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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________________________________________________________________
FORM 10-Q
__________________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                    
Commission File Number: 001-35966
__________________________________________________________________
bluebird bio, Inc.
(Exact Name of Registrant as Specified in Its Charter)
__________________________________________________________________
Delaware13-3680878
(State or Other Jurisdiction of
Incorporation or Organization)
(IRS Employer
Identification No.)

60 Binney Street
Cambridge,Massachusetts02142
(Address of Principal Executive Offices)(Zip Code)
(339) 499-9300
(Registrant’s Telephone Number, Including Area Code)
__________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareBLUEThe NASDAQ Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  
As of October 30, 2020, there were 66,373,320 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.



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This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
the initiation, timing, progress and results of our preclinical and clinical studies, and our research and development programs;
our ability to advance product candidates into, and successfully complete, clinical studies;
our ability to advance our viral vector and drug product manufacturing capabilities, and to ensure adequate supply of our viral vectors and drug products;
the timing or likelihood of regulatory filings and approvals for our product candidates;
the timing or success of commercialization of our approved product, and any future approved products;
the pricing and reimbursement of our approved product, and any future approved products;
the implementation of our business model, strategic plans for our business, product candidates and technology;
the scope of protection we are able to establish and maintain for intellectual property rights covering our approved product, product candidates and technology;
estimates of our expenses, future revenues, capital requirements and our needs for additional financing;
the potential benefits of strategic collaboration agreements and our ability to enter into strategic arrangements;
our ability to maintain and establish collaborations and licenses;
developments relating to our competitors and our industry;
the impact of the COVID-19 pandemic; and
other risks and uncertainties, including those listed under Part II, Item 1A. Risk Factors.
Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A. Risk Factors and elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.


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bluebird bio, Inc.
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Page
CERTIFICATIONS



Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
bluebird bio, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except par value amounts)
As of
September 30,
2020
As of
December 31,
2019
Assets
Current assets:
Cash and cash equivalents$324,164 $327,214 
Marketable securities906,091 779,246 
Prepaid expenses35,422 32,888 
Receivables and other current assets27,517 12,826 
Total current assets1,293,194 1,152,174 
Marketable securities207,615 131,506 
Property, plant and equipment, net157,681 151,176 
Intangible assets, net11,112 14,326 
Goodwill13,128 13,128 
Operating lease right-of-use assets188,450 185,885 
Restricted cash and other non-current assets74,304 79,229 
Total assets$1,945,484 $1,727,424 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$25,309 $42,995 
Accrued expenses and other current liabilities138,274 141,556 
Operating lease liability, current portion22,218 20,175 
Deferred revenue, current portion1,061 8,474 
Collaboration research advancement, current portion10,045 10,380 
Total current liabilities196,907 223,580 
Deferred revenue, net of current portion25,762 9,791 
Collaboration research advancement, net of current portion21,968 27,834 
Operating lease liability, net of current portion173,075 170,812 
Other non-current liabilities4,751 10,414 
Total liabilities422,463 442,431 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.01 par value, 5,000 shares authorized; 0 shares issued and outstanding at September 30, 2020 and December 31, 2019
  
Common stock, $0.01 par value, 125,000 shares authorized; 66,339 and 55,368 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
663 554 
Additional paid-in capital4,227,254 3,568,184 
Accumulated other comprehensive loss(4,223)(1,893)
Accumulated deficit(2,700,673)(2,281,852)
Total stockholders’ equity1,523,021 1,284,993 
Total liabilities and stockholders’ equity$1,945,484 $1,727,424 
See accompanying notes to unaudited condensed consolidated financial statements.
