed, as well as potentially additional pivotal clinical trials in order to obtain FDA approval to market these product candidates.

We have limited experience in preparing, submitting and prosecuting regulatory filings, and have not previously submitted a biologics license application, or BLA, for any product candidate.

Carrying out later-stage clinical trials is a complicated and lengthy process, and we do not expect that all data from patients participating in the clinical trials will be relevant or meaningful.

For example, the primary efficacy endpoint of our Phase 2 clinical trial of AVR-RD-01 is the change, from baseline to one year post-treatment with AVR-RD-01, in the average number of Gb3 inclusions per PTC, as measured in a patient kidney biopsy.

The second patient in the Phase 2 trial has an N215S genotype, which is associated with a late-onset cardiac variant phenotype and lower plasma lyso-Gb3 levels.

This patient’s cardiac variant phenotype does not typically result in Gb3 accumulation in the kidney and skin, and accordingly we do not expect that data obtained from this patient will have a meaningful impact on certain efficacy endpoints in our Phase 2 clinical trial, including kidney and skin biopsies.

Nonetheless, there may be other important insights derived from data collected from this patient in the Phase 2 clinical trial.

In addition, we have not yet conducted any company-sponsored clinical trials of any of our product candidates in the United States, and our interactions with the FDA have generally been limited.

We cannot be certain how many additional clinical trials of AVR-RD-01, AVR-RD-04, AVR-RD-02 or any other product candidates will be required or how such trials should be designed.

In order to commence a clinical trial in the United States, we are required to seek FDA acceptance of an IND for each of our product candidates.

We cannot be sure any IND we submit to the FDA, or any similar clinical trial application we submit in other countries, will be accepted.

While we have received clearance from the FDA to commence clinical testing in the United States for AVR-RD-01 and AVR-RD-02, and the sponsor of the investigator-led clinical trial for AVR-RD-04 has received the same, there can be no assurance that we will be able to submit and secure similar clearances for any of our other product candidates.

We may also be required to conduct additional preclinical testing prior to filing an IND for any of our product candidates, and the results of any such testing may not be positive.

Consequently, we may be unable to successfully and efficiently execute and complete necessary clinical trials in a way that leads to a BLA submission and approval of AVR-RD-01, AVR-RD-04, AVR-RD-02 or any of our other product candidates.

We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of product candidates that we develop.

Failure to commence or complete, or delays in, our planned clinical trials, could prevent us from or delay us in commercializing AVR-RD-01, AVR-RD-04, AVR-RD-02 or any of our other product candidates.

The ongoing Phase 1 clinical trial of AVR-RD-01 is an investigator-sponsored trial being conducted by University Health Network.

In addition, the ongoing Phase 1/2 clinical trial of AVR-RD-04 is also an investigator-sponsored clinical trial, which is being conducted by our collaborators at the University of California, San Diego.

We do not control the design or administration of investigator-sponsored trials, nor the submission or approval of any IND or foreign equivalent required to conduct these trials, and the investigator-sponsored trials could, depending on the actions of such third parties, jeopardize the validity of the clinical data generated, identify significant concerns with respect to our product candidates that could impact our findings or clinical trials, and adversely affect our ability to obtain marketing approval from the FDA or other applicable regulatory authorities.

To the extent the results of this or other investigator-sponsored trials are inconsistent with, or different from, the results of our planned company-sponsored trials or raise concerns regarding our product candidates, the FDA or a foreign regulatory authority may question the results of the company-sponsored trial, or subject such results to greater scrutiny than it otherwise would.

In these circumstances, the FDA or such foreign regulatory authorities may require us to obtain and submit additional clinical data, which could delay clinical development or marketing approval of our product candidates.

In addition, while investigator-sponsored trials could be useful to inform our own clinical development efforts, there is no guarantee that we will be able to use the data from these trials to form the basis for regulatory approval of our product candidates.

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

Results from preclinical studies or early clinical trials are not necessarily predictive of future clinical trial results and are not necessarily indicative of final results.

For example, there can be no assurance that prior results, such as signals of safety, activity or durability of effect, observed from preclinical studies or clinical trials will be replicated or will continue in ongoing or future studies or trials.

Furthermore, preliminary results may not be indicative of the final results of a trial after all data have been collected and analyzed.

Based on results observed from ongoing trials of AVR-RD-01, there can be no assurance that increased levels of AGA in patients treated with AVR-RD-01 will be maintained over time.

In addition, while the first, third and fifth patients from the ongoing investigator-sponsored Phase 1 clinical trial of AVR-RD-01 discontinued ERT, there can be no assurance that these patients, or others who in the future may discontinue ERT, will remain off ERT.

The initial results from the investigator-sponsored clinical trial of AVR-RD-04 only represent three months of clinical data from one patient, and there is no assurance that future clinical data from this patient or other patients will produce similar results.

There is a high failure rate for gene therapy and biologic product candidates proceeding through clinical trials.

Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in preclinical testing and earlier-stage clinical trials.

Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval.

In addition, the design of a pivotal clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced.

Our company has limited experience in designing and conducting clinical trials and we may be unable to design and execute a clinical trial to support regulatory approval.

To date, we have not received definitive guidance from the FDA or other foreign regulatory bodies regarding the necessary endpoints for approval of any of our product candidates, including AVR-RD-01, AVR-RD-04 and AVR-RD-02.

While we are aware that the FDA utilized an efficacy endpoint based on patients’ kidney biopsy in the recent approval of Migalastat for Fabry disease, for which we are also measuring as our primary efficacy endpoint in our ongoing Phase 2 clinical trial of AVR-RD-01, there can be no guarantees that regulatory agencies will permit us to use the same endpoint in connection with further development of AVR-RD-01.

Therefore, there are no assurances that the FDA or other foreign regulatory bodies will find the efficacy endpoints we propose in future pivotal trials to be sufficiently validated and clinically meaningful, or that our product candidates will achieve the pre-specified endpoints in future pivotal trials to a degree of statistical significance.

We also may experience regulatory delays or rejections as a result of many factors, including due to changes in regulatory policy during the period of our product candidate development.

Although patient enrollment has commenced for our Phase 1/2 clinical trial of AVR-RD-02, we have not dosed any patients, and our AVR-RD-03 product candidate is in preclinical development and has not yet been tested in humans.

Any of our other current or future product candidates may fail to show the desired safety and efficacy in clinical development despite positive results in preclinical studies.

Any such failure would cause us to abandon the product candidate.

Additionally, the clinical trials performed to date have been open-label studies and have been conducted at a limited number of clinical sites on a limited number of patients.

An “open-label” clinical trial is one where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug or placebo.

Most typically, open-label clinical trials test only the investigational product candidate and sometimes may do so at different dose levels.

Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect as patients in open-label clinical trials are aware when they are receiving treatment.

Open-label clinical trials may be subject to a “patient bias” where patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment.

Moreover, patients selected for early clinical studies often include the most severe sufferers and their symptoms may have been bound to improve notwithstanding the new treatment.

In addition, open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the physiological outcomes of the clinical trials are aware that patients have received treatment and may interpret the information more favorably given this knowledge.

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

Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success.

The timing of our clinical trials depends on our ability to recruit patients to participate as well as the completion of required follow-up periods.

Patients may be unwilling to participate in our gene therapy clinical trials because of negative publicity from adverse events related to the biotechnology or gene therapy fields, competitive clinical trials for similar patient populations, clinical trials in product candidates employing our vectors, the existence of current treatments or for other reasons.

In addition, the indications that we are currently targeting and may in the future target are rare diseases, which may limit the pool of patients that may be enrolled in our ongoing or planned clinical trials.

The timeline for recruiting patients, conducting studies and obtaining regulatory approval of our product candidates may be delayed, which could result in increased costs, delays in advancing our product candidates, delays in testing the effectiveness of our product candidates or termination of the clinical trials altogether.

We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics, to complete our clinical trials in a timely manner.

For example, in 2017, the ongoing investigator-sponsored Phase 1 clinical trial of AVR-RD-01 encountered delays in the enrollment of patients due to delays in identifying patients for enrollment and the evaluation of information from screened potential trial participants.

In 2019, we encountered delays in the enrollment of patients in the company-sponsored Phase 1/2 clinical trial of AVR-RD-02 for Gaucher disease.

While a number of patients had been identified for the Phase 1/2 clinical trial, we encountered patient pre-screening failures that impacted the commencement of enrollment.

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

size of the patient population and process for identifying patients;

design of the trial protocol;

eligibility and exclusion criteria;

perceived risks and benefits of the product candidate under study;

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

availability of competing therapies and clinical trials;

severity of the disease under investigation;

availability of genetic testing for potential patients;

proximity and availability of clinical trial sites for prospective patients;

ability to obtain and maintain subject consent;

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

patient referral practices of physicians;

ability to monitor patients adequately during and after treatment.

We anticipate expanding our patient enrollment activities to include patients who reside in a country other than the country where the applicable clinical site is located, and who would be required to travel for some or all of the clinical testing and procedures required for patients in the applicable clinical trial.

We may encounter logistical and regulatory challenges that could delay or prevent any such international patients from successfully enrolling and completing clinical trial procedures, including delays in processing or obtaining patient travel visas or denials of entry at borders, potential travel disruptions, or de-prioritization or unavailability of resources at clinical sites for non-resident international clinical trial participants, any of which could delay our progress and completion of planned clinical trials and which would have an adverse effect on our business.

Our current product candidates are being developed to treat rare conditions.

We plan to seek initial marketing approvals in the United States, Europe and certain other major markets, including Japan.

We may not be able to initiate or continue clinical trials if we cannot enroll a sufficient number of eligible patients to participate in the clinical trials required by FDA or other foreign regulatory authorities.

