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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 June 30, 2023
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.)
455 Grand Union Boulevard
Somerville,Massachusetts02145
(Address of Principal Executive Offices)(Zip Code)
(339) 499-9300
(Registrant’s Telephone Number, Including Area Code)

N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
__________________________________________________________________
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 August 4, 2023, there were 106,952,739 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.


Table of Contents
FORWARD LOOKING STATEMENTS
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 obtain adequate financing to fund our operations and to execute on our strategy;
our expectations and projections regarding the sufficiency of our cash, cash equivalents, marketable securities and restricted cash to fund our operations;
our ability to establish and scale commercial viral vector and drug product manufacturing capabilities, and to ensure adequate supply of our viral vectors and drug products, and our plans and expectations regarding our manufacturing activities;
the timing or likelihood of regulatory filings and marketing approvals for our product candidates and our plans and expectations relating thereto;
our plans and expectations regarding our commercialization activities for any approved products and the timing or success thereof, including expectations regarding our network of qualified treatment centers;
our ability to obtain adequate pricing and reimbursement of any 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 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 general economic conditions and uncertainties, including as a result 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.


Table of Contents
Summary of the Material and Other Risks Associated with Our Business
Below is a summary of the material risks to our business, operations and the investment in our common stock. This summary does not address all of the risks that we face. Risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q in its entirety before making investment decisions regarding our common stock.

We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.

There is substantial doubt regarding our ability to continue as a going concern. We will need to raise 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 commercial programs, product development efforts or other operations.

Among other potential adverse events, insertional oncogenesis is a significant risk of gene therapies using viral vectors that can integrate into the genome. Any such adverse events may require us to halt or delay further clinical development of our product candidates or to suspend or cease commercialization following marketing approval, and the commercial potential of our products and product candidates may be materially and negatively impacted.

We rely on complex, single-source supply chains for SKYSONA, ZYNTEGLO, and lovo-cel, respectively. The manufacture, testing and delivery of LVV and drug products present significant challenges for us, and we may not be able to produce our vector and drug products at the quality, quantities, or timing needed to support our clinical programs and commercialization.

Changes in our manufacturing processes may cause delays in our clinical development and commercialization plans.

We cannot predict when or if we will obtain marketing approval to commercialize lovo-cel, and the marketing approval of our product candidates may ultimately be for more narrow indications than we expect. If lovo-cel or other candidates are not approved in a timely manner or at all for any reason, our business prospects, results of operations, and financial condition would be adversely affected.

We have limited experience as a commercial company and the marketing and sale of ZYNTEGLO, SKYSONA and of lovo-cel following marketing approval (if and when obtained), may be unsuccessful or less successful than anticipated.

The commercial success of ZYNTEGLO, SKYSONA and of lovo-cel following marketing approval (if and when obtained), will depend upon the degree of market acceptance by physicians, patients, payers and other stakeholders.

If the market opportunities for our product candidates are smaller than we believe they are, and if we are not able to successfully identify patients and achieve significant market share, our revenues may be adversely affected and our business may suffer.

The insurance coverage and reimbursement status of newly-approved products in the United States is uncertain. Due to the novel nature of our technology and the potential for our product to offer lifetime therapeutic benefit in a single administration, we face unique and additional challenges in obtaining adequate pricing and reimbursement for our products. Failure to obtain or maintain adequate coverage and reimbursement for any new or current product could limit our ability to market those products and decrease our ability to generate revenue.

We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are more advanced, safer or more effective than ours, which may adversely affect our financial condition and our ability to successfully develop and commercialize ZYNTEGLO, SKYSONA and lovo-cel.


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bluebird bio, Inc.
Table of Contents
Page



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
June 30,
2023
As of
December 31,
2022
Assets
Current assets:
Cash and cash equivalents$172,872 $113,006 
Marketable securities72,431 67,321 
Prepaid expenses13,597 8,374 
Inventory13,642  
Receivables and other current assets15,435 10,787 
Total current assets287,977 199,488 
Marketable securities 1,414 
Property, plant and equipment, net10,227 9,362 
Goodwill5,646 5,646 
Intangible Assets5,490 4,868 
Operating lease right-of-use assets302,849 281,996 
Restricted cash and other non-current assets51,204 52,128 
Total assets$663,393 $554,902 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$10,894 $25,092 
Accrued expenses and other current liabilities56,531 51,985 
Operating lease liability, current portion67,591 51,160 
Total current liabilities135,016 128,237 
Operating lease liability, net of current portion239,266 230,230 
Other non-current liabilities92 92 
Total liabilities374,374 358,559 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.01 par value, 5,000 shares authorized; 0 shares issued and outstanding at June 30, 2023 and December 31, 2022
  
Common stock, $0.01 par value, 250,000 shares authorized; 106,454 and 82,923 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively
1,065 830 
Additional paid-in capital4,328,489 4,186,086 
Accumulated other comprehensive loss(2,364)(4,070)
Accumulated deficit(4,038,171)(3,986,503)
Total stockholders’ equity289,019 196,343 
Total liabilities and stockholders’ equity$663,393 $554,902 
See accompanying notes to unaudited condensed consolidated financial statements.
2

Table of Contents
bluebird bio, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
(in thousands, except per share data)

For the three months ended June 30,For the six months ended June 30,
2023202220232022
Revenue:
Product revenue, net$6,837 $1,331 $9,133 $2,739 
Other revenue53 188 138 725 
Total revenues
6,890 1,519 9,271 3,464 
Cost of product revenue9,564 1,745 12,940 10,055 
Gross margin(2,674)(226)(3,669)(6,591)
Operating expenses:
Selling, general and administrative40,349 36,694 77,703 72,800 
Research and development42,274 63,841 88,418 141,716 
 Restructuring expenses 6,639  6,639 
Total operating expenses
82,623 107,174 166,121 221,155 
Gain from sale of priority review voucher, net  92,930  
Income (loss) from operations(85,297)(107,400)(76,860)(227,746)
Interest income, net
2,679 174 5,504 280 
Other income (expense), net9,630 7,088 19,608 5,176 
Income (loss) before income taxes(72,988)(100,138)(51,748)(222,290)
Income tax (expense) benefit80  80  
Net income (loss)$(72,908)$(100,138)$(51,668)$(222,290)
Net income (loss) per share - basic$(0.67)$(1.36)$(0.49)$(3.02)
Net income (loss) per share - diluted$(0.67)$(1.36)$(0.49)$(3.02)
Weighted-average number of common shares used in computing net income (loss) per share - basic:108,685 73,767 105,819 73,727 
Weighted-average number of common shares used in computing net income (loss) per share - diluted:108,685 73,767 105,819 73,727 
Other comprehensive income (loss):
Other comprehensive income (loss), net of tax benefit (expense) of $0.0 million for the three and six months ended June 30, 2023 and 2022
722 43 1,706 (1,505)
Total other comprehensive income (loss)722 43 1,706 (1,505)
Comprehensive income (loss)$(72,186)$(100,095)$(49,962)$(223,795)
See accompanying notes to unaudited condensed consolidated financial statements.
3

Table of Contents
bluebird bio, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
(in thousands)

Common stock
Additional
paid-in
capital
Accumulated
other
comprehensive
income (loss)
Accumulated
deficit
Total
stockholders'
equity
Shares
Amount
Balances at December 31, 202282,923 $830 $4,186,086 $(4,070)$(3,986,503)$196,343 
Vesting of restricted stock units382 3 (198)— — (195)
Exercise of stock options3 — 7 — — 7 
Purchase of common stock under employee stock purchase plan (ESPP)62 1 226 — — 227 
Issuance of common stock23,000 230 130,061 — — 130,291 
Stock-based compensation— — 5,843 — — 5,843 
Other comprehensive income (loss)— — — 984 — 984 
Net income (loss)— — — — 21,240 21,240 
Balances at March 31, 2023106,370 $1,064 $4,322,025 $(3,086)$(3,965,263)$354,740 
Vesting of restricted stock units65 $1 $(1)$— $— $ 
Exercise of stock options19 — 77 — — 77 
Stock-based compensation— — 6,388 — — 6,388 
Other comprehensive income (loss)— — — 722 — 722 
Net income (loss)— — — — (72,908)(72,908)
Balances at June 30, 2023106,454 $1,065 $4,328,489 $(2,364)$(4,038,171)$289,019 
Common stock
Additional
paid-in
capital
Accumulated
other
comprehensive
income (loss)
Accumulated
deficit
Total
stockholders'
equity
SharesAmount
Balances at December 31, 202171,115 $711 $4,096,402 $(2,911)$(3,719,925)$374,277 
Vesting of restricted stock units310 3 (3)— —  
Exercise of stock options1 — 1 — — 1 
Stock-based compensation— — 12,681 — — 12,681 
Issuance of unrestricted common stock awards to settle accrued employee compensation12 — — — — — 
Other comprehensive income (loss)— — — (1,548)— (1,548)
Net income (loss)— — — — (122,152)(122,152)
Balances at March 31, 202271,438 $714 $4,109,081 $(4,459)$(3,842,077)$263,259 
Vesting of restricted stock units60 $1 $(1)$— $— $ 
Exercise of stock options1 — 1 — — 1 
Issuance of common stock2,052 20 8,023 — — 8,043 
Stock-based compensation— — 8,908 — — 8,908 
Other comprehensive income (loss)— — — 43 — 43 
Net income (loss)— — — — (100,138)(100,138)
Balances at June 30, 202273,551 $735 $4,126,012 $(4,416)$(3,942,215)$180,116 
See accompanying notes to unaudited condensed consolidated financial statements.
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bluebird bio, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
For the six months ended June 30,
20232022
Cash flows from operating activities:
Net income (loss)$(51,668)$(222,290)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization2,052 2,358 
Stock-based compensation expense11,145 21,298 
Gain from sale of priority review voucher(92,930) 
Loss (gain) on equity securities 3,135 
Excess inventory reserve3,939 7,519 
Other non-cash items343 661 
Changes in operating assets and liabilities:
Prepaid expenses and other assets(9,082)(9,629)
Inventory(16,496) 
Operating lease right-of-use assets24,102 17,636 
Accounts payable(14,767)(1,175)
Accrued expenses and other liabilities3,625 (28,565)
Operating lease liabilities(19,488)(10,602)
Deferred revenue(138) 
Net cash used in operating activities(159,363)(219,654)
Cash flows from investing activities:
Purchase of property, plant and equipment(937)(6,836)
Purchases of marketable securities(34,418) 
Proceeds from maturities of marketable securities26,521 108,225 
Proceeds from sales of marketable securities5,853 30,213 
Purchase of intangible assets(868) 
Proceeds from sale of priority review voucher92,930  
Net cash provided by investing activities89,081 131,602 
Cash flows from financing activities:
Proceeds from exercise of stock options and ESPP contributions85  
Proceeds from vesting of restricted stock(196) 
Proceeds from the secondary public offering, net of issuance costs130,122 8,043 
Net cash provided by financing activities130,011 8,043 
(Decrease) increase in cash, cash equivalents and restricted cash59,729 (80,009)
Cash, cash equivalents and restricted cash at beginning of period158,445 206,693 
Cash, cash equivalents and restricted cash at end of period$218,174 $126,684 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents$172,872 $81,499 
Restricted cash included in receivables and other current assets1,364 1,635 
Restricted cash included in restricted cash and other non-current assets43,938 43,550 
Total cash, cash equivalents and restricted cash$218,174 $126,684 
Supplemental cash flow disclosures from investing and financing activities:
Purchases of property, plant and equipment included in accounts payable and accrued expenses$2,290 $842 
Right-of-use assets obtained in exchange for operating lease liabilities44,968 218,836 
Reduction of right of use asset and associated lease liability due to lease reassessment(14) 
Cash paid during the period for income taxes7  
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 Somerville, Massachusetts. The Company is a biotechnology company committed to researching, developing, and commercializing potentially curative transformative gene therapies for severe genetic diseases based on our lentiviral vector (“LVV”) gene addition platform. In 2022, following more than a decade of leadership in research and clinical development, the Company received approval from the U.S. Food and Drug Administration (the “FDA”) for two gene therapies, both of which were recently launched.