2

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bluebird bio, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
(in thousands, except per share data)
For the three months ended September 30,For the nine months ended September 30,
2020201920202019
Revenue:
Service revenue$13,352 $4,598 $108,542 $24,902 
Collaborative arrangement revenue2,422 1,977 114,398 4,408 
Royalty and other revenue3,499 2,335 17,086 5,367 
Total revenues
19,273 8,910 240,026 34,677 
Operating expenses:
Research and development
140,431 151,412 450,862 420,592 
Selling, general and administrative68,046 66,250 209,922 195,160 
Cost of royalty and other revenue1,318 862 3,897 1,905 
Change in fair value of contingent consideration
(828)802 (5,591)1,312 
Total operating expenses
208,967 219,326 659,090 618,969 
Loss from operations
(189,694)(210,416)(419,064)(584,292)
Interest income, net
1,964 8,417 10,258 27,906 
Other expense, net(6,686)(4,298)(9,582)(10,623)
Loss before income taxes
(194,416)(206,297)(418,388)(567,009)
Income tax (expense) benefit(329)264 (433)748 
Net loss
$(194,745)$(206,033)$(418,821)$(566,261)
Net loss per share - basic and diluted:
$(2.94)$(3.73)$(6.89)$(10.27)
Weighted-average number of common shares used in computing net loss per share - basic and diluted:
66,251 55,292 60,762 55,139 
Other comprehensive (loss) income:
Other comprehensive (loss) income, net of tax benefit (expense) of $0.1 million and $0.0 million for the three months ended September 30, 2020 and 2019, respectively, and $0.0 million and $(1.3) million for the nine months ended September 30, 2020 and 2019, respectively
(1,823)(2,032)(2,330)776 
Total other comprehensive (loss) income(1,823)(2,032)(2,330)776 
Comprehensive loss
$(196,568)$(208,065)$(421,151)$(565,485)
See accompanying notes to unaudited condensed consolidated financial statements.
3

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bluebird bio, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
(in thousands)
Common stock
Additional
paid-in
capital
Accumulated
other
comprehensive
loss
Accumulated
deficit
Total
stockholders'
equity
Shares
Amount
Balances at December 31, 201955,368 $554 $3,568,184 $(1,893)$(2,281,852)$1,284,993 
Vesting of restricted stock units
204 2 (2)— —  
Exercise of stock options
20 — 750 — — 750 
Purchase of common stock under ESPP
28 — 1,872 — — 1,872 
Stock-based compensation
— — 36,335 — — 36,335 
Other comprehensive loss
— — — (906)— (906)
Net loss
— — — — (202,611)(202,611)
Balances at March 31, 202055,620 $556 $3,607,139 $(2,799)$(2,484,463)$1,120,433 
Issuance of common stock upon public offering,
   net of issuance costs of $33,465
10,455 105 541,431 — — 541,536 
Vesting of restricted stock units
114 1 (1)— —  
Exercise of stock options
7 — 347 — — 347 
Stock-based compensation
— — 40,781 — — 40,781 
Other comprehensive income
— — — 399 — 399 
Net loss
— — — — (21,465)(21,465)
Balances at June 30, 202066,196 $662 $4,189,697 $(2,400)$(2,505,928)$1,682,031 
Vesting of restricted stock units
62 1 (1)— —  
Exercise of stock options
28 — 249 — — 249 
Purchase of common stock under ESPP
53 — 1,902 — — 1,902 
Stock-based compensation
— — 35,407 — — 35,407 
Other comprehensive loss— — — (1,823)— (1,823)
Net loss
— — — — (194,745)(194,745)
Balances at September 30, 202066,339 $663 $4,227,254 $(4,223)$(2,700,673)$1,523,021 
See accompanying notes to unaudited condensed consolidated financial statements.









4

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bluebird bio, Inc.