Our ability to successfully initiate, enroll and complete a clinical trial in any foreign country is subject to numerous risks unique to conducting business in foreign countries, including:

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

different standards for the conduct of clinical trials;

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

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

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

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

Business interruptions resulting from the coronavirus disease (COVID-19) outbreak or similar public health crises could cause a disruption of the development of our product candidates and adversely impact our business.

Public health crises such as pandemics or similar outbreaks could adversely impact our business.

In December 2019, a novel strain of a virus named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes coronavirus disease, or COVID-19, was reported to have surfaced in Wuhan, China and has reached multiple other regions and countries, including Cambridge, Massachusetts where our primary office and laboratory space is located.

The coronavirus pandemic is evolving, and to date has led to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public health safety measures.

The extent to which the coronavirus impacts our operations or those of our third party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.

Additionally, timely enrollment in our clinical trials is dependent upon global clinical trial sites which may be adversely affected by global health matters, such as pandemics.

We are currently conducting clinical trials for our product candidates in the United States, Canada and Australia, and plan to expand to other geographies including Japan, Europe and Israel, and many of these regions are currently being affected by the coronavirus.

Some factors from the coronavirus outbreak that may delay or otherwise adversely affect enrollment in the clinical trials of our product candidates, as well as our business generally, include:

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

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

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

business disruptions caused by potential workplace, laboratory and office closures and an increased reliance on employees working from home, disruptions to or delays in ongoing laboratory experiments and operations, staffing shortages, travel limitations or mass transit disruptions, any of which could adversely impact our business operations or delay necessary interactions with local regulators, ethics committees and other important agencies and contractors.

These and other factors arising from the coronavirus could worsen in countries that are already afflicted with the corona virus or could continue to spread to additional countries, each of which could further adversely impact our ability to conduct clinical trials and our business generally, and could have a material adverse impact on our operations and financial condition and results .

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

Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical studies to demonstrate the safety and efficacy of the product candidates in humans.

Clinical testing is expensive, time-consuming and uncertain as to outcome.

We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all.

A failure of one or more clinical studies can occur at any stage of testing.

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

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

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

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

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

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

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

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

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

delays in having patients complete participation in a study or return for post-treatment follow-up;

clinical study sites or patients dropping out of a study;

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

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

Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to generate revenues.

In addition, if we make changes to our product candidates, we may need to conduct additional studies to bridge our modified product candidates to earlier versions, which could delay our clinical development plan or marketing approval for our product candidates.

For example, for our Phase 2 clinical trial of AVR-RD-01, we have transitioned our lentiviral vectors to an LV2 version in connection with our plato platform implementation.

In addition, the transition from LV1 to LV2 has required (and is anticipated to continue to require) submission of relevant data to the applicable regulatory authorities in connection with certain of our regulatory filings, including our INDs and clinical trial applications, to demonstrate analytic comparability between LV1 and LV2.

Our IND application for our planned Phase 2 clinical study of AVR-RD-01 for Fabry disease in the United States, which was cleared by the FDA in April 2019, included data to demonstrate comparability between LV1 and LV2 and a transition to an automated manufacturing platform.

In addition, our CTA (including amendments) and IND for our Phase 1/2 clinical study of AVR-RD-02 for Gaucher disease in Canada and the United States, for which Health Canada has issued no objection letters and the FDA has cleared, respectively, included data utilizing LV2 and our automated manufacturing platform.

While these applications included data relating to our LV2 lentiviral vector and our automated manufacturing process, which are elements of our plato platform, and allow us to commence clinical trials incorporating such elements, there can be no assurance that the FDA, Health Canada or other regulatory authorities will not require us to undertake additional actions in connection with our transition to our plato platform, including submission of additional comparability studies in connection with future regulatory filings, which may result in delays, suspension or termination of ongoing or future clinical trials, or our inability to conduct our trials according to the plans or the timelines that we have envisioned.

For example, the Phase 1/2 investigator-sponsored clinical study of AVR-RD-04 for cystinosis in the United States, which has been cleared by the FDA, does not include our LV2 lentiviral vector or our automated manufacturing platform, and we anticipate that we will be required to submit comparability data in future regulatory filings relating to our transition to LV2 and the automated manufacturing platform.

Any such filings may result in delay, suspension or termination of ongoing or future clinical trials pending our submission, and the applicable regulatory agency’s review, of such updates.

Clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates, if approved, or allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

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

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

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

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

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

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

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

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

experience damage to our reputation.

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

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

We cannot commercialize a product until the appropriate regulatory authorities have reviewed and approved the product candidate.

Even if our product candidates demonstrate safety and efficacy in clinical studies, the regulatory agencies may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval.

Additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval.

In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical studies and the review process.

Regulatory agencies also may approve a treatment candidate for fewer or more limited indications than requested or may grant approval subject to the performance of post-marketing studies.

In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates.

If we are unable to obtain necessary regulatory approvals, our business, prospects, financial condition and results of operations may suffer.

Certain of our clinical trials, including the ongoing investigator-sponsored clinical trial of AVR-RD-01, a portion of our company-sponsored clinical trial of AVR-RD-01, and the investigator-sponsored clinical trial of AVR-RD-04, do not utilize our commercial-scale plato platform.

While we have submitted and intend to continue to submit comparability studies to the FDA and other regulatory agencies, as needed, with respect to our implementation of our commercial-scale plato platform, there can be no assurance that the FDA or other regulatory agencies will not in the future require us to conduct additional preclinical studies or clinical trials with respect to these programs or our other product candidates that could result in delays in our development or commercialization programs of our product candidates, if approved, and additional expenses and otherwise could adversely affect our business.

We intend to continue implementing our commercial-scale plato platform, including heightened vector efficiency, our closed, automated manufacturing system and utilization of a TDM conditioning regimen with busulfan, in connection with each of our investigational product candidates.

We have developed the plato platform to form the backbone of our commercial programs, with the intent of replacing our original academic platform with improved solutions for delivering our gene therapy candidates to patients in multiple disease indications.

We believe improvements from our plato platform may lead to better patient outcomes with our gene therapy candidates.

In order to implement this transition, we have been and will be required to conduct additional studies to bridge our modified product candidates to earlier versions, which could delay our clinical development plans or marketing approvals, if any, including for AVR-RD-01, where the ongoing investigator-sponsored clinical trial does not use the plato platform, a portion of our Company-sponsored clinical trial for AVR-RD-01, and for AVR-RD-04 where the investigator-sponsored clinical trial will not utilize the plato platform.

For example, we have transitioned our AVR-RD-01 lentiviral vectors to an LV2 version, and the fourth patient in our Phase 2 trial of AVR-RD-01 was dosed in 2019 using the plato platform.

While LV2 is intended to confer improvements in transduction efficiency in viral

production, there is no guarantee that we can realize these intended benefits.

Nevertheless, there can be no assurance that the FDA, Health Canada or other regulatory agencies will not in the future require us to conduct additional preclinical studies or clinical trials with respect to these programs or our other product candidates, which may result in delay, suspension or termination of ongoing or future clinical trials.

While we intend to seek designations for our product candidates with the FDA and comparable foreign regulatory authorities that are intended to confer benefits such as a faster development process or an accelerated regulatory pathway, there can be no assurance that we will successfully obtain such designations.

In addition, even if one or more of our product candidates are granted such designations, we may not be able to realize the intended benefits of such designations.

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

These designations may confer benefits such as additional interaction with regulatory authorities, a potentially accelerated regulatory pathway and priority review.

However, there can be no assurance that we will successfully obtain such designations for any of our product candidates.

In addition, while such designations could expedite the development or approval process, they generally do not change the standards for approval.

Even if we obtain such designations for one or more of our product candidates, there can be no assurance that we will realize their intended benefits.

For example, we may seek a Breakthrough Therapy Designation for some of our product candidates.

A breakthrough therapy is defined as a therapy that is intended, alone or in combination with one or more other therapies, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the therapy may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

For therapies that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens.

Therapies designated as breakthrough therapies by the FDA are also eligible for accelerated approval.

Designation as a breakthrough therapy is within the discretion of the FDA.

Accordingly, even if we believe one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation.

In any event, the receipt of a Breakthrough Therapy Designation for a product candidate may not result in a faster development process, review or approval compared to therapies considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA.

In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that such product candidates no longer meet the conditions for qualification.

In addition, we may seek Fast Track Designation for some of our product candidates.

If a therapy is intended for the treatment of a serious or life-threatening condition and the therapy demonstrates the potential to address unmet medical needs for this condition, the therapy sponsor may apply for Fast Track Designation.

The FDA has broad discretion whether or not to grant this designation, so even if we believe a particular product candidate is eligible for this designation, there can be no assurance that the FDA would decide to grant it.

Even if we do receive Fast Track Designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures, and receiving a Fast Track Designation does not provide assurance of ultimate FDA approval.

In addition, the FDA may withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our clinical development program.

In addition, we may seek a regenerative medicine advanced therapy, or RMAT, designation for some of our product candidates.

An RMAT is defined as cell therapies, therapeutic tissue engineering products, human cell and tissue products, and combination products using any such therapies or products.

Gene therapies, including genetically modified cells that lead to a durable modification of cells or tissues may meet the definition of a regenerative medicine therapy.

The RMAT program is intended to facilitate efficient development and expedite review of RMATs, which are intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition.

A new drug application or a BLA for an RMAT may be eligible for priority review or accelerated approval through (1) surrogate or intermediate endpoints reasonably likely to predict long-term clinical benefit or (2) reliance upon data obtained from a meaningful number of sites.

Benefits of such designation also include early interactions with FDA to discuss any potential surrogate or intermediate endpoint to be used to support accelerated approval.