On August 17, 2022, ZYNTEGLO (betibeglogene autotemcel, also known as beti-cel), was approved by the FDA for the treatment of adult and pediatric patients with ß-thalassemia who require regular red blood cell transfusions. On September 16, 2022, the FDA granted Accelerated Approval of SKYSONA (elivaldogene autotemcel, also known as eli-cel), to slow the progression of neurologic dysfunction in boys 4-17 years of age with early active cerebral adrenoleukodystrophy (“CALD”). On June 21, 2023, the Company announced that the FDA had accepted for priority review the Company's biologics licensing application (“BLA”) for its third gene therapy candidate – lovotibeglogene autotemcel – also known as lovo-cel – which was submitted for the treatment of patients 12 and older with sickle cell disease (“SCD”) with a history of vaso-occlusive-events. The FDA set a Prescription Drug User Fee Act (PDUFA) goal date for lovo-cel of December 20, 2023 and if approved, the Company anticipates commercial launch in early 2024.
The Company is focusing its development and commercialization efforts in the U.S. market. The Company has obtained the withdrawal of the marketing authorization for beti-cel in the European Union, which became effective on March 24, 2022. On November 18, 2021, the Company obtained the withdrawal of the marketing authorization for eli-cel in the European Union. The Company withdrew its marketing applications for beti-cel and eli-cel from the MHRA in the United Kingdom. The Company is continuing the long-term follow-up of patients previously enrolled within the clinical trial programs in Europe as planned but do not intend to initiate any new clinical trials in Europe for β-thalassemia, CALD or SCD.
Since its inception in 1992, the Company has devoted substantially all of its resources to its development and commercialization efforts relating to its products and product candidates, including activities to manufacture product candidates in compliance with good manufacturing practices ("GMP") to conduct clinical studies of its product candidates, to provide selling, general and administrative support for these operations, to market, commercially manufacture and distribute its approved products and to protect its intellectual property. The Company has not generated material revenue from product sales. The Company has funded its operations primarily through the sale of common stock in its public offerings, private placements of preferred stock and warrants, the sale of two Rare Pediatric Disease Priority Review Vouchers ("PRVs") and through collaborations.

In August 2022 and September 2022 the Company received the two PRVs under a U.S. Food and Drug Administration program intended to encourage the development of treatments for rare pediatric diseases. In the first quarter of 2023, the Company sold its second PRV for aggregate net proceeds of $92.9 million.
In the first quarter of 2023, the Company sold 23.0 million shares of common stock (inclusive of shares sold pursuant to an option to the underwriters in connection with the offering) through an underwritten public offering at a price of $6.00 per share for aggregate net proceeds of $130.5 million.
In April 2022, the Board of Directors of the Company approved a comprehensive restructuring plan intended to reduce operating expenses and enhance the Company’s focus on achieving FDA approval for its programs in the U.S. As part of the restructuring, the Company reduced its workforce by approximately 30% across the second and third quarters of 2022. Refer to Note 14, Restructuring, for more information on this restructuring.
In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. As of June 30, 2023, the Company had an accumulated deficit of $4.04 billion. During the six months ended June 30, 2023, the Company had a net loss of $51.7 million and used $159.4 million of cash in operations. As of June 30, 2023, the Company had cash, cash equivalents and marketable securities of $245.3 million.
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This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. In performing its analysis, management excluded certain elements of its operating plan that cannot be considered probable. Under ASC 205-40, the future receipt of potential funding from future equity or debt issuances and the release of restricted cash related to the Company’s 50 Binney Street sublease cannot be considered probable at this time because these plans are not entirely within the Company’s control nor have been approved by the Board of Directors as of the date of these condensed consolidated financial statements.
The Company's expectation to generate operating losses and negative operating cash flows in the future and the need for additional funding to support its planned operations raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year after the date that these consolidated financial statements are issued. Management's plans to alleviate the conditions that raise substantial doubt include evaluating 2023 spending, including realized savings through the move of the Company's headquarters to Assembly Row in Somerville, Massachusetts, and the pursuit of additional cash resources through public or private equity or debt financings. Management has concluded the likelihood that its plan to successfully obtain sufficient funding from one or more of these sources, or adequately reduce expenditures, while reasonably possible, is less than probable. Accordingly, the Company has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least 12 months from the date of issuance of these consolidated financial statements.
The Company will assess on a quarterly basis whether the determination for estimates remain appropriate based on actual data observed. However, the Company has based this estimate on assumptions that may prove to be wrong, and its operating plan may change as a result of many factors currently unknown to it. As a result, the Company could deplete its capital resources sooner than it currently expects. The Company expects to finance its future cash needs through the issuance of equity, or debt, or other alternative means. If the Company is unable to obtain funding on a timely basis, or if revenues from collaboration arrangements or product sales are less than it has projected, the Company may be required to further revise its business plan and strategy, which may result in the Company significantly curtailing, delaying or discontinuing one or more of our research or development programs or the commercialization of any product candidates or may result in the Company being unable to expand its operations or otherwise capitalize on its business opportunities. As a result, the Company's business, financial condition and results of operations could be materially affected.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.
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”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States GAAP as included in the ASC and Accounting Standards Updates (“ASUs”) 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 June 30, 2023 and 2022.
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, 2022, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2023 (the "2022 Annual Report on Form 10-K").
Amounts reported are computed based on thousands, except percentages, per share amounts or as otherwise noted. As a result, certain totals may not sum due to rounding.
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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. 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 six months ended June 30, 2023 are consistent with those discussed in Note 2 to the consolidated financial statements included in the Company’s 2022 Annual Report on Form 10-K.
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 and judgments 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, stock-based compensation expense, accrued expenses, income taxes, gross to net revenue reserves, inventory reserved, 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.
Inventory
Inventories are stated at the lower of cost or net realizable value under the first-expired, first-out ("FEFO") methodology. Given human gene therapy products are a new and novel category of therapeutics and future economic benefit is not probable until regulatory approval for the product has been obtained, the Company has only considered inventory for capitalization upon and after regulatory approval. Manufacturing costs incurred prior to regulatory approval for pre-launch inventory that did not qualify for capitalization and clinical manufacturing costs were charged to research and development expense in the Company’s consolidated statements of operations and comprehensive loss as costs were incurred. Additionally, inventory that initially qualifies for capitalization but that may ultimately be used for the production of clinical drug product is expensed as research and development expense when it has been designated for the manufacture of clinical drug product.
Inventory consists of cell banks, plasmids, lentiviral vector ("LVV"), other materials and compounds sourced from third party suppliers and utilized in the manufacturing process, and drug product, which has been produced for the treatment of specific patients, that are owned by the Company.
Management periodically reviews inventories for excess or obsolescence, considering factors such as sales forecasts compared to quantities on hand and firm purchase commitments as well as remaining shelf life of on hand inventories. The Company writes-down its inventory that is obsolete or otherwise unmarketable to its estimated net realizable value in the period in which the impairment is first identified. Any such adjustments are included as a component of cost of goods sold within cost of product revenue on the Company’s consolidated statements of operations and comprehensive loss.
Revenue recognition
Under ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”), an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer.
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Once a contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and if so, they are considered performance obligations. 
The Company assesses whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract. This assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such are separable from the other aspects of the contractual relationship. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct) and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract).  
The transaction price is then determined and allocated to the identified performance obligations in proportion to their standalone selling prices (“SSP”) on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied.
If the consideration promised in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the promised goods or services to a customer. The Company determines the amount of variable consideration by using the expected value method or the most likely amount method. The Company includes the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment.
If a license arrangement includes development and regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.
In determining the transaction price, the Company adjusts consideration for the effects of the time value of money if the timing of payments provides the Company with a significant benefit of financing. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less. The Company assessed each of its revenue generating arrangements in order to determine whether a significant financing component exists and concluded that a significant financing component does not exist in any of its arrangements.
The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied, at a point in time.
The Company recognizes revenue within the following financial statement captions:
Product revenue, net
The Company recognizes product revenue, net in accordance with Topic 606. Product revenue, net represents sales of ZYNTEGLO and SKYSONA.
In 2022, the Company received approval of ZYNTEGLO and SKYSONA from the FDA. The amount of revenue recognized by the Company is equal to the amount of consideration that is expected to be received from the sale of product to its customers. The Company has Specialty Distributors ("SD") and Specialty Pharmacies ("SP") that deliver product to the Qualified Treatment Centers ("QTC"). Revenue is only recognized when the performance obligation is satisfied. The Company recognizes revenue upon infusion to the patient. To determine whether a significant reversal will occur in future periods, the Company assesses both the likelihood and magnitude of any such potential reversal of revenue.
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Other revenue
In 2021, the Company entered into a grant agreement with the Bill and Melinda Gates Foundation. The Company recognizes grant revenue in accordance with ASC 958-605, Revenue Recognition Not-for-Profit Entities, when qualifying costs are incurred and barriers to restriction have been overcome. When grant funds are received after costs have been incurred, the Company records revenue and a corresponding grant receivable. Cash received from grants in advance of incurring qualifying costs is recorded as deferred revenue and recognized as revenue when qualifying costs are incurred. In 2023, the Company ceased further research work and is in the process of winding down such collaboration.
Recent accounting pronouncements
During the periods presented, the Company was not required to adopt any recently issued accounting standards. The Company does not expect any recently issued accounting standards to have a material impact on its financial statements.
3. Marketable securities
The following table summarizes the marketable securities held at June 30, 2023 and December 31, 2022 (in thousands):
Description
Amortized
cost / Cost
Unrealized
gains
Unrealized
losses
Fair
value
June 30, 2023
U.S. government agency securities and treasuries
$72,250 $3 $(319)$71,934 
Corporate bonds
500  (3)497 
Total
$72,750 $3 $(322)$72,431 
December 31, 2022
U.S. government agency securities and treasuries$67,970 $ $(1,733)$66,237 
Corporate bonds
2,524  (26)2,498 
Total
$70,494 $ $(1,759)$68,735 
No available-for-sale debt securities held as of June 30, 2023 or December 31, 2022 had remaining maturities greater than one year.
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 June 30, 2023 and December 31, 2022 (in thousands):
Description
Total
Quoted
prices in
active
markets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
June 30, 2023
Assets:
Cash and cash equivalents$172,872 $172,872 $ $ 
Marketable securities:
U.S. government agency securities and treasuries71,934  71,934  
Corporate bonds497  497  
Total$245,303 $172,872 $72,431 $ 
December 31, 2022
Assets:
Cash and cash equivalents$113,006 $113,006 $ $ 
Marketable securities:
U.S. government agency securities and treasuries66,237  66,237  
Corporate bonds2,498  2,498  
Total$181,741 $113,006 $68,735 $ 
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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 June 30, 2023 and December 31, 2022, cash and cash equivalents comprise funds in cash and money market accounts held at multiple banking and asset management institutions.