Condensed Consolidated Statements of Stockholders’ Equity - (continued)
(unaudited)
(in thousands)
Common stock
Additional
paid-in
capital
Accumulated
other
comprehensive
loss
Accumulated
deficit
Total
stockholders'
equity
SharesAmount
Balances at December 31, 201854,738 $547 $3,386,958 $(3,627)$(1,498,808)$1,885,070 
Adjustments to beginning accumulated deficit
   from adoption of ASU 2016-02
— — — — 6,564 6,564 
Vesting of restricted stock units
131 2 (2)— —  
Exercise of stock options
189 2 9,502 — — 9,504 
Purchase of common stock under ESPP
11 — 1,231 — — 1,231 
Stock-based compensation
— — 32,341 — — 32,341 
Other comprehensive income
— — — 1,835 — 1,835 
Net loss
— — — — (164,446)(164,446)
Balances at March 31, 201955,069 $551 $3,430,030 $(1,792)$(1,656,690)$1,772,099 
Vesting of restricted stock units
66 1 (1)— —  
Exercise of stock options
93 1 3,972 — — 3,973 
Stock-based compensation
— — 55,111 — — 55,111 
Other comprehensive income
— — — 973 — 973 
Net loss
— — — — (195,782)(195,782)
Balances at June 30, 201955,228 $553 $3,489,112 $(819)$(1,852,472)$1,636,374 
Vesting of restricted stock units
27 — — — — — 
Exercise of stock options
51 1 3,320 — — 3,321 
Purchase of common stock under ESPP
14 — 1,535 — — 1,535 
Stock-based compensation
— — 38,546 — — 38,546 
Other comprehensive loss— — — (2,032)— (2,032)
Net loss
— — — — (206,033)(206,033)
Balances at September 30, 201955,320 $553 $3,532,513 $(2,851)$(2,058,505)$1,471,710 
See accompanying notes to unaudited condensed consolidated financial statements.
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bluebird bio, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
For the nine months ended
September 30,
20202019
Cash flows from operating activities:
Net loss$(418,821)$(566,261)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of contingent consideration(5,591)1,312 
Depreciation and amortization14,378 12,378 
Stock-based compensation expense123,640 125,998 
Unrealized loss on equity securities9,068 9,778 
Other non-cash items(1,538)(9,362)
Changes in operating assets and liabilities:
Prepaid expenses and other assets(11,916)(10,672)
Operating lease right-of-use assets16,345 16,687 
Accounts payable(15,420)23,280 
Accrued expenses and other liabilities(13,056)15,260 
Operating lease liabilities(14,603)(4,843)
Deferred revenue8,558 (14,556)
Collaboration research advancement(6,202)(4,407)
Net cash used in operating activities(315,158)(405,408)
Cash flows from investing activities:
Purchase of property, plant and equipment(21,098)(58,638)
Purchases of marketable securities(964,428)(646,937)
Sales of marketable securities29,878  
Proceeds from maturities of marketable securities722,487 1,034,353 
Purchase of intangible assets (4,224)
Net cash (used in) provided by investing activities(233,161)324,554 
Cash flows from financing activities:
Proceeds from public offering of common stock, net of issuance costs541,536  
Proceeds from exercise of stock options and ESPP contributions3,747 19,182 
Net cash provided by financing activities545,283 19,182 
Decrease in cash, cash equivalents and restricted cash(3,036)(61,672)
Cash, cash equivalents and restricted cash at beginning of period381,709 417,099 
Cash, cash equivalents and restricted cash at end of period$378,673 $355,427 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents$324,164 $300,426 
Restricted cash included in receivables and other current assets$ $100 
Restricted cash included in restricted cash and other non-current assets$54,509 $54,901 
Total cash, cash equivalents and restricted cash$378,673 $355,427 
Supplemental cash flow disclosures from investing and financing activities:
Purchases of property, plant and equipment included in accounts payable and accrued expenses
$1,686 $6,611 
Right-of-use assets obtained in exchange for operating lease liabilities$18,909 $23,939 
See accompanying notes to unaudited condensed consolidated financial statements.
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bluebird bio, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Description of the business
bluebird bio, Inc. (the “Company” or “bluebird”) was incorporated in Delaware on April 16, 1992, and is headquartered in Cambridge, Massachusetts. The Company is a biotechnology company committed to researching, developing and commercializing potentially transformative gene therapies for severe genetic diseases and cancer. Since its inception, the Company has devoted substantially all of its resources to its research and development efforts relating to its product candidates, including activities to manufacture product candidates, conduct clinical studies of its product candidates, perform preclinical research to identify new product candidates and provide selling, general and administrative support for these operations, including commercial-readiness activities.