A regenerative medicine therapy that is granted accelerated approval and is subject to post-approval requirements may fulfill such requirements through the submission of clinical evidence, clinical studies, patient registries, or other sources of real-world evidence, such as electronic health records;

the collection of larger confirmatory data sets;

or post-approval monitoring of all patients treated with such therapy prior to its approval.

RMAT designation is within the discretion of the FDA.

Accordingly, even if we believe one of our product candidates meets the criteria for designation as a regenerative medicine advanced therapy, the FDA may disagree and instead determine not to make such designation.

In any event, the receipt of RMAT designation for a product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA.

In addition, even if one or more of our product candidates qualify for RMAT designation, the FDA may later decide that the biological products no longer meet the conditions for qualification.

Outside of the United States, we intend to develop AVR-RD-01 in Japan under the purview of the Japanese Pharmaceutical and Medical Device Agency, or PMDA.

Pursuant to Japan’s regenerative medicine law, an expedited path to conditional approval may exist for regenerative medicine products that show sufficient safety evidence and signals of efficacy in a Phase 2 clinical trial.

However, there can be no assurance that the results of our ongoing Phase 2 clinical trial will demonstrate the safety evidence and efficacy signals required for such conditional approval.

In addition, this conditional approval is time-limited, and there must be an agreement as to follow-up collection of information to confirm efficacy and safety, similar to a post-marketing commitment in the United States.

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

Regulatory authorities in some jurisdictions, including the United States and other major markets, may designate drugs intended to treat conditions or diseases affecting relatively small patient populations as orphan drugs.

Under the Orphan Drug Act of 1983, the FDA may designate a product candidate as an orphan drug if it is intended to treat a rare disease or condition, which is generally defined as having a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States.

In the European Union, EMA’s Committee for Orphan Medicinal Products grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than 5 in 10,000 persons in the European Union.

Additionally, orphan designation is granted for products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biologic product.

In December 2018, October 2019 and March 2020, the FDA granted our requests for orphan drug designation for AVR-RD-01 for the treatment of Fabry disease, AVR-RD-02 for the treatment of Gaucher disease and AVR-RD-04 for the treatment of cystinosis, respectively.

To date, we have not requested orphan drug designation (or the foreign equivalent) for any other product candidates, and even if we do in the future there can be no assurances that the FDA or foreign regulatory authorities will grant any of our product candidates such designation.

Additionally, the designation of any of our product candidates as an orphan product does not mean that any regulatory agency will accelerate regulatory review of, or ultimately approve, that product candidate, nor does it limit the ability of any regulatory agency to grant orphan drug designation to product candidates of other companies that treat the same indications as our product candidates prior to our product candidates receiving exclusive marketing approval.

Generally, if a product candidate with an orphan drug designation receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or foreign regulatory authorities from approving another marketing application for a product that constitutes the same drug treating the same indication for that marketing exclusivity period, except in limited circumstances.

If another sponsor receives such approval before we do (regardless of our orphan drug designation), we will be precluded from receiving marketing approval for our product for the applicable exclusivity period.

The applicable period is seven years in the United States and 10 years in the European Union.

The exclusivity period in the European Union can be reduced to six years if a product no longer meets the criteria for orphan drug designation or if the product is sufficiently profitable so that market exclusivity is no longer justified.

Orphan drug exclusivity may be revoked if any regulatory agency determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or condition.

Even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the product candidate from competition because different drugs can be approved for the same condition in the United States.

Even after an orphan drug is approved, the FDA may subsequently approve another drug for the same condition if the FDA concludes that the latter drug is not the same drug or is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.

In the European Union, marketing authorization may be granted to a similar medicinal product for the same orphan indication if:

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

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

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

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

Even if we obtain any regulatory approval for our product candidates, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping and submission of safety and other post-market information.

Any regulatory approvals that we receive for our product candidates also may be subject to a REMS, limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the quality, safety and efficacy of the product.

For example, the holder of an approved BLA is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the BLA.

FDA guidance advises that patients treated with some types of gene therapy undergo follow-up observations for potential adverse events for as long as 15 years.

The holder of an approved BLA also must submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process.

Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws.

In addition, product manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current good manufacturing practices, or CGMP, requirements and adherence to commitments made in the BLA or foreign marketing application.

If we, or a regulatory authority, discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured or disagrees with the promotion, marketing or labeling of that product, a regulatory authority may impose restrictions relative to that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.

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

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

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

suspend or withdraw regulatory approval;

suspend any ongoing clinical trials;

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

restrict the marketing or manufacturing of the product;

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

refuse to permit the import or export of products;

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

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity.

The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and adversely affect our business, financial condition, results of operations and prospects.

In addition, the FDA’s policies, and those of equivalent foreign regulatory agencies, may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would materially and adversely affect our business, financial condition, results of operations and prospects.

We face significant competition in our industry and there can be no assurance that our product candidates, if approved, will achieve acceptance in the market over existing established therapies.

In addition, our competitors may develop therapies that are more advanced or effective than ours, which may adversely affect our ability to successfully market or commercialize any of our product candidates.

We operate in a highly competitive segment of the biopharmaceutical market.

We face competition from many different sources, including larger pharmaceutical, specialty pharmaceutical and biotechnology companies, as well as from academic institutions, government agencies and private and public research institutions.

Our product candidates, if successfully developed and approved, will compete with established therapies, some of which are being marketed by large and international companies.

In addition, we expect to compete with new treatments that are under development or may be advanced into the clinic by our competitors.

There are a variety of product candidates, including gene therapies, in development for the indications that we are targeting.

We anticipate competing with the largest pharmaceutical companies in the world.

For example, Sanofi Genzyme and Shire, acquired by Takeda Pharmaceutical Company Ltd., market the enzyme replacement therapies, or ERTs, that represent the standard of care for Fabry patients.

Amicus has secured regulatory approval in the United States and Europe for Migalastat, its oral therapy for Fabry disease.

For Gaucher disease, we expect to compete with existing enzyme replacement therapies marketed by Sanofi Genzyme, Shire, Protalix and Pfizer, as well as oral therapies marketed by Actelion and Sanofi.

Sanofi also markets an enzyme replacement therapy for Pompe disease.

Cystinosis is currently treated by therapies marketed by Horizon Orphan, Mylan, Chiesi, Recordati and Sigma Tau Pharmaceuticals, and Eloxx Pharmaceuticals has been advancing a new treatment in clinical trials, though in March 2020 it announced that its Phase 2 study of the new treatment has been discontinued.

In addition, we may compete with other gene therapy companies in our industry such as bluebird bio and Spark Therapeutics (which was acquired by Roche in the fourth quarter of 2019).

In particular, a number of gene therapy companies have announced preclinical or clinical adeno-associated virus, or AAV, based gene therapy programs that, if such programs are successful in obtaining regulatory approval, could compete with our gene therapies.

These include companies such as Abeona, Amicus, Freeline, JCR Pharmaceuticals, Sangamo and uniQure which have announced gene therapy programs for Fabry disease;

Freeline and Prevail which have announced gene therapy programs for Gaucher disease;

and Abeona, Actus, Amicus, Audentes, Sarepta and Spark Therapeutics which have announced gene therapy programs for Pompe disease.

Many of our competitors have significantly greater financial, product candidate development, manufacturing and marketing resources than we do.

Large pharmaceutical and biotechnology companies have extensive experience in clinical testing and obtaining regulatory approval for their products, and mergers and acquisitions within these industries may result in even more resources being concentrated among a smaller number of larger competitors.

Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel therapeutics or to in-license novel therapeutics that could make the product candidates that we develop obsolete.

Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries.

Our business would be materially and adversely affected if competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, have broader market acceptance, are more convenient or are less expensive than any product candidate that we may develop.

Even if we obtain regulatory approval of our product candidates, the availability and price of our competitors’ products could limit the demand and the price we are able to charge for our product candidates.

We may not be able to implement our business plan if the acceptance of our product candidates is inhibited by price competition or the reluctance of physicians to switch from existing methods of treatment to our product candidates, or if physicians switch to other new drug or biologic products or choose to reserve our product candidates for use in limited circumstances.

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

As part of our growth strategy, we intend to identify, develop and market additional product candidates beyond our existing product candidates for Fabry disease, Gaucher disease, cystinosis and Pompe disease.

We may spend several years completing our development of any particular current or future product candidates, and failure can occur at any stage.

The product candidates to which we allocate our resources may not end up being successful.

Because we have limited resources, we may forego or delay pursuit of opportunities with certain programs or product candidates or for indications that later prove to have greater commercial potential than our product candidates.

Our spending on current and future research and development programs may not yield any commercially viable product candidates.

If we do not accurately evaluate the commercial potential for a particular product candidate, we may relinquish valuable rights to that product candidate through strategic collaborations, licensing or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

If any of these events occur, we may be forced to abandon our development efforts with respect to a particular product candidate or fail to develop a potentially successful product candidate.

Because our internal research capabilities are limited, we may be dependent upon biotechnology companies, academic scientists and other researchers to sell or license product candidates, approved products or the underlying technology to us.

The success of this strategy depends partly upon our ability to identify, select, discover and acquire promising product candidates and products.

In addition, certain of our current or future product candidates may not demonstrate in patients any or all of the pharmacological benefits we believe they may possess or compare favorably to existing, approved therapies, such as ERT.

We have not yet succeeded and may never succeed in demonstrating efficacy and safety of our product candidates or any future product candidates in clinical trials or in obtaining marketing approval thereafter.

Accordingly, our focus on treating these diseases may not result in the development of commercially viable products.

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

Risks related to our reliance on third parties

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

We do not expect to independently conduct all aspects of our vector production, product manufacturing, protocol development, research and preclinical and clinical testing.