Marketable securities

Marketable securities classified as Level 2 within the valuation hierarchy generally consist of 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 June 30, 2023 and December 31, 2022, the balance in the Company’s accumulated other comprehensive loss was composed primarily of activity related to the Company’s available-for-sale debt securities. There were $0.1 million and no realized losses recognized on the sale or maturity of available-for-sale debt securities during the three and six months ended June 30, 2023 and 2022, respectively.
Accrued interest receivable on the Company's available-for-sale debt securities totaled $0.5 million and $0.1 million as of June 30, 2023 and December 31, 2022, respectively. No accrued interest receivable was written off during the three and six months ended June 30, 2023 or 2022.
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 June 30, 2023 and December 31, 2022 (in thousands):
Less than 12 months12 months or greaterTotal
DescriptionFair valueUnrealized lossesFair valueUnrealized lossesFair valueUnrealized losses
June 30, 2023
U.S. government agency securities
   and treasuries
$9,875 $(9)$37,186 $(310)$47,061 $(319)
Corporate bonds  497 (3)497 (3)
Total$9,875 $(9)$37,683 $(313)$47,558 $(322)
December 31, 2022
U.S. government agency securities
   and treasuries
$ $ $66,237 $(1,733)$66,237 $(1,733)
Corporate bonds  2,498 (26)2,498 (26)
Total$ $ $68,735 $(1,759)$68,735 $(1,759)
The Company determined that there was no material change in the credit risk of the above investments during the six months ended June 30, 2023. As such, an allowance for credit losses was not recognized.
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5. Inventory
Inventory, net, consists of the following (in thousands):
As of June 30, 2023As of December 31, 2022
Raw materials$ $ 
Work in progress13,000  
Finished goods642  
Inventory$13,642 $ 
Raw materials inventory consists of completed materials meeting quality acceptance standards to be used in the manufacture of drug product. Materials may include small molecules, plasmids, or vector products. Work in progress inventory consists of materials that are either partially completed or fully manufactured but are pending quality acceptance. Finished goods are completed drug product having full quality acceptance that may be shipped to a qualified treatment center, but has not yet been infused in the patient.
As of December 31, 2022, the Company did not have any manufactured inventory that was in progress or had received final quality acceptance after the FDA approval of ZYNTEGLO or SKYSONA. Prior to FDA approval, the existing inventory was expensed to research and development expense.
6. Property, plant and equipment, net
Property, plant and equipment, net, consists of the following (in thousands):
As of June 30, 2023As of December 31, 2022
Laboratory equipment$17,064 $25,092 
Computer equipment and software1,810 1,854 
Office equipment4,524 4,348 
Construction-in-progress
2,905  
Total property, plant and equipment
26,303 31,294 
Less accumulated depreciation and amortization
(16,076)(21,932)
Property, plant and equipment, net
$10,227 $9,362 
7. Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consist of the following (in thousands):
As of June 30, 2023As of December 31, 2022
Accrued manufacturing costs$8,882 $7,199 
Accrued goods and services9,883 8,134 
Accrued clinical and contract research organization costs13,360 12,368 
Accrued employee compensation16,775 20,095 
Accrued professional fees1,781 1,939 
Deferred revenue, current portion1,364 1,502 
Other4,486 748 
Total accrued expenses and other current liabilities$56,531 $51,985 

8. Leases
The Company leases certain office and laboratory space, primarily located in Somerville, Massachusetts. Additionally, the Company has embedded leases through its agreements with contract manufacturing organizations in both the United States and internationally. Except as described below, there have been no material changes in lease obligations from those disclosed in Note 8 to the consolidated financial statements included in the Company's 2022 Annual Report on Form 10-K.
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Embedded operating leases
In December 2022, the Company entered into an agreement reserving manufacturing capacity with a contract manufacturing organization. The Company concluded that this agreement contains an embedded operating lease as the Company is using the entire capacity of a manufacturing suite at the facility. Under the terms of the agreement, the Company will be required to pay suite fees of $13.5 million in 2023 and $18.0 million per year in 2024 and 2025, in addition to the cost of any services provided. The term of the agreement is three years. The Company recorded a right-of-use asset and lease liability for this operating lease upon lease commencement in April 2023 and is recognizing rent expense of a straight-line basis throughout the remaining term of the embedded lease.
9. Commitments and contingencies
Other funding commitments
The Company is party to various agreements, principally relating to licensed technology, that require future payments relating to milestones that may be met in subsequent periods or royalties on future sales of specified products.
The Company may be obligated to make future development, regulatory, and commercial milestone payments, and royalty payments on future sales of specified products associated with its collaboration and license agreements. Payments under these agreements generally become due and payable upon achievement of such milestones or sales. When the achievement of these milestones or sales have occurred, the corresponding amounts are recognized in the Company’s financial statements.
Additionally, the Company is party to various contracts with contract research organizations and contract manufacturers that generally provide for termination on notice, with the exact amounts in the event of termination to be based on the timing of the termination and the terms of the agreement. As compared to the contractual obligations and commitments as disclosed in the Company's 2022 Annual Report on Form 10-K, the Company's future minimum purchase commitments as of the six months ended June 30, 2023 decreased by $8.5 million.
The Company is, and may become, party to various claims and complaints arising in the ordinary course of business, including securities class action and intellectual property litigation. The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to the agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is generally unlimited. Management does not believe that any ultimate liability resulting from any of these claims will have a material adverse effect on its results of operations, financial position, or liquidity. However, management cannot give any assurance regarding the ultimate outcome of any claims, and their resolution could be material to operating results for any particular period.
The Company also indemnifies each of its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company's request in such capacity, as permitted under Delaware law and in accordance with its certificate of incorporation and by-laws. The term of the indemnification period lasts as long as such officer or director may be subject to any proceeding arising out of acts or omissions of such officer or director in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company currently holds director and officer liability insurance. This insurance allows the transfer of risk associated with the Company's exposure and may enable it to recover a portion of any future amounts paid. The Company believes that the fair value of these indemnification obligations is minimal. Accordingly, it has not recognized any liabilities relating to these obligations.
10. Equity
On January 18, 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC in connection with the public offering, issuance and sale by the Company of 20.0 million shares of the Company’s common stock, $0.01 par value per share, at a public offering price of $6.00 per share, less underwriting discounts and commissions. Under the terms of the Underwriting Agreement, the Company also granted the underwriters an option exercisable for 30 days to purchase up to an additional 3.0 million shares of Common Stock at the public offering price, less underwriting discounts and commissions, which the underwriters exercised in full. The offering closed on January 23, 2023.
For the six months ended June 30, 2023, the Company sold 23.0 million shares of common stock for gross proceeds of $138.0 million ($130.5 million net of offering costs), pursuant to the Underwriting Agreement.
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11. Stock-based compensation
In January 2023 and 2022, the number of shares of common stock available for issuance under the 2013 Stock Option and Incentive Plan (“2013 Plan”) was increased by approximately 3.3 million and 2.8 million shares, respectively, as a result of the automatic increase provision of the 2013 Plan. On June 16, 2023, the Company’s stockholders approved the 2023 Incentive Award Plan (the “2023 Plan”), which replaced the 2013 Plan. Following approval of the 2023 Plan, no further awards will be granted under the 2013 Plan. As of June 30, 2023, the total number of shares of common stock available for issuance under the 2023 Plan was approximately 5.0 million.
Stock-based compensation expense
The Company recognized stock-based compensation expense totaling $5.8 million and $8.9 million during the three months ended June 30, 2023 and 2022, respectively. The Company recognized stock-based compensation expense totaling $11.1 million and $21.3 million for the six months ended June 30, 2023 and 2022, respectively. Stock-based compensation expense recognized by award type is included within the condensed consolidated statements of operations and comprehensive loss was as follows (in thousands):
For the three months ended June 30,For the six months ended June 30,

2023202220232022
Stock options
$1,710 $3,685 $3,433 $8,945 
Restricted stock units
3,969 4,850 7,637 11,884 
Employee stock purchase plan and other75 372 75 469 
$5,754 $8,907 $11,145 $21,298 
Stock-based compensation expense by classification included within the condensed consolidated statements of operations and comprehensive loss was as follows (in thousands): 
For the three months ended June 30,For the six months ended June 30,
2023202220232022
Cost of product revenue(10) 93  
Selling, general and administrative2,681 3,652 5,042 9,488 
Research and development3,083 5,255 6,010 11,810 
$5,754 $8,907 $11,145 $21,298 
During the six months ended June 30, 2023, the Company had $1.1 million of stock compensation expense that was capitalized into inventory.
Stock options
The following table summarizes the stock option activity under the Company’s equity award plans and have been adjusted to reflect the effects of the November 2021 separation of our severe genetic disease and oncology programs into two separate, publicly traded companies:
Shares
(in thousands)
Weighted-
average
exercise price
per share
Outstanding at December 31, 20222,668 $24.38 
Granted
1,974 $5.04 
Exercised
(3)$2.74 
Canceled or forfeited(210)$22.51 
Outstanding at June 30, 20234,429 $15.91 
Exercisable at June 30, 20231,425 $34.27 
Vested and expected to vest at June 30, 20234,429 $15.91 
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During the six months ended June 30, 2023, less than 0.1 million stock options were exercised, resulting in total proceeds to the Company of less than $0.1 million.
Restricted stock units
The following table summarizes the restricted stock unit activity under the Company’s equity award plans:
Shares
(in thousands)
Weighted-
average
grant date
fair value
Unvested at December 31, 20222,415 $11.44 
Granted
2,943 $4.97 
Vested
(420)$17.11 
Forfeited
(301)$9.10 
Unvested at June 30, 20234,637 $7.25 
Employee stock purchase plan
In June 2013, the Company adopted its 2013 Employee Stock Purchase Plan (“2013 ESPP”), which authorized the initial issuance of up to a total of 0.2 million shares of the Company’s common stock to participating employees. In June 2021, the Company amended the 2013 ESPP to authorize an additional 1.4 million shares of the Company’s common stock available to participating employees. During each of the six months ended June 30, 2023 and 2022, less than 0.1 million shares and no shares, respectively, of common stock were issued under the 2013 ESPP.
12. Income taxes
Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using statutory rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, the Company has recorded a full valuation allowance against the Company’s otherwise recognizable net deferred tax assets. The tax benefit recognized during the three and six months ended June 30, 2023 is $0.1 million due to the wind down of our operations in Europe and the full valuation allowance.
On August 16, 2022, the Inflation Reduction Act (“IRA”) was enacted and introduced a 15% corporate alternative minimum tax ("CAMT") for corporations with average annual adjusted financial statement income for any three-year tax period ending after December 31, 2022 and preceding tax year exceeding $1 billion, effective for tax years beginning after December 31, 2021, as well as a 1% excise tax on stock repurchases made by public companies. The Company has concluded that the provisions in the IRA have an immaterial impact on the Company’s income tax expense due to its cumulative losses and full valuation allowance position.
13. Net loss per share
The following common stock equivalents were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect (in thousands):
For the three months ended
June 30,
20232022
Outstanding stock options6,109 4,958 
Restricted stock units4,682 3,408 
ESPP shares and other 264 
10,791 8,630 
14. Restructuring
In April 2022, the Board of Directors of the Company approved a comprehensive restructuring plan intended to reduce operating expenses. As part of the restructuring, the Company reduced its workforce by nearly 30% across the second and third quarters of 2022. The Company incurred approximately $4.9 million in costs to implement the restructuring, comprised
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primarily of severance payments and continuing health care coverage over the severance period. The restructuring actions associated with these charges commenced in April 2022, and were completed by September 30, 2022.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission, or the SEC, on March 29, 2023 (the "2022 Annual Report on Form 10-K").
Except for the historical information contained herein, the matters discussed in this Quarterly Report on Form 10-Q may be deemed to be forward-looking statements that involve risks and uncertainties. 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. In this Quarterly Report on Form 10-Q, words such as “may,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements.
Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods.
The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, including those risks identified under Part II, Item 1A. Risk Factors.
We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
Overview
We are a biotechnology company committed to researching, developing, and commercializing potentially curative transformative gene therapies for severe genetic diseases based on our lentiviral vector (“LVV”) gene addition platform. In 2022, following more than a decade of leadership in research and clinical development, we received approval from the U.S. Food and Drug Administration (the “FDA”) for two gene therapies, both of which were recently launched.
On August 17, 2022, ZYNTEGLO (betibeglogene autotemcel, also known as beti-cel), was approved by the FDA for the treatment of adult and pediatric patients with ß-thalassemia who require regular red blood cell transfusions. On September 16, 2022, the FDA granted Accelerated Approval of SKYSONA (elivaldogene autotemcel, also known as eli-cel), to slow the progression of neurologic dysfunction in boys 4-17 years of age with early active cerebral adrenoleukodystrophy (“CALD”). On June 21, 2023, we announced that the FDA had accepted for priority review our biologics licensing application (“BLA”) for our third gene therapy candidate – lovotibeglogene autotemcel – also known as lovo-cel – which was submitted for the treatment of patients 12 and older with sickle cell disease (“SCD”) with a history of vaso-occlusive-events. The FDA set a Prescription Drug User Fee Act (PDUFA) goal date for lovo-cel of December 20, 2023 and if approved, we anticipate commercial launch in early 2024.
We are focusing our development and commercialization efforts in the U.S. market. We have obtained the withdrawal of the marketing authorization for beti-cel in the European Union, which became effective on March 24, 2022. On November 18, 2021, we obtained the withdrawal of the marketing authorization for eli-cel in the European Union. We withdrew our marketing applications for beti-cel and eli-cel from the MHRA in the United Kingdom. We are continuing the long-term follow-up of patients previously enrolled within the clinical trial programs in Europe as planned but do not intend to initiate any new clinical trials in Europe for β-thalassemia, CALD or SCD.
Since our inception in 1992, we have devoted substantially all of our resources to our development and commercialization efforts relating to our products and product candidates, including activities to manufacture product candidates in compliance with good manufacturing practices ("GMP") to conduct clinical studies of our product candidates, to provide selling, general and administrative support for these operations, to market, commercially manufacture and distribute our approved products and
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to protect our intellectual property. We have not generated material revenue from product sales. We have funded our operations primarily through the sale of common stock in our public offerings, private placements of preferred stock and warrants, the sale of two Rare Pediatric Disease Priority Review Vouchers ("PRVs") and through collaborations.
In August 2022 and September 2022 we received the two PRVs under an FDA program intended to encourage the development of treatments for rare pediatric diseases. In the first quarter of 2023, we sold our second PRV for aggregate net proceeds of $92.9 million, inclusive of additional legal costs incurred.