The Company’s programs in severe genetic diseases include betibeglogene autotemcel (beti-cel; formerly LentiGlobin for β-thalassemia gene therapy) as a treatment for transfusion-dependent β-thalassemia, or TDT; its LentiGlobin® product candidate as a treatment for sickle cell disease, or SCD; and elivaldogene autotemcel (eli-cel; formerly Lenti-D gene therapy) as a treatment for cerebral adrenoleukodystrophy, or CALD. The Company’s programs in oncology are focused on developing novel T cell-based immunotherapies, including chimeric antigen receptor (CAR) and T cell receptor (TCR) T cell therapies. Idecabtagene vicleucel, or ide-cel, and bb21217, are product candidates in oncology under the Company’s collaboration arrangement with Bristol-Myers Squibb ("BMS"), formerly Celgene Corporation ("Celgene") prior to its acquisition by BMS in November 2019. ide-cel and bb21217 are CAR T cell product candidates for the treatment of multiple myeloma. Please refer to Note 9, Collaborative arrangements, for further discussion of the Company’s collaboration with BMS.
In June 2019, the Company received conditional marketing authorization from the European Commission for beti-cel as a treatment of patients 12 years and older with TDT who do not have a β00 genotype, for whom hematopoietic stem cell (HSC) transplantation is appropriate but a human leukocyte-matched related HSC donor is not available. beti-cel is being marketed as ZYNTEGLO™ in the European Union. Through September 30, 2020, the Company had not generated any revenue from product sales of ZYNTEGLO.
As of September 30, 2020, the Company had cash, cash equivalents and marketable securities of $1.44 billion. The Company expects that its cash, cash equivalents and marketable securities will be sufficient to fund current planned operations for at least twelve months from the date of issuance of these financial statements, though it may pursue additional cash resources through public or private debt and equity financings and establish collaborations with or license its technology to other companies.
2. Basis of presentation, principles of consolidation and significant accounting policies
Basis of presentation
The accompanying condensed consolidated financial statements are unaudited and have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”) as found in the Accounting Standards Codification ("ASC") and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. These condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the Company’s financial position and results of operations for the interim periods ended September 30, 2020 and 2019.
The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2019, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 18, 2020.
Certain items in the prior year’s condensed consolidated financial statements have been reclassified to conform to the current presentation.  However, no subtotals in the prior year condensed consolidated financial statements were impacted as a result.
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Amounts reported are computed based on thousands. As a result, certain totals may not sum due to rounding.
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to GAAP. The Company views its operations and manages its business in one operating segment.
Significant accounting policies
The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and nine months ended September 30, 2020 are consistent with those discussed in Note 2 to the consolidated financial statements included in the Company’s 2019 Annual Report on Form 10-K, except as noted immediately below and as noted within the "Recent accounting pronouncements - Recently adopted" section.
Marketable securities
Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements ("ASU 2016-13" or "ASC 326"), using the effective date method. As the Company had never recorded any other-than-temporary-impairment adjustments to its available-for-sale debt securities prior to the effective date, no transition provisions are applicable to the Company.
The Company assesses its available-for-sale debt securities under the available-for-sale debt security impairment model in ASC 326 as of each reporting date in order to determine if a portion of any decline in fair value below carrying value recognized on its available-for-sale debt securities is the result of a credit loss. The Company records credit losses in the condensed consolidated statements of operations and comprehensive loss as credit loss expense within other expense, net, which is limited to the difference between the fair value and the amortized cost of the security. To date, the Company has not recorded any credit losses on its available-for-sale debt securities.
Accrued interest receivable related to the Company's available-for-sale debt securities is presented within receivables and other current assets on the Company's condensed consolidated balance sheets. The Company has elected the practical expedient available to exclude accrued interest receivable from both the fair value and the amortized cost basis of available-for-sale debt securities for the purposes of identifying and measuring any impairment. The Company writes off accrued interest receivable once it has determined that the asset is not realizable. Any write offs of accrued interest receivable are recorded by reversing interest income, recognizing credit loss expense, or a combination of both. To date, the Company has not written off any accrued interest receivables associated with its marketable securities.