We currently rely, and expect to continue to rely, on third parties with respect to these items.

For example, we have moved our cell processing to an automated, closed system with a single third-party supplier.

Any of these third parties may terminate their engagements with us at any time.

If we need to enter into alternative arrangements, it could delay our product development activities.

Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibility to ensure compliance with all required regulations and study protocols.

For example, for product candidates that we develop and commercialize on our own, we will remain responsible for ensuring that each of our preclinical and clinical studies are conducted in accordance with the study plan, protocols and regulatory requirements.

If our contract counterparties do not successfully carry out their contractual duties, meet expected deadlines or conduct our studies in accordance with regulatory requirements or our stated study plans and protocols, we will not be able to complete, or may be delayed in completing, the preclinical and clinical studies required to support approval of our product candidates or the FDA or other regulatory agencies may refuse to accept our clinical or preclinical data.

In 2019, we encountered delays in the enrollment of patients in the company-sponsored Phase 1/2 clinical trial of AVR-RD-02 for Gaucher disease.

While a number of interested patients had been identified for the Phase 1/2 clinical trial, we encountered patient pre-screening failures that impacted the commencement of enrollment in these studies.

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

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

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

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

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

Any of these events could lead to delays of our preclinical and clinical studies or failure to obtain regulatory approval, or impact our ability to successfully commercialize future products.

Some of these events could be the basis for FDA action, including injunction, recall, seizure or total or partial suspension of production.

We and our contract manufacturers are subject to significant regulation with respect to manufacturing our products.

The manufacturing facilities on which we rely may not continue to meet regulatory requirements and have limited capacity.

We currently have relationships with a limited number of suppliers for the manufacturing of our viral vectors and product candidates.

Each supplier may require licenses to manufacture such components if such processes are not owned by the supplier or in the public domain and we may be unable to transfer or sublicense the intellectual property rights we may have with respect to such activities.

All entities involved in the preparation of therapeutics for clinical studies or commercial sale, including our existing contract manufacturers for our product candidates, are subject to extensive regulation.

Components of a finished therapeutic product approved for commercial sale or used in clinical studies must be manufactured in accordance with CGMP.

These regulations govern manufacturing processes and procedures (including record keeping) and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale.

Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in the properties or stability of our product candidates that may not be detectable in final product testing.

We or our contract manufacturers must supply all necessary documentation in support of a BLA on a timely basis and must adhere to the FDA’s good laboratory practices, or GLP, and CGMP regulations enforced by the FDA through its facilities inspection program.

Some of our contract manufacturers have not produced a commercially-approved product and have never been inspected by the FDA before.

Our facilities and quality systems and the facilities and quality systems of some or all of our third-party contractors must pass a pre-approval inspection for compliance with the applicable regulations as a condition of regulatory approval of our product candidates or any of our other potential products.

In addition, the regulatory authorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of our product candidates or our other potential products or the associated quality systems for compliance with the regulations applicable to the activities being conducted.

If these facilities do not pass a pre-approval plant inspection, FDA approval of the products will not be granted.

The regulatory authorities also may, at any time following approval of a product for sale, audit our manufacturing facilities or those of our third-party contractors.

If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly and/or time-consuming for us or a third party to implement and that may include the temporary or permanent suspension of a clinical study or commercial sales or the temporary or permanent closure of a facility.

Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.

If we or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new drug product or biologic product, or revocation of a pre-existing approval.

As a result, our business, financial condition and results of operations may be materially harmed.

These factors could cause the delay of clinical studies, regulatory submissions, required approvals or commercialization of our product candidates, cause us to incur higher costs and prevent us from commercializing our products successfully.

Furthermore, if our suppliers fail to meet contractual requirements, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our preclinical and clinical studies may be delayed.

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

We currently depend on a limited number of suppliers for some of the components necessary for our product candidates.

We cannot be sure that these suppliers will remain in business, or that they will not be purchased by one of our competitors or another company that is not interested in continuing to produce these materials for our intended purpose.

Our use of a limited number of suppliers of raw materials, components and finished goods exposes us to several risks, including disruptions in supply, price increases, late deliveries and an inability to meet customer demand.

There are, in general, relatively few alternative sources of supply for these components.

These vendors may be unable or unwilling to meet our future demands for our clinical trials or commercial sale.

Establishing additional or replacement suppliers for these components could take a substantial amount of time and it may be difficult to establish replacement suppliers who meet regulatory requirements.

Any disruption in supply from any supplier or manufacturing location could lead to supply delays or interruptions which would damage our business, financial condition, results of operations and prospects.

If we are required to switch to a replacement supplier, the manufacture and delivery of our product candidates could be interrupted for an extended period, adversely affecting our business.

Establishing additional or replacement suppliers may not be accomplished quickly.

If we are able to find a replacement supplier, the replacement supplier would need to be qualified and may require additional regulatory authority approval, which could result in further delay.

For example, the FDA could require additional supplemental data and clinical trial data if we rely upon a new supplier.

While we seek to maintain adequate inventory of the components and materials used in our product candidates, any interruption or delay in the supply of components or materials, or our inability to obtain components or materials from alternate sources at acceptable prices in a timely manner, could impair our ability to conduct our clinical trials and, if our product candidates are approved, to meet the demand of our customers and cause them to cancel orders.

In addition, as part of the FDA’s approval of our product candidates, the FDA must review and approve the individual components of our production process, which includes the manufacturing processes and facilities of our suppliers.

Our current suppliers have not undergone this process, nor have they had any components included in any product approved by the FDA.

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

the interruption of supply resulting from modifications to or discontinuation of a supplier’s operations;

delays in product shipments resulting from uncorrected defects, reliability issues, or a supplier’s variation in a component;

a lack of long-term supply arrangements for key components with our suppliers;

the inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms;

difficulty and cost associated with locating and qualifying alternative suppliers for our components in a timely manner;

production delays related to the evaluation and testing of products from alternative suppliers, and corresponding regulatory qualifications;

a delay in delivery due to our suppliers prioritizing other customer orders over ours;

damage to our reputation caused by defective components produced by our suppliers;

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

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

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

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

Because we rely on third parties to manufacture our vectors and our product candidates, and because we collaborate with various organizations and academic institutions on the advancement of our gene therapy approach, we must, at times, share trade secrets with them.

We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information.

These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets.

Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements.

Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.

In addition, these agreements typically restrict the ability of our collaborators, advisors, employees and consultants to publish data potentially relating to our trade secrets.

Our academic collaborators typically have rights to publish data, provided that we are notified in advance and may delay publication for a specified time in order to secure our intellectual property rights arising from the collaboration.

In other cases, publication rights are controlled exclusively by us, although in some cases we may share these rights with other parties.

Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of these agreements, independent development or publication of information including our trade secrets in cases where we do not have proprietary or otherwise protected rights at the time of publication.

A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse impact on our business.

Risks related to commercialization of our product candidates

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

We are in the preliminary stages of building our commercial organization.

To successfully commercialize any of our current or future product candidates, if approved, we will need to develop these capabilities, either on our own or with others.

The establishment and development of our own commercial team or the establishment of a contract sales force to market any product candidate we may develop will be expensive and time-consuming and could delay any product launch.

Moreover, we cannot be certain that we will be able to successfully develop this capability.

We may enter into collaborations regarding any approved product candidates with other entities to utilize their established marketing and distribution capabilities, but we may be unable to enter into such agreements on favorable terms, if at all.

If any future collaborators do not commit sufficient resources to commercialize our product candidates, or we are unable to develop the necessary capabilities on our own, we will be unable to generate sufficient product revenue to sustain our business.

We compete with many companies that currently have extensive, experienced and well-funded sales, distribution and marketing operations to recruit, hire, train and retain marketing and sales personnel.

We also face competition in our search for third parties to assist us with the sales and marketing efforts of our product candidates, if approved.

Without an internal team or the support of a third-party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

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

We focus our research and product development on treatments for serious lysosomal diseases.

Our understanding of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, are based on estimates.

These estimates may prove to be incorrect and new studies may reduce the estimated incidence or prevalence of these diseases.

The number of patients in the United States and elsewhere may turn out to be lower than expected, may not be otherwise amenable to treatment with our products or patients may become increasingly difficult to identify and access, all of which would adversely affect our business, financial condition, results of operations and prospects.

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

Even if we obtain any regulatory approval for our product candidates, the commercial success of our product candidates will depend in part on the medical community, patients, and third-party payors accepting gene therapy products in general, and our product candidates in particular, as effective, safe and cost-effective.

Any product that we bring to the market may not gain market acceptance by physicians, patients, third-party payors and others in the medical community.

The degree of market acceptance of these product candidates, if approved for commercial sale, will depend on a number of factors, including:

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

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

the prevalence and severity of any adverse events or side effects, including any limitations or warnings contained in a product’s approved labeling;

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

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

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

the relative convenience and ease of dosing and administration compared to alternative treatments;

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

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

restrictions on how the product is distributed;

publicity concerning our products or competing products and treatments;

favorable third-party insurance coverage and sufficient reimbursement.

Sales of medical products also depend on the willingness of physicians to prescribe the treatment, which is likely to be based on a determination by these physicians that the products are safe, therapeutically effective and cost effective.

In addition, the inclusion or exclusion of products from treatment guidelines established by various physician groups and the viewpoints of influential physicians can affect the willingness of other physicians to prescribe the treatment.

We cannot predict whether physicians, physicians’ organizations, hospitals, other healthcare providers, government agencies or private insurers will determine that our product is safe, therapeutically effective and cost effective as compared with competing treatments.

Even if a product candidate displays a favorable efficacy and safety profile in preclinical and clinical studies, market acceptance of the product, if approved for commercial sale, will not be known until after it is launched.

Our efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful.