In the first quarter of 2023, we sold 23.0 million shares of common stock (inclusive of shares sold pursuant to an option to the underwriters in connection with the offering) through an underwritten public offering at a price of $6.00 per share for aggregate net proceeds of $130.5 million, inclusive of additional offering costs incurred.
In April 2022, we initiated a comprehensive restructuring plan intended to reduce operating expenses. As part of the restructuring, we reduced our workforce by approximately 30% in the second and third quarters of 2022. See Note 14, Restructuring, to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for more information on this restructuring plan.
As of June 30, 2023, we had cash, cash equivalents and marketable securities of approximately $245.3 million. Absent the sale of our PRVs, we have never been profitable and have incurred net losses in each year since inception. Our net loss was $72.9 million and $51.7 million for the three and six months ended June 30, 2023, respectively, and our accumulated deficit was $4.04 billion as of June 30, 2023. Substantially all of our net losses resulted from costs incurred in connection with our research and development programs and from selling, general and administrative costs associated with our operations. We expect to continue to incur significant expenses and operating losses for at least the next several years, as we:

fund activities related to the commercial launches of ZYNTEGLO and SKYSONA in the United States;

seek regulatory approval for lovo-cel and any other product candidates;

scale our manufacturing capabilities in support of commercialization of ZYNTEGLO and SKYSONA and lovo-cel, if approved;

conduct clinical studies for our clinical program; and

increase research and development-related activities for severe genetic diseases.
Because of the numerous risks and uncertainties associated with product development and commercialization, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. We may not be able to generate substantial revenue from the sale of our products, and we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations. Until we generate significant revenues from product sales, if ever, we expect to continue to seek to fund our operations through public or private equity or debt financings, strategic collaborations, or other sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our product candidates.
Business update
We had cash, cash equivalents and marketable securities of approximately $245.3 million as of June 30, 2023. Our expectation is that we will continue to generate operating losses and negative operating cash flows in the foreseeable future as we commercialize ZYNTEGLO and SKYSONA and lovo-cel, if approved, and seek regulatory approval of lovo-cel for SCD and will require the need for additional funding to support our planned operations before becoming profitable.
Although management has concluded that there is substantial doubt regarding our ability to continue as a going concern, this conclusion is based on our analysis under applicable accounting principles. Based on our current business plan, we anticipate our cash, cash equivalents, and marketable securities as of June 30, 2023, together with $45.3 million of restricted cash, will be sufficient to fund our operations into the fourth quarter of 2024. Without the release of our restricted cash, however, we estimate our cash, cash equivalents and marketable securities as of June 30, 2023 will be sufficient to fund our operations into the second quarter of 2024. We have based these estimates on assumptions of revenues and operating costs that may prove to be wrong. Our restricted cash is currently unavailable for use, and there is no assurance as to when or if our
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restricted cash will become available for use. Furthermore, pursuant to the terms of certain agreements we have in place, we could be required to further increase our restricted cash due, in part, to recent concerns related to the stability of the banking sector, which would consequently reduce the amount of cash available to fund our operations. In addition, our future net product revenues will depend upon the size of the markets, our ability to obtain regulatory approval of lovo-cel for SCD, our ability to achieve sufficient market acceptance, reimbursement from third-party payers, adequate market share in those markets and the performance of drug product subject to outcome-based programs. As a result, we could deplete our capital resources sooner than we currently expect. If, for any reason, our revenues or our expenses differ materially from our assumptions or we utilize our cash more quickly than anticipated, or if we are unable to obtain funding on a timely basis or access our restricted cash, we may be required to revise our business plan and strategy, which may result in bluebird significantly curtailing, delaying or discontinuing one or more of our research or development programs or the commercialization of any products or may result in bluebird being unable to expand our operations or otherwise capitalize on our business opportunities. As a result, our business, financial condition, and results of operations could be materially affected.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.
Financial operations overview
Product revenue, net
Our revenues have primarily been derived from product revenues associated with the sale of SKYSONA and ZYNTEGLO in the United States.
Other revenue
We have recognized an immaterial amount of revenue associated with grants.
Cost of product revenue
Cost of product revenue includes costs associated with the sale of SKYSONA and ZYNTEGLO in the United States.
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of salaries and related costs for personnel, including stock-based compensation and travel expenses for our employees in executive, operational, finance, legal, business development, commercial, information technology, and human resource functions. Other selling, general and administrative expenses include facility-related costs, professional fees for accounting, tax, legal and consulting services, directors’ fees and expenses associated with obtaining and maintaining patents. These expenses include lease expense related to 50 Binney Street; however, sublease income is presented in other income (expense), net.
We anticipate that our selling, general and administrative expenses, including payroll and sales and marketing expenses, will continue to increase in the future relative to current levels as we continue commercialization activities for ZYNTEGLO and SKYSONA in the United States and perform commercial readiness activities in the United States for lovo-cel, in anticipation of potential approval.
Research and development expenses
Research and development expenses consist primarily of costs incurred for the development of our product candidates, which include:
employee-related expenses, including salaries, benefits, travel and stock-based compensation expense;
expenses incurred under agreements with contract research organizations (“CROs”) and clinical sites that conduct our clinical studies;
facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, information technology, insurance, and other supplies in support of research and development activities;
costs associated with our research platform and preclinical activities;
milestones and upfront license payments; and
costs associated with our regulatory, quality assurance and quality control operations.
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Research and development costs are expensed as incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites. We cannot determine with certainty the duration and completion costs of the current or future clinical studies of our product candidates or to what extent we will generate revenues from the commercialization and sale of our approved products and any of our product candidates that obtain regulatory approval. We may not succeed in achieving regulatory approval for all of our product candidates. The duration, costs, and timing of clinical studies and development of our product candidates will depend on a variety of factors, any of which could mean a significant change in the costs and timing associated with the development of our product candidates, including:
the scope, rate of progress, and expense of our ongoing as well as any additional clinical studies and other research and development activities we undertake;
future clinical study results;
uncertainties in clinical study enrollment rates;
new manufacturing processes or protocols that we may choose to or be required to implement in the manufacture of our LVV or drug product;
regulatory feedback on requirements for regulatory approval, as well as changing standards for regulatory approval; and
the timing and receipt of any regulatory approvals.
We plan to continue to incur research and development expenses for the foreseeable future as we continue to advance the development of lovo-cel, and conduct research activities for our platform technology. Absent new initiatives, we expect our research and development expenses to decrease in conjunction with an increase in commercial activities and selling, general and administrative expense due to the approvals of ZYNTEGLO and SKYSONA and the performance of commercial readiness activities for lovo-cel in anticipation of potential approval. Our research and development expenses include expenses associated with the following activities:
the long-term follow-up protocol associated with the clinical studies of ZYNTEGLO, and a postmarketing study for the same;
the long-term follow-up protocol associated with the clinical studies of SKYSONA, and a postmarketing study for the same;
the clinical studies of lovo-cel, consisting of HGB-206, HGB-210 study, and the associated long-term follow-up protocol;
research and development activities for our platform technology; and
the manufacture of clinical study materials in support of our clinical studies.
Our direct research and development expenses consist principally of external costs, such as fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical studies, and costs related to acquiring and manufacturing clinical study materials. We allocate salary and benefit costs directly related to specific programs. We do not allocate personnel-related discretionary bonus or stock-based compensation costs, laboratory and related expenses, certain license and other collaboration costs, depreciation or other indirect costs that are deployed across multiple projects under development and, as such, the costs are separately classified as other research and development expenses in the table below:
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For the
three months ended June 30,
For the
six months ended June 30,
2023202220232022
(in thousands)
(in thousands)
ZYNTEGLO (beti-cel)$2,744 $15,588 $6,051 $27,058 
lovo-cel (formerly LentiGlobin for SCD)17,706 16,878 38,907 42,554 
SKYSONA (eli-cel)4,084 9,046 7,740 19,963 
Preclinical programs185 1,054 516 5,956 
Total direct research and development expense24,719 42,566 53,214 95,531 
Employee-and contractor-related expenses6,902 7,179 14,198 17,108 
Stock-based compensation expense3,083 5,255 6,010 11,810 
License and other related expenses24 — 111 — 
Laboratory and other expenses902 107 1,634 1,048 
Facility expenses6,644 8,734 13,251 16,219 
Total other research and development expenses17,555 21,275 35,204 46,185 
Total research and development expense$42,274 $63,841 $88,418 $141,716 
Restructuring expenses
Restructuring expenses consist of costs associated with postemployment nonretirement benefits in accordance with ASC 712, Postemployment Nonretirement Benefits. Such costs are based on the estimate of fair value in the period the expenses were incurred.
Gain from sale of priority review voucher, net.
Gain from sale of priority review voucher, net consists of gain from sale of priority review voucher. In the first quarter of 2023, we sold our second PRV for aggregate net proceeds of $92.9 million. We received the PRV in August 2022 under an FDA program intended to encourage the development of treatments for rare pediatric diseases.
Interest income, net
Interest income, net consists primarily of interest income earned on investments.
Other income (expense), net
Other income (expense), net consists primarily of rental income on sublease, gains and losses on investments, gains and losses on disposal of fixed assets, and gains and losses on foreign currency transactions.
Critical accounting policies and estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, 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. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. In making estimates and judgments, management employs critical accounting policies. During the six months ended June 30, 2023, there were no material changes to our critical accounting policies as reported in our 2022 Annual Report on Form 10-K, except as otherwise described in Note 2, Basis of presentation, principles of consolidation and significant accounting policies, in the Notes to Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q.
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Results of Operations
Comparison of the three months ended June 30, 2023 and 2022:
For the three months ended
June 30,
20232022
Change
(in thousands)
Revenue:
Product revenue, net$6,837 $1,331 $5,506 
Other revenue53 188 (135)
Total revenues6,890 1,519 5,371 
Cost of product revenue9,564 1,745 7,819 
Gross margin(2,674)(226)(2,448)
Operating expenses:
Selling, general and administrative40,349 36,694 3,655 
Research and development42,274 63,841 (21,567)
 Restructuring expenses— 6,639 (6,639)
Total operating expenses82,623 107,174 (24,551)
Income (loss) from operations(85,297)(107,400)22,103 
Interest income, net2,679 174 2,505 
Other income (expense), net9,630 7,088 2,542 
Income (loss) before income taxes(72,988)(100,138)27,150 
Income tax (expense) benefit80 — 80 
Net income (loss)$(72,908)$(100,138)$27,230 