Stock-based compensation
The Company estimates the fair value of its option awards using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including (i) the expected stock price volatility, (ii) the calculation of the expected term of the award, (iii) the risk-free interest rate, and (iv) expected dividends. Effective January 1, 2020, the Company eliminated the use of a representative peer group and uses only its own historical volatility data in its estimate of expected volatility given that there is now a sufficient amount of historical information regarding the volatility of its own stock price.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including: expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements. Estimates are used in the following areas, among others: future undiscounted cash flows and subsequent fair value estimates used to assess potential and measure any impairment of long-lived assets, including goodwill and intangible assets, and the measurement of right-of-use assets and lease liabilities, contingent consideration, stock-
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based compensation expense, accrued expenses, revenue, income taxes, and the assessment of the Company's ability to fund its operations for at least the next twelve months from the date of issuance of these financial statements.
Recent accounting pronouncements
Recently adopted
ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements, ASU No. 2019-5 Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief, ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements.  The new standard, as amended, requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The targeted transition relief standard allows filers an option to irrevocably elect the fair value option of ASC 825-10, Financial Instruments-Overall, applied on an instrument-by-instrument basis for eligible instruments. The Company adopted this standard on January 1, 2020 on a prospective basis and the adoption did not have a material impact on its financial position and results of operations.
ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The new standard removes certain disclosures, modifies certain disclosures, and adds additional disclosures related to fair value measurement. The Company adopted this standard on January 1, 2020, and it did not have a material impact on its financial position and results of operations upon adoption.
ASU No. 2018-15, Intangibles-Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update. The Company adopted this standard on a prospective basis as of January 1, 2020, and it did not have a material impact on its financial position and results of operations upon adoption.
ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, (“ASU 2018-18”). The amendments in this update clarify that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606, Revenue from Contracts with Customers (“Topic 606” or "ASC 606") when the counter party is a customer in the context of a unit of account. ASU 2018-18 also precludes companies from presenting transactions with collaborative partners that are outside the scope of Topic 606 together with revenue within the scope of Topic 606. The Company adopted this standard on a retrospective basis on January 1, 2020. As a result, revenue for prior periods are presented in accordance with the new standard.
Prior to the adoption of ASU 2018-18, the Company presented all revenue recognized under its collaborative arrangements as collaboration revenue on its condensed consolidated statement of operations and comprehensive loss. However, as the Company recognizes revenue under its collaborative arrangements both within and outside the scope of Topic 606, the Company has revised its presentation of revenue on its condensed consolidated statement of operations and comprehensive loss as follows: service revenue includes revenue from collaborative partners recognized within the scope of Topic 606 and collaborative arrangement revenue includes revenue from collaborative partners recognized outside the scope of Topic 606. The disaggregation of revenue recognized under Topic 606 and outside of Topic 606 had previously otherwise been disclosed in the Notes to Condensed Consolidated Financial Statements.
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ASU No. 2019-4, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments
In April 2019, the FASB issued ASU 2019-4, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. This update provides clarifications for three topics related to financial instruments accounting, some of which apply to the Company. The Company adopted this standard on January 1, 2020 on a prospective basis, and it did not have a material impact on its financial position and results of operations upon adoption.
Not yet adopted
ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The new standard will be effective beginning January 1, 2021. The Company is currently evaluating the potential impact ASU 2019-12 may have on its financial position and results of operations upon adoption.
3. Marketable securities
The following table summarizes the marketable securities held at September 30, 2020 and December 31, 2019 (in thousands):
Description
Amortized
cost / Cost
Unrealized
gains
Unrealized
losses
Fair
value
September 30, 2020
U.S. government agency securities and treasuries
$778,742 $539 $(223)$779,058 
Corporate bonds
237,884 1,079 (58)238,905 
Commercial paper
91,939 2  91,941 
Equity securities
20,017 (16,215)3,802 
Total
$1,128,582 $1,620 $(16,496)$1,113,706 
December 31, 2019
U.S. government agency securities and treasuries$633,970 $2,014 $(48)$635,936 
Certificates of deposit
960   960 
Corporate bonds
185,827 824 (43)186,608 
Commercial paper
74,378   74,378 
Equity securities
20,017  (7,147)12,870 
Total
$915,152 $2,838 $(7,238)$910,752 
No available-for-sale debt securities held as of September 30, 2020 or December 31, 2019 had remaining maturities greater than five years.