Such efforts to educate the marketplace may require more resources than are required by the conventional technologies marketed by our competitors.

If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable.

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

We are currently conducting clinical trials for our product candidates in the United States, Canada and Australia, and plan to expand to other geographies including Japan, Europe and Israel.

If any of our product candidates are approved for commercialization, we may enter into agreements with third parties to market them on a worldwide basis or in more limited geographical regions.

We expect that we will be subject to additional risks related to entering into international business relationships, including:

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

reduced protection for intellectual property rights;

unexpected changes in tariffs, trade barriers and regulatory requirements;

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

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

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

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

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

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

The insurance coverage and reimbursement status of newly-approved products are uncertain.

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

The regulations that govern marketing approvals, pricing and reimbursement for new drugs vary widely from country to country.

In the United States, recently enacted legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals.

Some countries require approval of the sale price of a drug before it can be marketed.

In many countries, the pricing review period begins after marketing or product licensing approval is granted.

In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.

As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our or their commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenue we are able to generate from the sale of the product in that country.

Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if any product candidates we may develop obtain marketing approval.

Our ability to successfully commercialize our product candidates or any other products that we or they may develop also will depend in part on the extent to which reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers, and other organizations.

Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels.

The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford treatments.

Sales of our product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors.

We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement.

If reimbursement is not available, or is available only at limited levels, we may not be able to successfully commercialize our product candidates, if approved.

Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products.

In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S.

Department of Health and Human Services, as CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare.

Private payors tend to follow CMS to a substantial degree.

It is difficult to predict what CMS will decide with respect to reimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents for these new products.

Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment.

Adequate coverage and reimbursement from governmental healthcare programs and commercial payors are critical to new product acceptance.

Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which drugs and treatments they will cover and the amount of reimbursement.

Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:

a covered benefit under its health plan;

safe, effective and medically necessary;

appropriate for the specific patient;

cost-effective;

neither experimental nor investigational.

A primary trend in the U.S.

healthcare industry and elsewhere is cost containment.

Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe and certain other major markets where we plan to commercialize may put pressure on the pricing and usage of our product candidates.

In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems, and pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product.

To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost effectiveness of our product candidates to other available therapies.

In general, the prices of medicines under such systems are substantially lower than in the United States.

Other countries allow companies to fix their own prices for medicines, but monitor and control company profits.

Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates.

Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.

Moreover, efforts by governmental and third-party payors, in the United States and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our product candidates.

We expect to experience pricing pressures in connection with the sale of any of our product candidates, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes.

The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense.

As a result, increasingly high barriers are being erected to the entry of new products.

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

Our target patient populations are relatively small, as a result of which the pricing and reimbursement of our product candidates, if approved, must be adequate to support commercial infrastructure.

If we are unable to obtain adequate levels of reimbursement, our ability to successfully market and sell our product candidates will be adversely affected.

The manner and level at which reimbursement is provided for services related to our product candidates (e.g., for administration of our product to patients) is also important.

Inadequate reimbursement for such services may lead to physician resistance and adversely affect our ability to market or sell our product candidates, if approved.

Gene therapies are novel, complex and difficult to manufacture.

We could experience production problems that result in delays in our development or commercialization programs or otherwise adversely affect our business.

The manufacturing process we use to produce our product candidates is complex, novel and has not been validated for commercial use.

Several factors could cause production interruptions, including equipment malfunctions, facility contamination, raw material shortages or contamination, natural disasters, disruption in utility services, human error or disruptions in the operations of our suppliers.

Our product candidates require processing steps that are more complex than those required for most chemical pharmaceuticals.

Moreover, unlike chemical pharmaceuticals, the physical and chemical properties of a biologic such as ours generally cannot be fully characterized.

As a result, assays of the finished product may not be sufficient to ensure that the product will perform in the intended manner.

Accordingly, we and our manufacturing suppliers employ multiple steps to control the manufacturing process with the goal of ensuring that the product candidate is made strictly and consistently in compliance with the process.

Problems with the manufacturing process, including even minor deviations from the intended process, could result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims or insufficient inventory.

We may encounter problems achieving adequate quantities and quality of clinical-grade materials that meet FDA or other applicable regulatory standards or specifications with consistent and acceptable production yields and costs.

In addition, the FDA and other foreign regulatory authorities may require us to submit samples of any lot of any approved product together with the protocols showing the results of applicable tests at any time.

Under some circumstances, the FDA or other foreign regulatory authorities may require that we not distribute a lot until the agency authorizes its release.

Even slight deviations in the manufacturing process, including those affecting quality attributes and stability, may result in unacceptable changes in the product that could result in lot failures or product recalls.

There is no assurance we will not experience lot failures in the future.

Lot failures or product recalls could cause us to delay clinical trials, or, if approved, commercial product launches, which could be costly to us and otherwise harm our business, financial condition, results of operations and prospects.

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

The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that could prevent or delay marketing approval of our product candidates or any future product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product for which we obtain marketing approval.

Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example:

(i) changes to our manufacturing arrangements;

(ii) additions or modifications to product labeling;

(iii) the recall or discontinuation of our products;

or (iv) additional record-keeping requirements.

If any such changes were to be imposed, they could adversely affect the operation of our business.

In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs.

For example, in 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or the ACA, was enacted, which, substantially changes the way healthcare is financed by both governmental and private insurers, and significantly impacts the U.S.

pharmaceutical industry.

The ACA, among other things, subjects biologic products to potential competition by lower-cost biosimilars, addresses a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increases the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, increases the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program, extends the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjects manufacturers to new annual fees and taxes for certain branded prescription drugs, creates a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% (as of 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D, and provides incentives to programs that increase the federal government’s comparative effectiveness research.

Additionally, Congress has introduced several pieces of legislation aimed at significantly revising or repealing the ACA.

It is unclear whether the ACA will be overturned, repealed, replaced, or further amended.

We cannot predict what affect further changes to the ACA would have on our business.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted.

In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress.

A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs.

This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013, and will remain in effect through 2029 unless additional Congressional action is taken.

In January 2013, the American Taxpayer Relief Act of 2012, was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

There has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices.

Specifically, there have been several recent U.S.

Congressional inquiries and proposed federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.

At the federal level, the Trump administration’s budgets for fiscal years 2019 and 2020 contain further drug price control measures that could be enacted in future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients.

Additionally, the Trump administration released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers.

Department of Health and Human Services, or HHS, has already started the process of soliciting feedback on some of these measures and, at the same time, is immediately implementing others under its existing authority.

For example, in May 2019, CMS issued a final rule to allow Medicare Advantage Plans the option of using step therapy, a type of prior authorization, for Part B drugs beginning January 1, 2020.

This final rule codified

CMS’s policy change that was effective January 1, 2019.

Although a number of these, and other proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We expect that the healthcare reform measures that have been adopted and may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product and could seriously harm our future revenues.

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private third-party payors.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare.

We cannot predict the initiatives that may be adopted in the future.

The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:

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

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

our ability to generate revenue and achieve or maintain profitability;

the level of taxes that we are required to pay;

the availability of capital.

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

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

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes.

Average review times at the agency have fluctuated in recent years as a result.

In addition, government funding of other agencies on which our operations may rely, including those that fund research and development activities, is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.

For example, over the last several years the U.S.

government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA and other government employees and stop critical activities.

If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Further, future shutdowns of other government agencies, such as the SEC, may also impact our business through review of our public filings and our ability to access the public markets.

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

Given the nature of biologics manufacturing, there is a risk of contamination in our manufacturing processes.

Any contamination could materially adversely affect our ability to produce product candidates on schedule and could, therefore, harm our results of operations and cause reputational damage.

Some of the materials required in our manufacturing process are derived from biologic sources.

Such materials are difficult to procure and may be subject to contamination or recall.

A material shortage, contamination, recall or restriction on the use of biologically derived substances in the manufacture of our product candidates could adversely impact or disrupt the commercial manufacturing or the production of clinical material, which could materially and adversely affect our development timelines and our business, financial condition, results of operations and prospects.

Risks related to our business operations

Our gene therapy approach utilizes lentiviral vectors derived from viruses, which may be perceived as unsafe or may result in unforeseen adverse events.

Negative public opinion and increased regulatory scrutiny of gene therapy and genetic research may damage public perception of our product candidates or adversely affect our ability to conduct our business or obtain regulatory approvals for our product candidates.

Gene therapy remains a novel technology, with only a limited number of gene therapy products approved to date.

Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of the public or the medical community.

In particular, our success will depend upon physicians specializing in the treatment of those diseases that our product candidates target prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments they are already familiar with and for which greater clinical data may be available.

More restrictive government regulations or negative public opinion would have a negative effect on our business or financial condition and may delay or impair the development and commercialization of our product candidates or demand for any products we may develop.

For example, earlier gene therapy trials led to several well-publicized adverse events, including cases of leukemia, myelodysplastic syndromes and deaths seen in other trials using other vectors.

Adverse events in our clinical studies, even if not ultimately attributable to our product candidates (such as the many adverse events that typically arise from the conditioning process), or adverse events in other lentiviral gene therapy trials, and the resulting publicity could result in increased governmental regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our potential product candidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand for any such product candidates.

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

We are highly dependent on principal members of our executive team and key employees, including our Chief Executive Officer, Chief Financial Officer, President of Research and Development, Head of Operations, Chief Science Officer, Chief Business Officer, and General Counsel, the loss of whose services may adversely impact the achievement of our objectives.

While we have entered into employment agreements with each of our executive officers, any of them could leave our employment at any time, as all of our employees are “at will” employees.

We do not maintain “key person” insurance policies on the lives of these individuals or the lives of any of our other employees.

The loss of the services of one or more of our current employees might impede the achievement of our research, development and commercialization objectives.