Revenues. Total revenue was $6.9 million for the three months ended June 30, 2023, compared to $1.5 million for the three months ended June 30, 2022. The increase of $5.4 million was primarily attributable to revenue recognized for the sales of SKYSONA and ZYNTEGLO in the United States in 2023, after receiving FDA approval in September and August 2022, respectively.
Cost of product revenue. Cost of product revenue was $9.6 million for the three months ended June 30, 2023, compared to $1.7 million for the three months ended June 30, 2022. The increase is primarily attributable to costs recognized for the sales of SKYSONA and ZYNTEGLO in 2023.
Selling, general and administrative expenses. Selling, general and administrative expenses were $40.3 million for the three months ended June 30, 2023, compared to $36.7 million for the three months ended June 30, 2022. The net increase of $3.6 million was primarily attributable to the following:
$2.0 million of increased commercial costs driven by marketing activities for ZYNTEGLO and SKYSONA in the United States and the performance of commercial readiness activities in the United States for lovo-cel, in anticipation of potential FDA approval;
$1.7 million of increased information technology and facility-related costs driven by the 50 Binney sublease; and
$1.4 million of increased net employee compensation, benefit, and other headcount-related expenses, driven by increased headcount in selling, general and administrative costs in 2023 offset by a decrease in stock-based compensation expense due to an overall decrease in the value of awards.
These increased costs were partially offset by $1.9 million of decreased costs related to consultants.
Research and development expenses. Research and development expenses were $42.3 million for the three months ended June 30, 2023, compared to $63.8 million for the three months ended June 30, 2022. The net decrease of $21.5 million was primarily attributable to the following:
$13.0 million decreased manufacturing costs primarily driven by material production now being included in inventory and cost of product revenue;
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$6.7 million of decreased net employee compensation, benefit, and other headcount-related expenses, including a decrease of $2.2 million in stock-based compensation expense, driven by related expenses now being included in inventory and cost of product revenue; and
$2.9 million of decreased information technology and facility related costs driven by decreased information technology spending, related expenses now being included in inventory and cost of product revenue and the impact of lease changes.
These decreased costs were partially offset by $0.8 million of increased costs related to consultants.
Restructuring expenses. The decrease in restructuring expenses is primarily related to the costs associated with our decision to reduce our workforce by 30% during the second and third quarters of 2022.
Interest income, net. The increase in interest income, net was primarily related to higher interest income earned on investments and dividends related to our operating account.
Other income (expense), net. The increase in other income (expense), net was primarily related to the common area maintenance ("CAM") rental income on our sublease.
Comparison of the six months ended June 30, 2023 and 2022:
For the six months ended June 30,
20232022
Change
(in thousands)
Revenue:
Product revenue, net$9,133 $2,739 $6,394 
Other revenue138 725 (587)
Total revenues9,271 3,464 5,807 
Cost of product revenue12,940 10,055 2,885 
Gross margin(3,669)(6,591)2,922 
Operating expenses:
Selling, general and administrative77,703 72,800 4,903 
Research and development88,418 141,716 (53,298)
Restructuring expenses— 6,639 (6,639)
Total operating expenses166,121 221,155 (55,034)
Gain from sale of priority review voucher, net92,930 — 92,930 
Income (loss) from operations(76,860)(227,746)150,886 
Interest income, net5,504 280 5,224 
Other income (expense), net19,608 5,176 14,432 
Income (loss) before income taxes(51,748)(222,290)170,542 
Income tax (expense) benefit80 — 80 
Net income (loss)$(51,668)$(222,290)$170,622 
Revenues. Total revenue was $9.3 million for the six months ended June 30, 2023, compared to $3.5 million for the six months ended June 30, 2022. The increase of $5.8 million was primarily attributable to revenue recognized for the sales of SKYSONA and ZYNTEGLO in the United States in 2023, after receiving FDA approval in September and August 2022, respectively.
Cost of product revenue. Cost of product revenue was $12.9 million for the six months ended June 30, 2023, compared to $10.1 million for the six months ended June 30, 2022. The increase is primarily attributable to costs recognized for the sales of SKYSONA and ZYNTEGLO in 2023, partially offset by inventory reserved during the first quarter of 2022 upon the Company's exit from Europe.
Selling, general and administrative expenses. Selling, general and administrative expenses were $77.7 million for the six months ended June 30, 2023, compared to $72.8 million for the six months ended June 30, 2022. The net increase of $4.9 million was primarily attributable to the following:
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$12.2 million of increased information technology and facility-related costs driven by the commencements of the 50 Binney sublease in April 2022, and the Assembly Row Lease in March 2022; and
$2.6 million of increased commercial readiness related costs.
These increased costs were partially offset by the following:
$6.1 million of decreased costs related to consultants; and
$4.8 million of decreased employee compensation, benefit, and other headcount-related expenses, which is primarily driven by a decrease of $4.4 million in stock-based compensation expense due to an overall decrease in the value of awards.
Research and development expenses. Research and development expenses were $88.4 million for the six months ended June 30, 2023, compared to $141.7 million for the six months ended June 30, 2022. The net decrease of $53.3 million was primarily attributable to the following:
$31.1 million of decreased manufacturing costs primarily driven by 2022 manufacturing commitments; a decrease in research and development production costs in 2023 as well as material production now being included in inventory and cost of product revenue;
$20.3 million of decreased net employee compensation, benefit, and other headcount-related expenses, including a decrease of $5.8 million in stock-based compensation expense, driven by related expenses now being included in inventory and cost of product revenue; and
$4.5 million of decreased information technology and facility related costs driven by decreased information technology spending, related expenses now being included in inventory and cost of product revenue as well as the impact of lease changes.
These decreased costs were partially offset by $2.2 million of increased clinical costs.
Restructuring expenses. The decrease in restructuring expenses is primarily related to the costs associated with our decision to reduce our workforce by 30% during the second and third quarters of 2022.
Gain from sale of priority review voucher, net. The increase in gain from sale of priority review voucher, net was related to the sale of a priority review voucher in the first quarter of 2023.
Interest income, net. The increase in interest income, net was primarily related to higher interest income earned on investments and dividends related to our operating account.
Other income (expense), net. The increase in other income (expense), net was primarily related to the rental income from the 50 Binney sublease starting in April 2022 and CAM rental income from the sublease in 2023.
Liquidity and Capital Resources
As of June 30, 2023, we had cash, cash equivalents and marketable securities of approximately $245.3 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. As of June 30, 2023, our funds are primarily held in U.S. government agency securities and treasuries, corporate bonds, and money market accounts.
We have incurred losses and cumulative negative cash flows from operations since our inception in April 1992, and as of June 30, 2023, we had an accumulated deficit of $4.04 billion. We expect our research and development expenses to decrease in conjunction with an increase in commercial activities and selling, general and administrative expense due to the approvals of ZYNTEGLO and SKYSONA and the performance of commercial readiness activities for lovo-cel in anticipation of potential approval.
Although management has concluded that there is substantial doubt regarding our ability to continue as a going concern, this conclusion is based on our analysis under applicable accounting principles. Based on our current business plan, we anticipate our cash, cash equivalents, and marketable securities as of June 30, 2023, together with $45.3 million of restricted cash, will be sufficient to fund our operations into the fourth quarter of 2024. Without the release of our restricted cash, however, we estimate our cash, cash equivalents and marketable securities as of June 30, 2023 will be sufficient to fund our operations into second quarter of 2024. We have based these estimates on assumptions of revenues and operating costs that may
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prove to be wrong. Our restricted cash is currently unavailable for use, and there is no assurance as to when or if our restricted cash will become available for use. Furthermore, pursuant to the terms of certain agreements we have in place, we could be required to further increase our restricted cash due, in part, to recent concerns related to the stability of the banking sector, which would consequently reduce the amount of cash available to fund our operations. However, we have based this estimate on assumptions of revenues and operating costs that may prove to be wrong. Our future net product revenues will depend upon the size of the markets, our ability to obtain regulatory approval of lovo-cel for SCD, our ability to achieve sufficient market acceptance, reimbursement from third-party payers, adequate market share in those markets and the performance of drug product subject to outcome-based programs. As a result, we could deplete our capital resources sooner than we currently expect. If, for any reason, our revenues or our expenses differ materially from our assumptions or we utilize our cash more quickly than anticipated, or if we are unable to obtain funding on a timely basis we may be required to revise our business plan and strategy, which may result in bluebird significantly curtailing, delaying or discontinuing one or more of our research or development programs or the commercialization of any products or may result in bluebird being unable to expand our operations or otherwise capitalize on our business opportunities. As a result, our business, financial condition, and results of operations could be materially affected.
We have funded our operations principally from the sale of common stock in public offerings and the sale of the two PRVs. The following is a summary of recent financing transactions:
In the first quarter of 2023, we sold our second PRV for aggregate net proceeds of $92.9 million.
In the first quarter of 2023, we sold 23.0 million shares of common stock (inclusive of shares sold pursuant to an option to the underwriters in connection with the offering) in an underwritten public offering at a price of $6.00 per share for aggregate net proceeds of $130.5 million.
Sources of Liquidity
Cash Flows
The following table summarizes our cash flow activity:
For the six months ended
June 30,
20232022
(in thousands)
Net cash used in operating activities
$(159,363)$(219,654)
Net cash provided by investing activities89,081 131,602 
Net cash provided by financing activities
130,011 8,043 
Net (decrease) increase in cash, cash equivalents and restricted cash$59,729 $(80,009)