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4. Fair value measurements
The following table sets forth the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 (in thousands):
Description
Total
Quoted
prices in
active
markets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
September 30, 2020
Assets:
Cash and cash equivalents$324,164 $261,964 $62,200 $ 
Marketable securities:
U.S. government agency securities and treasuries779,058  779,058  
Corporate bonds238,905  238,905  
Commercial paper91,941  91,941  
Equity securities3,802 3,802   
Total$1,437,870 $265,766 $1,172,104 $ 
Liabilities:
Contingent consideration$2,386 $ $ $2,386 
Total$2,386 $ $ $2,386 
December 31, 2019
Assets:
Cash and cash equivalents$327,214 $311,245 $15,969 $ 
Marketable securities:
U.S. government agency securities and treasuries635,936  635,936  
Certificates of deposit960  960  
Corporate bonds186,608  186,608  
Commercial paper74,378  74,378  
Equity securities12,870 12,870   
Total$1,237,966 $324,115 $913,851 $ 
Liabilities:
Contingent consideration$7,977 $ $ $7,977 
Total$7,977 $ $ $7,977 
Cash and cash equivalents
The Company considers all highly liquid securities with original final maturities of 90 days or less from the date of purchase to be cash equivalents. As of September 30, 2020, cash and cash equivalents comprise funds in cash, money market accounts, U.S. government agency securities and treasuries, and commercial paper. As of December 31, 2019, cash and cash equivalents comprise funds in cash, money market accounts, and commercial paper.
Marketable securities
Marketable securities classified as Level 2 within the valuation hierarchy generally consist of certificates of deposit, U.S. government agency securities and treasuries, corporate bonds, and commercial paper. The Company estimates the fair values of these marketable securities by taking into consideration valuations obtained from third-party pricing sources. These pricing sources utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include market pricing based on real-time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs. The Company validates the prices provided by its third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances.
The amortized cost of available-for-sale debt securities is adjusted for amortization of premiums and accretion of discounts to the earliest call date for premiums or to maturity for discounts. At September 30, 2020 and December 31, 2019, the balance
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in the Company’s accumulated other comprehensive loss includes activity related to the Company’s available-for-sale debt securities. There were no material realized gains or losses recognized on the sale or maturity of available-for-sale securities during the three and nine months ended September 30, 2020 or 2019.
Accrued interest receivable on the Company's available-for-sale debt securities totaled $3.3 million and $3.6 million as of September 30, 2020 and December 31, 2019, respectively. No accrued interest receivable was written off during the three and nine months ended September 30, 2020 or 2019.
The following table summarizes available-for-sale debt securities in a continuous unrealized loss position for less than and greater than twelve months, and for which an allowance for credit losses has not been recorded at September 30, 2020 and December 31, 2019 (in thousands):
Less than 12 months12 months or greaterTotal
DescriptionFair valueUnrealized lossesFair valueUnrealized lossesFair valueUnrealized losses
September 30, 2020
U.S. government agency securities
and treasuries
$363,028 $(221)$10,499 $(2)$373,527 $(223)
Corporate bonds67,251 (58)2,503  69,754 (58)
Total$430,279 $(279)$13,002 $(2)$443,281 $(281)
December 31, 2019
U.S. government agency securities
and treasuries
$13,234 $(3)$79,618 $(45)$92,852 $(48)
Corporate bonds53,983 (43)  53,983 (43)
Total$67,217 $(46)$79,618 $(45)$146,835 $(91)
The Company determined that there was no material change in the credit risk of the above investments during the nine months ended September 30, 2020. As such, an allowance for credit losses was not recognized. As of September 30, 2020, the Company does not intend to sell such securities and it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost bases.
The Company holds equity securities with an aggregate fair value of $3.8 million and $12.9 million as of September 30, 2020 and December 31, 2019, respectively, within short-term marketable securities on its condensed consolidated balance sheets. The Company has recorded unrealized losses of $5.8 million and $9.1 million during the three and nine months ended September 30, 2020, respectively, and unrealized losses of $3.6 million and $9.8 million during the three and nine months ended September 30, 2019, respectively, related to its equity securities, which are included in other expense, net on the condensed consolidated statements of operations and comprehensive loss.