Recruiting and retaining other qualified employees, consultants and advisors for our business, including scientific and technical personnel, will also be critical to our success.

There is currently a shortage of skilled executives in our industry, which is likely to continue.

As a result, competition for skilled personnel, including in gene therapy research and vector manufacturing, is intense and the turnover rate can be high.

We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for individuals with similar skill sets.

In addition, failure to succeed in preclinical or clinical trials may make it more challenging to recruit and retain qualified personnel.

The inability to recruit or the loss of the services of any executive, key employee, consultant or advisor may impede the progress of our research, development and commercialization objectives.

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

As of December 31, 2019, we had 85 full-time employees.

As we mature, we expect to rapidly expand our full-time employee base and to hire more consultants and contractors.

Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities.

We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees.

Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional product candidates.

If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced, and we may not be able to implement our business strategy.

Our future financial performance and our ability to commercialize product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth.

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

If we are successful in executing our business strategy, we will need to expand our managerial, operational, financial and other systems and resources to manage our operations, continue our research and development activities and, in the longer term, build a commercial infrastructure to support commercialization of any of our product candidates that are approved for sale.

Future growth would impose significant added responsibilities on members of management.

It is likely that our management, finance, development personnel, systems and facilities currently in place may not be adequate to support this future growth.

Our need to effectively manage our operations, growth and product candidates requires that we continue to develop more robust business processes and improve our systems and procedures in each of these areas and to attract and retain sufficient numbers of talented employees.

We may be unable to successfully implement these tasks on a larger scale and, accordingly, may not achieve our research, development and growth goals.

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

We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants and commercial partners.

Misconduct by these parties could include intentional failures to comply with the regulations of the FDA or of other foreign regulatory authorities, provide accurate information to the FDA and other foreign regulatory authorities, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us.

In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices.

These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.

Such misconduct could also involve the improper use of information obtained in the course of clinical studies, which could result in regulatory sanctions and cause serious harm to our reputation.

We have adopted a code of conduct applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.

We are subject to certain U.S.

and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations.

We can face serious consequences for violations.

Among other matters, U.S.

and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations, which are collectively referred to as Trade Laws, prohibit companies and their employees, agents, clinical research organizations, legal counsel, accountants, consultants, contractors, and other partners from authorizing, promising, offering, providing, soliciting, or receiving directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector.

Violations of Trade Laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.

We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations.

We also expect our non-U.S.

activities to increase in time.

We plan to engage third parties for clinical trials and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals and we can be held liable for the corrupt or other illegal activities of our personnel, agents, or partners, even if we do not explicitly authorize or have prior knowledge of such activities.

The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting.

The SEC also may suspend or bar issuers from trading securities on U.S.

exchanges for violations of the United States Foreign Corrupt Practices Act’s accounting provisions.

We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws health information privacy and security laws, and other health care laws and regulations.

If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our operations will be directly, or indirectly through our prescribers, customers and purchasers, subject to various federal and state fraud and abuse laws and regulations, including, without limitation, the federal Health Care Program Anti-Kickback Statute, the federal civil and criminal False Claims Act and Physician Payments Sunshine Act and regulations.

These laws will impact, among other things, our proposed sales, marketing and educational programs.

In addition, we may be subject to patient privacy laws by both the federal government and the states in which we conduct our business.

The laws that will affect our operations include, but are not limited to:

the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs.

A person or entity can be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it.

In addition, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act, or FCA.

The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers on the other.

There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution;

Manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims.

The FCA also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery;

the anti-inducement law, which prohibits, among other things, the offering or giving of remuneration, which includes, without limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions), to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular supplier of items or services reimbursable by a federal or state governmental program;

the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit a person from knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters;

similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information relating to the privacy, security and transmission of individually identifiable health information;

Effective January 1, 2022, these reporting obligations will extend to include transfers of value made to certain non-physician providers such as physician assistants and nurse practitioners;

federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate and timely manner to government programs;

federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers

Additionally, we are subject to state and foreign equivalents of each of the healthcare laws described above, among others, some of which may be broader in scope and may apply regardless of the payor.

states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare services reimbursed by any source, not just governmental payors, including private insurers.

In addition, some states have passed laws that require pharmaceutical companies to comply with the April 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and/or the Pharmaceutical Research and Manufacturers of America’s Code on Interactions with Healthcare Professionals.

Several states also impose other marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to the state.

There are ambiguities as to what is required to comply with these state requirements and if we fail to comply with an applicable state law requirement we could be subject to penalties.

Finally, there are state and foreign laws governing the privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations.

Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.

Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert a company’s attention from the business.

The failure to comply with any of these laws or regulatory requirements subjects entities to possible legal or regulatory action.

Depending on the circumstances, failure to meet applicable regulatory requirements can result in significant civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from participation in federal and state funded healthcare programs (such as Medicare and Medicaid), contractual damages and the curtailment or restructuring of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws.

Any action for violation of these laws, even if successfully defended, could cause a pharmaceutical manufacturer to incur significant legal expenses and divert management’s attention from the operation of the business.

If any of the physicians or other healthcare providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, that person or entity may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Prohibitions or restrictions on sales or withdrawal of future marketed products could materially affect business in an adverse way.

Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs.

It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations.

If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

In addition, the approval and commercialization of any of our candidates outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.

Failure to comply with health and data protection laws and regulations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business.

We and any potential collaborators may be subject to federal, state, and foreign data protection laws and regulations (i.e., laws and regulations that address privacy and data security).

In the United States, numerous federal and state laws and regulations, including federal health information privacy laws, state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), that govern the collection, use, disclosure and protection of health-related and other personal information could apply to our operations or the operations of our collaborators.

In addition, we may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under HIPAA, as amended by HITECH.

Depending on the facts and circumstances, we could be subject to civil, criminal, and administrative penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.

Compliance with U.S.

and international data protection laws and regulations could require us to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions.

Failure to comply with these laws and regulations could result in government enforcement actions (which could include civil, criminal and administrative penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business.

Moreover, clinical trial patients, employees and other individuals about whom we or our potential collaborators obtain personal information, as well as the providers who share this information with us, may limit our ability to collect, use and disclose the information.

Claims that we have violated individuals’ privacy rights, failed to comply with data protection laws, or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.

European data collection is governed by restrictive regulations governing the use, processing and cross-border transfer of personal information.

In the event we decide to conduct clinical trials in the European Union, or EU, we may be subject to additional privacy restrictions.

The collection and use of personal health data in the EU is governed by the provisions of the General Data Protection Regulation, or GDPR.

This directive imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, notification of data processing obligations to the competent national data protection authorities and the security and confidentiality of the personal data.

The GDPR also imposes strict rules on the transfer of personal data out of the European Union to the United States.

Failure to comply with the requirements of the Data Protection Directive, the GDPR, and the related national data protection laws of the European Union Member States may result in fines and other administrative penalties.

The GDPR introduces new data protection requirements in the European Union and substantial fines for breaches of the data protection rules.

The GDPR regulations may impose additional responsibility and liability in relation to personal data that we process and we may be required to put in place additional mechanisms ensuring compliance with these and/or new data protection rules.

This may be onerous and adversely affect our business, financial condition, prospects and results of operations.

We face potential product liability, and, if successful claims are brought against us, we may incur substantial liability and costs.

If the use of our product candidates harms patients, or is perceived to harm patients even when such harm is unrelated to our product candidates, our regulatory approvals could be revoked or otherwise negatively impacted and we could be subject to costly and damaging product liability claims.

The use of our product candidates in clinical studies and the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims.

Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our products.

There is a risk that our product candidates may induce adverse events.

If we cannot successfully defend against product liability claims, we could incur substantial liability and costs.

In addition, regardless of merit or eventual outcome, product liability claims may result in:

the impairment of our business reputation;

the withdrawal of clinical study participants;

costs due to related litigation;

the distraction of management’s attention from our primary business;

substantial monetary awards to patients or other claimants;

the inability to commercialize our product candidates;

decreased demand for our product candidates, if approved for commercial sale.

We carry master product liability insurance of $5.0 million per occurrence and $5.0 million in the aggregate in the United States.

For Canada, we carry product liability insurance of CAD $10.0 million in the aggregate.

For Australia, we carry product liability insurance of AUD $20.0 million in the aggregate.

We believe our product liability insurance coverage is sufficient in light of our current clinical programs;

however, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability.

If and when we obtain marketing approval for product candidates, we intend to expand our insurance coverage to include the sale of commercial products;

however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts.

On occasion, large judgments have been awarded in class action lawsuits based on drugs or medical treatments that had unanticipated adverse effects.

A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business.

Patients with the diseases targeted by certain of our product candidates are often already in severe and advanced stages of disease and have both known and unknown significant pre-existing and potentially life- threatening health risks.

During the course of treatment, patients may suffer adverse events, including death, for reasons that may be related to our product candidates.

Such events could subject us to costly litigation, require us to pay substantial amounts of money to injured patients, delay, negatively impact or end our opportunity to receive or maintain regulatory approval to market our products, or require us to suspend or abandon our commercialization efforts.

Even in a circumstance in which we do not believe that an adverse event is related to our products, the investigation into the circumstance may be time-consuming or inconclusive.

These investigations may interrupt our sales efforts, delay our regulatory approval process in other countries, or impact and limit the type of regulatory approvals our product candidates receive or maintain.

As a result of these factors, a product liability claim, even if successfully defended, could have a material adverse effect on our business, financial condition or results of operations.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes.

Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials.

Our operations also produce hazardous waste products.

We generally contract with third parties for the disposal of these materials and wastes.

We cannot eliminate the risk of contamination or injury from these materials.