Operating Activities. The $60.3 million decrease in cash used in operating activities for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily due to the decrease in net loss during this period of $170.6 million, offset by adjustments for non-cash items, including a gain from the sale of priority review voucher of $92.9 million.
Investing Activities. The $42.5 million decrease in cash provided by investing activities for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily due to a decrease in proceeds from sales of marketable securities of $24.4 million, a decrease in proceeds from maturities of marketable securities of $81.7 million and an increase in cash used to purchase marketable securities of $34.4 million, partially offset by an increase in proceeds from sale of priority review voucher of $92.9 million during the six months ended June 30, 2023 compared to the six months ended June 30, 2022.
Financing Activities. The $122.0 million increase in cash provided by financing activities for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily due to the increase in proceeds from the secondary public offering, net of paid offering costs of $122.1 million during the six months ended June 30, 2023.
Contractual Obligations and Commitments
Except as discussed in Note 8, Leases, and Note 9, Commitments and contingencies, in the Notes to Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q, there have been no material changes to our contractual obligations and commitments as included in our 2022 Annual Report on Form 10-K.
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Item 3. Quantitative and Qualitative Disclosures About Market Risks
We are exposed to market risk related to changes in interest rates. As of June 30, 2023 and December 31, 2022, we had cash, cash equivalents and marketable securities of $245.3 million and $181.7 million, respectively, primarily invested in U.S. government agency securities and treasuries, corporate bonds, commercial paper, equity securities, and money market accounts. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term securities. Our available-for-sale securities are subject to interest rate risk and will fall in value if market interest rates increase. If market interest rates were to increase immediately and uniformly by 100 basis points, or one percentage point, from levels at June 30, 2023, the net fair value of our interest-sensitive marketable securities would have resulted in a hypothetical decline of approximately $0.1 million.
Item 4. Controls and Procedures
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of our Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2023, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of business, we are from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to intellectual property, commercial arrangements, employment and other matters. The outcome of these proceedings and claims cannot be predicted with certainty. We believe no governmental proceedings are pending or, to our knowledge, contemplated against us. We are not a party to any material proceedings in which any director, member of senior management or affiliate of ours is either a party adverse to us or our subsidiaries or has a material interest adverse to us or our subsidiaries.
On October 21, 2021, San Rocco Therapeutics, LLC, formerly known as Errant Gene Therapeutics, LLC, filed a complaint against us in the United States District Court for the District of Delaware for alleged infringement of U.S. Patent Nos. 7,541,179 and 8,058,061. The term of U.S. Patent No. 8,058,061 already expired on November 25, 2022, and U.S. Patent No. 7,541,179 will expire on May 13, 2024. The allegations relate to our use of the BB305 lentiviral vector, including in connection with the beti-cel program and seeks injunctive relief and money damages. On February 21, 2022, the parties stipulated to amend the case caption, in light of the plaintiff’s name change, from Errant Gene Therapeutics, LLC to San Rocco Therapeutics, LLC ("SRT"). The Court granted this stipulation and, accordingly, the case is now captioned, San Rocco Therapeutics, LLC v. bluebird bio, Inc. and Third Rock Ventures, LLC, C.A. No. 21-1478-RGA. On April 6, 2022, we—along with Third Rock Ventures, LLC—filed a motion seeking various relief including to stay the proceedings and compel arbitration on two threshold issues, which we argued warranted complete dismissal of the action as a matter of law, regardless of the merits of SRT’s underlying infringement claims. On July 26, 2022, the Court granted our request to stay the proceedings and issued an Order compelling the parties to arbitrate the threshold issues we raised. On February 7, 2023, the Arbitrator issued a final award finding in favor of SRT on both threshold issues, thereby enabling SRT to pursue its claims for alleged infringement. On March 1, 2023, the parties jointly stipulated, subject to the approval of the United States District Court for the District of Delaware, to lift the stay.  The Court lifted the stay on March 2, 2023, and on March 31, 2023 we filed our answer to SRT's complaint with counterclaims asserting that we do not infringe the patents-in-suit and that the patents-in-suit are invalid. Also, on April 24, 2023, the Patent Trial & Appeal Board of the U.S. PTO granted institution of our two petitions for inter partes review, which are seeking to invalidate various claims of the patents-in-suit. On May 25, 2023, the Court entered a scheduling order that the parties agreed on, which scheduled a five-day jury trial to begin on April 21, 2025. We moved the Court to stay the case pending the inter partes review proceedings on May 24, 2023, which was fully briefed on June 14, 2023. We plan to vigorously defend against SRT's claims including by seeking a declaration from the Court that SRT's action is an exceptional case within the meaning of 35 U.S.C. § 285, and by seeking costs, attorney fees, and other relief to which we may be justly entitled.
On April 27, 2023, SRT filed another complaint against us (as well as against Mr. Nick Leschly, Mr. Mitchell Finer, Mr. Philip Reilly, Third Rock Ventures LLC, and 2Seventy Bio, Inc.) in the United States District Court for the District of Massachusetts. This complaint alleges civil violations of the Federal Racketeer Influenced and Corrupt Organizations Act, violations of Mass. Gen. Laws ch. 93A, § 11, and fraudulent inducement of SRT into a release provision in a November 2020 confidential settlement agreement we executed with, inter alia, SRT. The allegations relate to our use of the BB305 lentiviral vector, including in connection with the beti-cel program, and SRT seeks declaratory relief and money damages. The case is captioned San Rocco Therapeutics, LLC v. Nick Leschly, Mitchell Finer, Philip Reilly, Third Rock Ventures LLC, bluebird bio, Inc. and 2Seventy Bio, Inc., C.A. No. 1:23-cv-10919-ADB. On July 3, 2023, we (in conjunction with the other defendants) moved to dismiss all claims with prejudice brought by SRT in its Complaint for failure to state a claim upon which relief may be granted. We plan to vigorously defend against SRT’s claims in this action, which we believe have no merit whatsoever.
Item 1A. Risk Factors
An investment in shares of our common stock involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this Quarterly Report on Form 10-Q, including our financial statements and related notes hereto, before deciding to invest in our common stock. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations and future growth prospects. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment.
Those risk factors below denoted with a “*” are newly added or have been materially updated from our 2022 Annual Report on Form 10-K.
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*We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.
We have incurred significant losses since our inception in 1992. As of June 30, 2023, we had an accumulated deficit of $4.04 billion. The amount of our future net losses will depend, in part, on the rate of our future expenditures and our ability to generate revenues. We have devoted significant financial resources to research and development, including our clinical and preclinical development activities, which, absent new initiatives, we expect to directionally decrease as we focus on bringing our therapies to patients in the commercial setting. To date, we have financed our operations primarily through the sale of equity securities and priority review vouchers, and, to a lesser extent, through collaboration agreements and grants from governmental agencies and charitable foundations. We did not generate material revenues from the sale of ZYNTEGLO in the European Union and only recently launched ZYNTEGLO and SKYSONA in the US. Our future revenues will depend upon the size of any markets in which our products and product candidates have received approval, and our ability to achieve sufficient market acceptance, reimbursement from third-party payers and adequate market share for our potential products in those markets.
We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we:
continue to invest in lovo-cel as we prepare for the PDUFA date for our recently accepted BLA;
grow our capabilities to support our commercialization efforts for ZYNTEGLO and SKYSONA, including continuing to establish a sales, marketing and distribution infrastructure in the United States;
obtain, build and expand manufacturing capacity, including capacity at third-party manufacturers;
attract and retain skilled personnel;
initiate additional research, preclinical, clinical or other programs as we seek to identify and validate additional product candidates;
acquire or in-license other product candidates and technologies;
maintain, protect and expand our intellectual property portfolio; and
experience any delays or encounter issues with any of the above.
The net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. In any particular quarter or quarters, our operating results could be below the expectations of securities analysts or investors, which could cause our stock price to decline.
There is substantial doubt regarding our ability to continue as a going concern. We will need to raise 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 commercial programs, product development efforts or other operations.
Developing and commercializing gene therapy products is expensive, and we do not expect to generate meaningful product revenues in the foreseeable future. Based on our current business plan as of the date hereof, there is substantial doubt regarding our ability to continue as a going concern. See Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” of this Quarterly Report on Form 10-Q for a discussion of our expected cash runway both including our restricted cash of $45.3 million and excluding this restricted cash. Our restricted cash is currently unavailable for use, and there is no assurance as to when or if our restricted cash will become available for use. Furthermore, pursuant to the terms of certain agreements we have in place, we could be required to further increase our restricted cash due, in part, to recent concerns related to the stability of the banking sector, which would consequently reduce the amount of cash available to fund our operations. Accordingly, we will need to raise additional funding in order to execute on our current business plans and strategy, including prior to becoming profitable.
Our efforts to raise additional funding may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our products. In addition, we cannot guarantee that financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity, traditional debt or other debt-like arrangements, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities would dilute all of our stockholders. The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on
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our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.
Moreover, as a result of recent volatile market conditions, the cost and availability of capital has been and may continue to be adversely affected. Concern about the stability of the banking sector has generally led many lenders and institutional investors to reduce, and in some cases, cease to provide credit to businesses and consumers. Continued turbulence in the U.S. market and economy may adversely affect our liquidity and financial condition, including our ability to access the capital markets to meet liquidity needs. In addition, we maintain the majority of our cash and cash equivalents in accounts with major financial institutions, and our deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position.
If we are unable to obtain funding on a timely basis, or if revenues from collaboration arrangements or product sales are less than we have projected, we may be required to further revise our business plan and strategy, which may result in us significantly curtailing, delaying or discontinuing one or more of our research or development programs or the commercialization of any product candidates or may result in our being unable to expand our operations or otherwise capitalize on our business opportunities. As a result, our business, financial condition and results of operations could be materially affected.
* Among other potential adverse events, insertional oncogenesis is a significant risk of gene therapies using viral vectors that can integrate into the genome. Any such adverse events may require us to halt or delay further clinical development of our product candidates or to suspend or cease commercialization following marketing approval, and the commercial potential of our products and product candidates may be materially and negatively impacted.
Adverse events or other undesirable side effects caused by our product or product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay, denial or withdrawal of regulatory approval by the FDA or other comparable foreign regulatory authorities. A potentially significant risk in any gene therapy product using viral vectors that can integrate into the genome is that the vector will insert in or near cancer-causing genes, leading to the proliferation of certain cellular clones that could cause cancer in the patient, known as insertional oncogenesis. For instance, five patients with CALD treated with eli-cel (now SKYSONA) in our clinical studies have been diagnosed with myelodysplastic syndrome (“MDS”), likely mediated by Lenti-D LVV insertion. SKYSONA's label includes a boxed warning for the known potential risk of hematologic malignancy and, accordingly, we expect additional cases to arise over time. We continue to closely monitor potential cases of hematologic malignancy in patients treated with SKYSONA and we are communicating regularly with treating physicians and regulatory authorities. We cannot make assurances that additional patients treated with SKYSONA, ZYNTEGLO or lovo-cel in the clinical or commercial setting will not be diagnosed with MDS, leukemia or lymphoma.