Contingent consideration
In connection with its prior acquisition of Precision Genome Engineering, Inc. (“Pregenen”), the Company may be required to pay future consideration that is contingent upon the achievement of specified development, regulatory approvals or sales-based milestone events. Contingent consideration is measured at fair value and is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions the Company believes would be made by a market participant. The Company assesses these estimates on an on-going basis as additional data impacting the assumptions is obtained. Future changes in the fair value of contingent consideration related to updated assumptions and estimates are recognized within the condensed consolidated statements of operations and comprehensive loss. In the absence of new information, changes in fair value will reflect changing discount rates and the passage of time. Contingent consideration is included in accrued expenses and other current liabilities and other non-current liabilities on the condensed consolidated balance sheets.
Please refer to Note 8, Commitments and contingencies, for further information.
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5. Property, plant and equipment, net
Property, plant and equipment, net, consists of the following (in thousands):
As of September 30, 2020As of December 31, 2019
Land
$1,210 $1,210 
Building
15,745 15,664 
Computer equipment and software
6,845 6,947 
Office equipment
7,626 7,599 
Laboratory equipment
52,366 44,560 
Leasehold improvements
34,104 33,788 
Construction-in-progress
86,858 77,981 
Total property, plant and equipment
204,754 187,749 
Less accumulated depreciation and amortization
(47,073)(36,573)
Property, plant and equipment, net
$157,681 $151,176 
North Carolina manufacturing facility
In November 2017, the Company acquired a manufacturing facility, which is in the process of construction, in Durham, North Carolina for the future manufacture of lentiviral vector for the Company’s gene therapies.  As of September 30, 2020, a portion of the facility has been placed into service, and the remainder of the facility is still in process of construction. Construction-in-progress as of September 30, 2020 and December 31, 2019 includes $85.3 million and $74.2 million, respectively, related to the North Carolina manufacturing facility.
6. Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consist of the following (in thousands):
As of September 30, 2020As of December 31, 2019
Employee compensation$49,225 $44,679 
Manufacturing costs22,085 23,126 
Clinical and contract research organization costs26,017 16,799 
Collaboration research costs15,723 27,142 
Property, plant, and equipment608 2,354 
License and milestone fees286 300 
Professional fees1,697 1,827 
Other22,633 25,329 
Accrued expenses and other current liabilities$138,274 $141,556 

7. Leases
The Company leases certain office and laboratory space.  Additionally, the Company has embedded leases at contract manufacturing organizations. Effective January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842), (“ASC 842”), using the required modified retrospective approach and utilizing the effective date as the date of initial application.
60 Binney Street Lease
In September 2015, the Company entered into a lease agreement for office and laboratory space located in a building (the “Building”) at 60 Binney Street, Cambridge, Massachusetts (the “60 Binney Street Lease”), which is now the Company’s corporate headquarters. Under the terms of the 60 Binney Street Lease, starting on October 1, 2016, the Company leases approximately 253,108 square feet of office and laboratory space at $72.50 per square foot per year, or $18.4 million per year in base rent, which is subject to scheduled annual rent increases of 1.75% plus certain operating expenses and taxes. The Company
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currently maintains a $13.8 million collateralized letter of credit and, subject to the terms of the lease and certain reduction requirements specified therein, including market capitalization requirements, this amount may decrease to $9.2 million over time. Pursuant to a work letter entered into in connection with the 60 Binney Street Lease, the landlord contributed an aggregate of $42.4 million toward the cost of construction and tenant improvements for the Building.
The Company occupied the Building beginning in March 2017 and the 60 Binney Street Lease will continue until March 31, 2027. The Company has the option to extend the 60 Binney Street Lease for two successive five-year terms. In applying the ASC 842 transition guidance, the Company classified this lease as an operating lease and recorded a right-of-use asset and lease liability on the effective date. The Company is recognizing rent expense on a straight-line basis throughout the remaining term of the lease.