In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources.

We also could incur significant costs associated with civil or criminal fines and penalties.

Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent.

We cannot predict the impact of such changes and cannot be certain of our future compliance.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations.

These current or future laws and regulations may impair our research, development or production efforts.

Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations.

These current or future laws and regulations may impair our research, development or production efforts.

Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions or liabilities, which could materially adversely affect our business, financial condition, results of operations and prospects.

Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets.

The recent global financial crisis caused extreme volatility and disruptions in the capital and credit markets.

A severe or prolonged economic downturn, such as the recent global financial crisis, could result in a variety of risks to our business, including weakened demand for our product candidates and our ability to raise additional capital when needed on acceptable terms, if at all.

A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption, or cause delays in payments for our services by third-party payors or our collaborators.

Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business, financial condition, results of operations and prospects.

We or the third parties upon whom we depend may be adversely affected by earthquakes or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

Earthquakes or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects.

If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as the manufacturing facilities of our third-party contract manufacturers, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time.

The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event.

We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, particularly when taken together with our lack of earthquake insurance, could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs.

Despite our security measures, our internal computer systems and those of our current and any future collaborators and other contractors or consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.

For example, in 2017 we were subjected to a cyberattack by a third party, which led to the theft of a portion of our funds.

We implemented remedial measures promptly following this breach and do not believe that this breach had a material adverse effect on our business.

In addition, in February 2019, one of our vendors was subject to a cyberattack by a third party, which resulted in the payment by us of a fraudulent invoice.

We have implemented remedial measures following this breach and do not believe that this breach had a material effect on our business.

However, if any cyberattack or data breach were to occur in the future and cause interruptions in our or our collaborators’, contractors’ or consultants’ operations, it could result in a material disruption of our development programs and our business operations, whether due to a loss of our business data, trade secrets or other proprietary information or other similar disruptions.

For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive position could be harmed and the further development and commercialization of our product candidates could be delayed.

Changes in tax law could adversely affect our business and financial condition.

The rules dealing with U.S.

federal, state, and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S.

Treasury Department.

Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock.

In recent years, many such changes have been made and changes are likely to continue to occur in the future.

Future changes in tax laws could have a material adverse effect on our business, cash flow, financial condition or results of operations.

We urge investors to consult with their legal and tax advisers regarding the implications of potential changes in tax laws on an investment in our common stock.

We might not be able to utilize a significant portion of our net operating loss carryforwards and research and development tax credit carryforwards.

As of December 31, 2019, we had federal and state net operating loss carryforwards of $121.8 million and $115.1 million, respectively, and federal and state research and development tax credit carryforwards of approximately $1.0 million and $0.2 million, respectively.

If not utilized, the net operating loss carryforwards and research and development credits will generally expire at various dates through 2037 (other than federal net operating loss carryforwards generated in taxable years ending after December 31, 2017, which are not subject to expiration).

These net operating loss and tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities.

In addition, under Section 382 Internal Revenue of the Code of 1986, as amended, or the Code, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited.

We may have experienced ownership changes in the past.

We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control.

If an ownership change occurred or occurs and our ability to use our historical net operating loss and tax credit carryforwards is materially limited, or if our research and development carryforwards are adjusted, it would harm our future operating results by effectively increasing our future tax obligations.

Risks related to our intellectual property

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

Our commercial success depends in part on avoiding infringement of the patents and proprietary rights of third parties.

There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and inter partes reexamination proceedings before the U.S.

Patent and Trademark Office, or USPTO, and corresponding foreign patent offices.

Numerous U.S.

and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are pursuing development candidates.

As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.

Third parties may assert that we or our licensors are employing their proprietary technology without authorization.

There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates.

In particular, we are aware of issued patents in the United States that cover the lentiviral vectors used in the manufacture of our product candidates.

While we believe that we have reasonable defenses against a claim of infringement, potentially including that certain of these patents are expected to expire prior to commercializing our product candidates, if approved, in the United States, there can be no assurance that we will prevail in any such action by the holder of these patents.

In the event that the holder of these patents seeks to enforce its patent rights and our defenses against a claim of infringement are unsuccessful, we may not be able to commercialize our product candidates in the United States, if approved, without first obtaining a license to some or all of these patents, which may not be available on commercially reasonable terms or at all.

In addition, the defense of any claim of infringement, even if successful, is time-consuming, expensive and diverts the attention of our management from our ongoing business operations.

Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may infringe or be alleged to infringe.

In addition, third parties may obtain patents in the future and claim that use of our or our licensors’ technologies infringes upon these patents.

If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire.

Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license or until such patent expires.

In either case, such a license may not be available on commercially reasonable terms or at all.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates.

Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.

In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.

Even in the absence of a finding of infringement, we may choose to obtain a license, if such a license is available.

A successful claim of patent or other intellectual property infringement against us could materially adversely affect our business, results of operations and financial condition.

Our rights to develop and commercialize our product candidates are subject, in part, to the terms and conditions of licenses granted to us by others.

We depend upon the intellectual property rights granted to us under licenses from third parties that are important or necessary to the development of our technology and products, including technology related to our manufacturing process and our gene therapy product candidates.

In particular, we have in-licensed certain intellectual property rights and know-how from the University Health Network (relevant to AVR-RD-01 and our Fabry program) and affiliates of Lund University (relevant to AVR-RD-02 and our Gaucher program).

In addition, we have in-licensed patents and patent applications from BioMarin Pharmaceutical Inc., or BioMarin (relevant to AVR-RD-03 and our Pompe program), and GenStem Therapeutics, Inc., or GenStem (relevant to AVR-RD-04 and our cystinosis program), directed to compositions and methods related to the manufacture and use of AVR-RD-03 and AVR-RD-04, respectively.

Any termination of these licenses could result in the loss of significant rights and could harm or prevent our ability to commercialize our product candidates.

Each of our existing licenses are exclusive but are limited to particular fields, such as Fabry disease, Gaucher disease, Pompe disease, or cystinosis, and are subject to certain retained rights.

Absent an amendment or additional agreement, we may not have the right to use intellectual property in-licensed for one of our programs for another program.

In addition, licenses that we may enter into in the future may not provide exclusive rights to use such intellectual property and technology in all relevant fields of use and in all territories in which we may wish to develop or commercialize our technology and products in the future.

As a result, we may not be able to prevent competitors from developing and commercializing competitive products in territories included in all of our licenses.

Licenses to additional third-party technology that may be required for our development programs may not be available in the future or may not be available on commercially reasonable terms, or at all, which could have a material adverse effect on our business and financial condition.

In some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties.

For example, pursuant to each of our intellectual property licenses with GenStem, BioMarin, and the rights holders associated with Lund University, our licensors retain control of such activities.

Therefore, we cannot be certain that these patents and applications will be prosecuted, maintained and enforced in a manner consistent with the best interests of our business.

If our licensors fail to maintain such patents, or lose rights to those patents or patent applications, the rights we have licensed may be reduced or eliminated and our right to develop and commercialize any of our products that are the subject of such licensed rights could be adversely affected.

Our current license agreements impose, and we expect that future license agreements that we may enter into will impose, various obligations, including diligence and certain payment obligations.

If we fail to satisfy our obligations, the licensor may have the right to terminate the agreement.

Disputes may arise between us and any of our licensors regarding intellectual property subject to such agreements and other issues.

Such disputes over intellectual property that we have licensed or the terms of our license agreements may prevent or impair our ability to maintain our current arrangements on acceptable terms, or at all, or may impair the value of the arrangement to us.

Any such dispute could have a material adverse effect on our business.

If we cannot maintain a necessary license agreement or if the agreement is terminated, we may be unable to successfully develop and commercialize the affected product candidates.

If we are unable to obtain and maintain patent protection for our product candidates, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our product candidates may be adversely affected.

Our ability to compete effectively will depend, in part, on our ability to maintain the proprietary nature of our technology and manufacturing processes.

We rely on manufacturing and other know-how, patents, trade secrets, trademarks, license agreements and contractual provisions to establish our intellectual property rights and protect our products.

These legal means, however, afford only limited protection and may not adequately protect our rights.

The failure to obtain, maintain, enforce or defend such intellectual property rights, for any reason, could allow third parties to make competing products or impact our ability to develop, manufacture and market our products, if approved, on a commercially viable basis, or at all, which could have a material adverse effect on our financial condition and results of operations.

In particular, we rely primarily on trade secrets, know-how and other unpatented technology, which are difficult to protect.

Although we seek such protection in part by entering into confidentiality agreements with our vendors, employees, consultants and others who may have access to proprietary information, we cannot be certain that these agreements will not be breached, adequate remedies for any breach would be available or our trade secrets, know-how and other unpatented proprietary technology will not otherwise become known to or be independently developed by our competitors.

If we are unsuccessful in protecting our intellectual property rights, sales of our products may suffer and our ability to generate revenue could be severely impacted.

Our licensors and we have sought, and we intend to continue to seek to protect our proprietary position by filing patent applications in the United States and, in at least some cases, one or more countries outside the United States related to current and future product candidates that are important to our business.

However, we cannot predict whether the patent applications we and our licensors are currently pursuing will issue as patents, whether the claims of any issued patents will provide us with a competitive advantage, or whether we will be able to successfully pursue patent applications in the future related to our current or future product candidates.

While we have in-licensed patents and patent applications relevant to AVR-RD-03, we currently have no owned or in-licensed patents or patent applications covering AVR-RD-01 or AVR-RD-02, and the patent application that we in-licensed related to AVR-RD-04 is at a very early stage.

Many of our product candidates are in-licensed from third parties.

Accordingly, in some cases, the availability and scope of potential patent protection is limited based on prior decisions by our licensors or the inventors, such as decisions on when to file patent applications or whether to file patent applications at all.