Moreover, in December 2021, the FDA placed the lovo-cel clinical development program under a partial clinical hold for patients under the age of 18. The hold related to a case of persistent anemia in an adolescent patient with two α-globin gene deletions (−α3.7/−α3.7), also known as alpha-thalassemia trait, who was treated with lovo-cel. In December 2022, the FDA lifted its partial clinical hold for patients under the age of 18 in studies evaluating lovo-cel for SCD. Notwithstanding the lifting of this partial clinical hold, additional adverse events or new data or analyses regarding previously reported events may indicate significant safety issues, and the FDA could potentially impose or reimpose a clinical hold in the future on studies evaluating lovo-cel. Moreover, laboratory results following gene therapy can be difficult to interpret, resulting in different or changing diagnoses by treating physicians. For instance, on January 31, 2023, we received a physician diagnosis of MDS in a patient treated with lovo-cel, in response to lab results obtained through routine monitoring of the same adolescent patient with two α-globin gene deletions subject to the partial clinical hold noted above. Consistent with established safety protocols, the information was reviewed by an independent Data Monitoring Committee which concluded that available evidence did not support a diagnosis of MDS and additional data would be needed to confirm such diagnosis, and that lovo-cel clinical studies should continue. Test results received since the investigator's initial report (including integration site analysis) demonstrated no evidence of insertional oncogenesis and the patient continues to be clinically stable and is not undergoing treatment for an MDS diagnosis. Study investigators and the FDA have been informed and we will continue to monitor additional analyses as further test results are received. We maintain dialogue with the FDA and, from time to time, as required by regulations or requested by the FDA, update the FDA on additional adverse events or new data or analyses regarding previously reported events.
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Furthermore, treatment with our products and product candidates involves chemotherapy or myeloablative treatments, which can cause side effects or adverse events that may impact the perception of the potential benefits of our products and product candidates. For instance, MDS leading to acute myeloid leukemia is a known risk of certain myeloablative regimens. Accordingly, it is possible that the events of MDS and acute myeloid leukemia previously reported in our HGB-206 clinical study were caused by underlying SCD, transplant procedure, and stress on the bone marrow following drug product infusion in connection with the lovo-cel treatment. Additionally, the procedures associated with the administration or collection of cells for ZYNTEGLO, SKYSONA, or lovo-cel, could potentially cause other adverse events that have not yet been predicted. The inclusion of patients with significant underlying medical problems in our clinical studies may result in deaths, or other adverse medical events, due to other therapies or medications that such patients may be using, or the progression of their disease.
Moreover, patients treated with our therapies, including lovo-cel, have exhibited persistent oligoclonality, which we define as two consecutive instances of (i) any LVV insertion site observed at >=10% relative frequency, or (ii) two or more insertion sites observed at >= to 5% relative frequency, as measured by integration site analysis. Based on our clinical protocols, we increase monitoring of patients who exhibit persistent oligoclonality. It is not clear at this time whether persistent oligoclonality represents an increased risk of developing MDS, leukemia, or lymphoma in the future, but it is a criterion used by the FDA to evaluate the safety of gene therapies over time.
Additionally, there is the potential risk of other delayed adverse events following exposure to gene therapy products due to persistent biological activity of the genetic material or other components of products used to carry the genetic material. The FDA has stated that LVVs possess characteristics that may pose high risks of delayed adverse events.
If any such adverse events occur, including insertional oncogenesis, further advancement of our clinical studies could be halted or delayed, we may not receive marketing approval for our product candidates, and we may be unable to commercialize our approved products in the manner we expect, or at all. It is possible that upon occurrence or recurrence of any of these events, the FDA may place one or more of our programs on hold, impose requirements that result in delays for regulatory approval for one or more of our programs, require risk evaluation or mitigation strategies as a condition for regulatory approval, or may cause us to cease commercialization of our approved products. If any of these were to occur, the commercial potential of our programs may be materially and negatively impacted.
Although ZYNTEGLO and SKYSONA have been approved by the FDA, serious safety events may result in an approved product being removed from the market or its market opportunity being significantly reduced. For instance, it is possible that as we commercialize our products or test our product candidates in larger, longer and more extensive clinical trials, or as use of these products and product candidates (if approved) becomes more widespread, illnesses, injuries, discomforts and other adverse events that were observed in previous trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by patients. Many times, side effects (that may or may not be related to our products or product candidates) are only detectable after investigational products are tested in large-scale clinical trials or, in some cases, after they are made available to patients on a commercial scale following approval. Other patients receiving our products and product candidates may develop cancers, including leukemia, lymphoma, or MDS in the future, which may negatively impact the commercial prospects of our products and product candidates. We or others may later identify undesirable side effects or adverse events caused by such products, or side effects or adverse events could accumulate over time, and a number of potentially significant negative consequences could result, including but not limited to:
regulatory authorities may suspend, limit or withdraw approvals of such product, or seek an injunction against its manufacture or distribution;
regulatory authorities may require additional warnings on the label, including “boxed” warnings, or issue safety alerts, "Dear Healthcare Provider" or "Dear Doctor" letters, press releases or other communications containing warnings or other safety information about the product;
we may be required to change the way the product is administered or conduct additional clinical trials or post-marketing studies;
we may be required to create a risk evaluation and mitigation strategy, or REMS which could include elements to assure safe use, or a medication guide outlining the risks of such side effects for distribution to patients;
we may be subject to fines, injunctions or the imposition of criminal penalties;
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patients and/or treating physicians could perceive the risk of undesirable side effects or adverse events caused by the product to exceed its potential benefit and choose not to use the product;
we could choose to remove such product from the market;
we could be sued and held liable for harm caused to patients; and
our reputation may suffer.
Any of these events could impair our ability to develop or commercialize our products and product candidates, and their commercial potential may be materially and negatively impacted.
We rely on complex, single-source supply chains for SKYSONA, ZYNTEGLO, and lovo-cel, respectively. The manufacture, testing and delivery of LVV and drug products present significant challenges for us, and we may not be able to produce our vector and drug products at the quality, quantities, or timing needed to support our clinical programs and commercialization.
We rely on third parties to manufacture the LVV and the drug product for ZYNTEGLO and SKYSONA, our two commercial products, and for our clinical trials, including the ongoing phase 3 clinical study evaluating the efficacy and safety of lovo-cel in the treatment of patients with SCD. Although we continue to advance plans to make additional investment in manufacturing to expand capacity, we, to date, have not secured all of the commercial-scale manufacturing capacity that we anticipate requiring for the commercialization of our therapies to meet our forecasts beyond the first year of anticipated sales. If we fail to secure adequate capacity to manufacture our drug products or LVV used in the manufacture of our drug products in accordance with our forecasts, we may be unable to execute on our commercialization plans on the timing that we expect, or at all.
The manufacture of LVV and drug products is complex and requires significant expertise. Even with the relevant experience and expertise, manufacturers of cell therapy products often encounter difficulties in production, particularly in scaling out and validating initial production, managing the transition from clinical manufacturing to manufacturing in the commercial setting, and ensuring that the product meets required specifications. These problems include difficulties with production costs and yields, quality control, including stability of the product, quality assurance testing, operator error, scarcity of qualified personnel, shortages of any production raw materials as well as compliance with strictly enforced federal, state and foreign regulations. We cannot make any assurances that these problems will not occur in the future, or that we will be able to resolve or address in a timely manner or with available funds problems that occur. Because of this complexity, transitioning production of either LVV or drug products to backup or second source manufacturing requires a lengthy technology transfer process and regulatory review and approval, which often takes significant time and may require additional significant financial expenditures. Furthermore, our cost of goods development is at an early stage.
The actual cost to manufacture our LVV and drug products could be greater than we expect and could materially and adversely affect the commercial viability of SKYSONA, ZYNTEGLO, or lovo-cel. If we or such third-party manufacturers are unable to produce the necessary quantities of LVV and our drug products, or in compliance with GMP or other pertinent regulatory requirements, and within our planned time frame and cost parameters, the development and commercialization of our products and product candidates may be materially harmed, result in delays in our plans or increased capital expenditures.
In addition, we currently have only one drug product supplier for ZYNTEGLO and SKYSONA and one drug product supplier anticipated for commercial distribution for lovo-cel and, accordingly, any significant disruption in our supplier relationships could harm our business. We source key materials from third parties, either directly through agreements with suppliers or indirectly through our manufacturers who have agreements with suppliers. There are a small number of suppliers for certain key materials that are used to manufacture SKYSONA, ZYNTEGLO, and lovo-cel. Such suppliers may not sell these key materials to us or to our manufacturers at the times we need them or on commercially reasonable terms. We do not have any control over the process or timing of the acquisition of these key materials by our manufacturers, and we currently do not have agreements for the commercial supply for all of these key materials.
Additionally, since the hematopoietic stem cells ("HSCs") used as starting material for drug products have a limited window of stability following procurement from a patient, we have initially established transduction facilities in areas which we believe can adequately service patients from regions where we are commercializing SKYSONA, ZYNTEGLO, and where we anticipate commercializing lovo-cel, if and when approved. However, we cannot ensure that such facilities will enable us to produce and deliver drug product in a timely manner; any issues with production and delivery of drug product could have a
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material adverse effect on our successful commercialization of our product and product candidates. Moreover, establishing additional facilities in appropriate regions may be financially impractical or impeded by technical, quality, or regulatory issues related to these new sites and we may also run into technical or scientific issues related to transfer of our transduction process or other developmental issues that we may be unable to resolve in a timely manner or with available funds.
Changes in our manufacturing processes may cause delays in our clinical development and commercialization plans.
The manufacturing processes for our LVV and our drug products are complex. We explore improvements to our manufacturing processes on a continual basis, as we evaluate clinical and manufacturing data and based on discussions with regulatory authorities. In some circumstances, changes in the manufacturing process may require us to perform additional comparability studies, collect additional data from patients, submit additional regulatory filings, or comply with additional requirements, which may lead to delays in our clinical development and commercialization plans.
For instance, in our lovo-cel program, we are seeking regulatory approval for drug product utilizing LVV manufactured using a scalable suspension manufacturing process using bioreactors, rather than an adherent cell tray manufacturing process, and drug product manufactured in a commercial, rather than a clinical, manufacturing facility. Such transitions require regulatory review and approval including reaching agreement with the FDA on an acceptable comparability data package. The FDA may require us to conduct additional clinical studies, collect additional data, develop additional assays, or modify product specifications relating to such comparability analysis prior to approving our BLA for lovo-cel, which may delay or prevent our plans for commercialization. Any such requests or delays may have a material adverse effect on our forecasted timelines for approval of lovo-cel and may require substantial additional funds.
We are evaluating plans to transition our drug product manufacturing process for lovo-cel, if approval is obtained, to utilize cryopreserved apheresis patient starting material in order to expand the potential reach of our therapy and to provide manufacturing flexibility. Such changes to our drug manufacturing process will similarly require comparability and process validation data to support such transition and, therefore, may not be approved in a timely manner, if at all.
We cannot predict when or if we will obtain marketing approval to commercialize lovo-cel, and the marketing approval of our product candidates may ultimately be for more narrow indications than we expect. If lovo-cel or other product candidates are not approved in a timely manner or at all for any reason, our business prospects, results of operations, and financial condition would be adversely affected.
The results from previous or ongoing studies are not necessarily predictive of our future clinical study results, and initial or interim results may not continue or be confirmed upon completion of the study. There are limited data concerning long-term safety and efficacy following treatment with our product candidates. These data, or other positive data, may not continue to occur for these patients or for any future patients in our ongoing or future clinical studies, and may not be repeated or observed in ongoing or future studies involving our product candidates. Furthermore, our marketed products or product candidates may also fail to show the desired safety and efficacy in later stages of clinical development despite having successfully advanced through initial clinical studies. There can be no assurance that any of these studies will ultimately be successful or support further clinical advancement or marketing approval of our product candidates. For instance, while patients with SCD who have been treated with lovo-cel may experience a reduction of vaso-occlusive events following successful engraftment, there can be no assurance that they will not experience vaso-occlusive events in the future. We have experienced unexpected results in the past, and we may experience unexpected results in the future.