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

Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States.

Although our license agreements grant us worldwide rights, and our currently in-licensed U.S.

patent rights have certain corresponding foreign patents or patent applications, there can be no assurance that we will obtain or maintain such corresponding patents or patent applications with respect to any future license agreements.

In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States even in jurisdictions where we and our licensors pursue patent protection.

Consequently, we and our licensors may not be able to prevent third parties from practicing our inventions in all countries outside the United States, even in jurisdictions where we and our licensors pursue patent protection, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

Competitors may use our technologies in jurisdictions where we and our licensors have not pursued and obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States.

These products may compete with our product candidates and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.

The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.

Proceedings to enforce our patent rights, even if obtained, in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us.

We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful.

Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court.

We may not be able to protect our trade secrets in court.

If one of our licensing partners or we initiate legal proceedings against a third-party to enforce a patent covering one of our product candidates, should such a patent issue, the defendant could counterclaim that the patent covering our product candidate is invalid or unenforceable.

In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace.

Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, written description or non-enablement.

Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld information material to patentability from the USPTO, or made a misleading statement, during prosecution.

Third parties also may raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation.

Such mechanisms include re-examination, post grant review, inter partes review and equivalent proceedings in foreign jurisdictions.

Such proceedings could result in the revocation or cancellation of or amendment to our patents in such a way that they no longer cover our product candidates.

The outcome following legal assertions of invalidity and unenforceability is unpredictable.

With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which the patent examiner and we or our licensing partners were unaware during prosecution.

If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we could lose at least part, and perhaps all, of the patent protection on one or more of our product candidates.

Such a loss of patent protection could have a material adverse impact on our business.

In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents.

However, trade secrets can be difficult to protect and some courts inside and outside the United States are less willing or unwilling to protect trade secrets.

We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors.

We cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes.

We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems.

While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach.

In addition, our trade secrets may otherwise become known or be independently discovered by competitors.

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

Certain of our employees, consultants or advisors are currently, or were previously, employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors.

Although we try to ensure that our employees, consultants and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these individuals or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer.

Litigation may be necessary to defend against these claims.

If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel.

Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

Our licensors may face similar risks, which could have an adverse impact on intellectual property that is licensed to us.

In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own.

The assignment of intellectual property rights may not be self-executing or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property.

We may be subject to claims challenging the inventorship or ownership of the patents and other intellectual property that we own or license.

We or our licensors may be subject to claims that former employees, collaborators or other third parties have an ownership interest in the patents and intellectual property that we own or license or that we may own or license in the future.

While it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own;

our licensors may face similar obstacles.

We could be subject to ownership disputes arising, for example, from conflicting obligations of consultants or others who are involved in developing our product candidates.

Litigation may be necessary to defend against any claims challenging inventorship or ownership.

If we or our licensors fail in defending any such claims, we may have to pay monetary damages and may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property, which could adversely impact our business, results of operations and financial condition.

Some intellectual property which we have in-licensed may have been discovered through government funded programs and thus may be subject to federal regulations such as “march-in” rights, certain reporting requirements, and a preference for U.S.

Compliance with such regulations may limit our exclusive rights, and limit our ability to contract with non-U.S.

manufacturers.

Some of the intellectual property rights we have licensed, including rights licensed to us by GenStem, may have been generated through the use of U.S.

government and California state funding and may therefore be subject to certain federal and state laws and regulations.

As a result, the U.S.

government may have certain rights to intellectual property embodied in our current or future product candidates pursuant to the Bayh-Dole Act of 1980, or Bayh-Dole Act.

government rights in certain inventions developed under a government-funded program include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose.

In addition, the U.S.

government has the right to require us to grant exclusive, partially exclusive, or non-exclusive licenses to any of these inventions to a third party if it determines that:

(i) adequate steps have not been taken to commercialize the invention;

(ii) government action is necessary to meet public health or safety needs;

or (iii) government action is necessary to meet requirements for public use under federal regulations (also referred to as “march-in rights”).

government also has the right to take title to these inventions if we, or the applicable licensor, fail to disclose the invention to the government and fail to file an application to register the intellectual property within specified time limits.

Intellectual property generated under a government funded program is also subject to certain reporting requirements, compliance with which may require us or the applicable licensor to expend substantial resources.

In addition, the U.S.

government requires that any products embodying the subject invention or produced through the use of the subject invention be manufactured substantially in the United States.

The manufacturing preference requirement can be waived if the owner of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible.

This preference for U.S.

manufacturers may limit our ability to contract with non-U.S.

product manufacturers for products covered by such

intellectual property.

To the extent any of our current or future intellectual property is generated through the use of U.S.

government funding, the provisions of the Bayh-Dole Act may similarly apply.

Any exercise by the government of certain of its rights could harm our competitive position, business, financial condition, results of operations and prospects.

With respect to state funding, specifically funding via the California Institute of Regenerative Medicine, or CIRM, which has granted funds for the study of AVR-RD-04 for cystinosis, the grantee has certain obligations and the state or CIRM has certain rights.

For example, the grantee has an obligation to share intellectual property, including research results, generated by CIRM-funded research, for research use in California.

Changes in U.S.

patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

Changes in either the patent laws or the interpretation of the patent laws in the United States could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents.

On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law.

The Leahy-Smith Act includes several significant changes to U.S.

These include provisions that affect the way patent applications are prosecuted and also may affect patent litigation.

These also include provisions that switched the United States from a “first-to-invent” system to a “first-to-file” system, allow third-party submission of prior art to the USPTO during patent prosecution and set forth additional procedures to attack the validity of a patent by the USPTO administered post grant proceedings.

Under a first-to-file system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to the patent on an invention regardless of whether another inventor had made the invention earlier.

The USPTO developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013.

Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business.

However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

The patent positions of companies engaged in the development and commercialization of biologics and pharmaceuticals are particularly uncertain.

Two cases involving diagnostic method claims and “gene patents” have recently been decided by the Supreme Court of the United States, or Supreme Court.

On March 20, 2012, the Supreme Court issued a decision in Mayo Collaborative Services v.

Prometheus Laboratories, Inc., or Prometheus, a case involving patent claims directed to a process of measuring a metabolic product in a patient to optimize a drug dosage for the patient.

According to the Supreme Court, the addition of well-understood, routine or conventional activity such as “administering” or “determining” steps was not enough to transform an otherwise patent-ineligible natural phenomenon into patent-eligible subject matter.

On July 3, 2012, the USPTO issued a guidance memo to patent examiners indicating that process claims directed to a law of nature, a natural phenomenon or a naturally occurring relation or correlation that do not include additional elements or steps that integrate the natural principle into the claimed invention such that the natural principle is practically applied and the claim amounts to significantly more than the natural principle itself should be rejected as directed to not patent-eligible subject matter.

On June 13, 2013, the Supreme Court issued its decision in Association for Molecular Pathology v.

Myriad Genetics, Inc., or Myriad, a case involving patent claims held by Myriad Genetics, Inc.

relating to the breast cancer susceptibility genes BRCA1 and BRCA2.

Myriad held that an isolated segment of naturally occurring DNA, such as the DNA constituting the BRCA1 and BRCA2 genes, is not patent-eligible subject matter, but that complementary DNA, which is an artificial construct that may be created from RNA transcripts of genes, may be patent-eligible.

On March 4, 2014, the USPTO issued a guidance memorandum to patent examiners entitled 2014 Procedure For Subject Matter Eligibility Analysis Of Claims Reciting Or Involving Laws Of Nature/Natural Principles, Natural Phenomena, And/Or Natural Products.

These guidelines instruct USPTO examiners on the ramifications of the Prometheus and Myriad rulings and apply the Myriad ruling to natural products and principles including all naturally occurring nucleic acids.

Certain claims of our licensed patents and patent applications contain, and any future patents we may obtain may contain, claims that relate to specific recombinant DNA sequences that are naturally occurring at least in part and, therefore, could be the subject of future challenges made by third parties.

In addition, the 2014 USPTO guidance could impact our ability to pursue similar patent claims in patent applications we may prosecute in the future.

We cannot assure you that our efforts to seek patent protection for our product candidates will not be negatively impacted by the decisions described above, rulings in other cases or changes in guidance or procedures issued by the USPTO.

We cannot fully predict what impact the Supreme Court’s decisions in Prometheus and Myriad may have on the ability of life science companies to obtain or enforce patents relating to their products in the future.

These decisions, the guidance issued by the USPTO and rulings in other cases or changes in USPTO guidance or procedures could have a material adverse effect on our existing patent rights and our ability to protect and enforce our intellectual property in the future.

Moreover, although the Supreme Court has held in Myriad that isolated segments of naturally occurring DNA are not patent-eligible subject matter, certain third parties could allege that activities that we may undertake infringe other gene-related patent claims, and we may deem it necessary to defend ourselves against these claims by asserting non-infringement and/or invalidity positions, or paying to obtain a license to these claims.

In any of the foregoing or in other situations involving third-party intellectual property rights, if we are unsuccessful in defending against claims of patent infringement, we could be forced to pay damages or be subjected to an injunction that would prevent us from utilizing the patented subject matter.

Such outcomes could harm our business, financial condition, results of operations or prospects.

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

Depending upon the timing, duration and specifics of any FDA marketing approval of our product candidates, one or more U.S.

patents that we license or may own or license in the future, if any, may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, or Hatch-Waxman Amendments.

The Hatch-Waxman Amendments permit a patent extension term of up to five years as compensation for patent term lost during the FDA regulatory review process.

A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended.

A patent may only be extended once and only based on a single approved product.

However, we may not be granted an extension because of, for example, failing to exerc

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What changed 10-K

Item 1. Business