Even if our product candidates demonstrate safety and efficacy in clinical studies, regulatory delays or rejections may be encountered as a result of many factors, including changes in regulatory policy during the period of product development. We may experience delays or rejections based upon additional government regulation from future legislation or administrative action, changes in regulatory agency policy, or additional regulatory feedback or guidance during the period of product development, clinical studies and the review process. The field of cell and gene therapy is evolving, and as more products are reviewed by regulatory authorities, they may impose additional requirements that were not previously anticipated. 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 treatment candidates. For example, the development of our product candidates for pediatric use is an important part of our current business strategy, and if we are unable to obtain marketing approval for the desired age ranges, such as using lovo-cel for treatment for children under the age of 18, our business may suffer.
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Our ability to obtain approval of a BLA is ultimately an FDA review decision, which will be dependent upon the data and information submitted in the original BLA and during review, and the data submitted may not be sufficiently robust from a safety and/or efficacy perspective, or from a manufacturing, comparability and/or quality perspective, to support the approval of the BLA. The BLA submission for lovo-cel is based on clinical data from Group C of our ongoing HGB-206 clinical study, which is our registrational Phase 1/2 clinical trial of lovo-cel in three treatment cohorts, and supporting data from our ongoing HGB-210 clinical study, which is our Phase 3 clinical trial of lovo-cel in pediatric and adult participants, and has been accepted for filing by the FDA and granted priority review, with a PDUFA goal date of December 20, 2023. However, the FDA may determine that lovo-cel cannot be approved or it may require that we conduct additional follow-up or larger clinical trials before we can obtain approval of the BLA for lovo-cel for the treatment of patients with SCD, if ever.
If lovo-cel or other product candidates are ultimately not approved for any reason, our business, prospects, results of operations and financial condition would be adversely affected.
Risks related to commercialization
We have limited experience as a commercial company and the marketing and sale of ZYNTEGLO, SKYSONA and of lovo-cel following marketing approval (if and when obtained), may be unsuccessful or less successful than anticipated.
We have limited experience as a commercial company as we have only recently launched ZYNTEGLO and SKYSONA in the US, our first two commercial products marketed in the US. Consequently, there is limited information about our ability to overcome many of the risks and uncertainties encountered by companies commercializing products in the biopharmaceutical industry in the U.S. To execute our business plan, we will need to successfully:
gain regulatory approval to commercialize lovo-cel in the United States;
sustain adequate pricing and reimbursement for ZYNTEGLO and SKYSONA, across all U.S. payer segments, and obtain pricing and reimbursement for lovo-cel across payers in the US, when and if approved;
establish and maintain, in the regions where we hope to treat patients, relationships with qualified treatment centers who will be treating the patients who receive ZYNTEGLO, SKYSONA, and lovo-cel, when and if approved;
manage our spending as we seek marketing approvals, and engage in commercialization efforts; and
initiate, develop and maintain successful strategic alliances.
If we are not successful in accomplishing these objectives, we may not be able to effectively commercialize ZYNTEGLO or SKYSONA, develop or commercialize lovo-cel, raise capital, expand our business, or continue our operations.
The commercial success of ZYNTEGLO, SKYSONA and of lovo-cel following marketing approval (if and when obtained), will depend upon the degree of market acceptance by physicians, patients, payers and other stakeholders.
The commercial success of ZYNTEGLO, SKYSONA, and of lovo-cel following marketing approval, if and when obtained, will depend in part on the medical community, patients, and third-party or governmental payers accepting gene therapy products in general, and ZYNTEGLO, SKYSONA, and lovo-cel, in particular, as medically useful, cost-effective, and safe. ZYNTEGLO, SKYSONA, and lovo-cel, which we may bring to the market if approved, may not gain market acceptance by physicians, patients, payers and other stakeholders. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable. The degree of market acceptance of ZYNTEGLO, SKYSONA, and of lovo-cel, if and when approved, will depend on a number of factors, including:
the potential and perceived efficacy and potential advantages over alternative treatments;
the prevalence and severity of any side effects, including any limitations or warnings contained in a product’s approved labeling; for instance, the SKYSONA product label includes a boxed warning for the risk of hematologic malignancy;
the prevalence and severity of any side effects resulting from the chemotherapy and myeloablative treatments associated with the procedure by which our products are administered, including the possible prejudicial effects that chemotherapy can have on fertility;
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relative convenience and ease of administration;
given the complexity of manufacturing product, the perception that issues may arise in the supply of product which could delay treatment;
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;
the pricing of our products;
publicity concerning our products, or competing products and treatments;
sufficient insurance coverage or reimbursement;
the possible occurrence of adverse clinical findings or decreased effectiveness of a product or product candidate over time identified during continued monitoring and evaluation of patients; and
the mix of private and governmental payers coverage, particularly if the percentage of patients receiving reimbursement from state Medicaid is high since such process can be slower to reimburse.
Even if a product displays a favorable efficacy and safety profile in clinical studies, market acceptance of the product will not be known until some period after it is launched. Our efforts to educate the medical community and payers on the benefits of our products may require significant resources and may never be successful. For instance, following marketing approval of ZYNTEGLO in the European Union, we did not reach agreement with payers on an acceptable price for reimbursement in our priority markets in Europe, and we are no longer seeking to commercialize our products and product candidates in Europe for the foreseeable future. Our efforts to educate the marketplace may require more resources than are required by the conventional technologies marketed by our competitors. Any of these factors may cause ZYNTEGLO, SKYSONA, or lovo-cel, to be unsuccessful or less successful than anticipated.
Our ability to successfully commercialize our products or product candidates, if approved, including our ability to achieve their widespread market acceptance, is critical to the success of our business.
We dedicate a substantial amount of our resources to the commercialization of ZYNTEGLO and SKYSONA. Our ability to generate revenue in the near-term will depend almost entirely on our ability to execute on our commercialization plans and the level of market adoption for, and the continued use of, ZYNTEGLO and SKYSONA and, if approved, lovo-cel, by physicians, hospitals, patients, and/or healthcare payers, including government payers, consumers, managed care organizations, and retail and specialty pharmacies. If we are not successful in commercializing our products, including achieving and maintaining an adequate level of market adoption, our profitability and our future business prospects will be adversely impacted.
Future expansion of commercial opportunity is dependent upon lifecycle management and access to complementary therapies. Our efforts to reduce cost of goods through efficiencies of scale or new technologies, such as improved mobilization, may not be successful and/or we may not have access to the complementary technologies we need to succeed, which could impact the level of future profitability. For instance, improvements in conditioning regimens (which could increase the patient population who has access to our products), may not be successfully developed and approved, and if they are, we may not have access to those improvements which, in most instances, are technology owned by third parties. Additionally, the future opportunity to market our therapies in geographies outside the US through partnership or our internal efforts may not materialize.
If the market opportunities for our product candidates are smaller than we believe they are, and if we are not able to successfully identify patients and achieve significant market share, our revenues may be adversely affected and our business may suffer.
We focus our research and product development on treatments for severe genetic diseases. Our projections 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 have been derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations, or market research, and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these diseases. The number of patients may turn out to be lower or more difficult to identify than expected. Additionally, the potentially addressable patient population for
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our product candidates may be limited or may not be amenable to treatment with our product candidates. For instance, in our lovo-cel and SKYSONA programs, we have received notice of safety events of acute myeloid leukemia or myelodysplastic syndrome, and additional such events may be reported in the future. The market opportunity for our gene therapies may be negatively impacted even if our gene therapies ultimately receive marketing approval.
Even if we obtain significant market share for a product within an approved indication, because the potential target populations for our products and product candidates are small, we may never achieve profitability without obtaining marketing approval for additional indications.
Any of these factors may negatively affect our ability to generate revenues from sales of our product candidates and our ability to achieve and maintain profitability and, as a consequence, our business may suffer.
We have limited sales and distribution experience and limited capabilities for marketing and market access. Although we have invested and expect to continue to invest significant financial and management resources, if we are unable to establish and maintain these commercial capabilities and infrastructure, or to enter into agreements with third parties to market and sell our products, we may be unable to generate sufficient revenue to sustain our business.
We have limited prior sales or distribution experience and limited capabilities for marketing and market access, and we did not generate meaningful product sales following the commercial launch of beti-cel following marketing approval in Europe. To successfully commercialize ZYNTEGLO, SKYSONA, and lovo-cel (following marketing approval in the United States, if and when obtained), we will need to further develop these capabilities. We may need to expand our infrastructure to further support commercial operations in the United States, either on our own or with others. Commercializing an autologous gene therapy is resource-intensive and has required, and will continue to require, substantial investment in commercial capabilities. We are competing with companies that currently have extensive and well-funded marketing and sales operations. Without significant commercial experience as a company or the support of a third-party to perform these functions, including marketing and sales functions, we may be unable to compete successfully against these more established companies.
Furthermore, a significant proportion of the patient populations for ZYNTEGLO, SKYSONA, and lovo-cel lies outside of the United States. We currently expect to focus our operations and efforts on markets in the United States and will need to rely heavily on third parties for commercializing any products in geographies outside of the United States. We may enter into collaborations with third parties to utilize their mature marketing and distribution capabilities, but we may be unable to enter into agreements on favorable terms, if at all. If we do not enter into collaboration arrangements with third parties to pursue regulatory authorization or commercialization of our programs for markets outside of the United States, or if our future collaborative partners do not commit sufficient resources to such efforts, we may be unable to generate sufficient revenue to sustain our business.
We may encounter challenges with engaging or coordinating with qualified treatment centers needed for the ongoing commercialization of ZYNTEGLO and SKYSONA and the potential commercialization of lovo-cel.
Our commercial strategy is to engage apheresis and transplant centers as qualified treatment centers for the collection of patient HSCs and infusion of the drug product once manufactured. To ensure that the qualified treatment centers are prepared to collect patient HSCs and to ship them to our transduction facilities in accordance with our specifications and regulatory requirements, we train and conduct quality assessments of each center as part of engagement. These qualified treatment centers are the first and last points on our complex supply chain to reach patients in the commercial setting. We may not be able to engage qualified treatment centers in all of the regions in our commercial launch strategy, or we may encounter other challenges or delays in engaging qualified treatment centers. For instance, we have currently signed agreements with fifteen such treatment centers and our corporate strategy is to contract with at least 40 such centers by the end of 2023; however, our ability to reach this goal depends on many factors beyond our control, including, for example, the availability of contracting staff at the centers, and as a result we may experience delays. Any delay or failure to meet these goals may limit patient access to our therapies and, accordingly, have a material adverse effect on our commercial forecasts and business.
Furthermore, we may fail to manage the logistics of collecting and shipping patient material to the manufacturing site and shipping the drug product back to the patient. Logistical and shipment delays and problems caused by us, our third-party vendors, and other factors not in our control, such as weather, could prevent or delay the manufacture of or delivery of drug product to patients. If our qualified treatment centers fail to perform satisfactorily, we may suffer reputational, operational, and business harm. Additionally, delays with infusion at the qualified treatment centers, due to, for instance, the patient's schedule or health condition or such center’s capacity, could result in a patient becoming medically ineligible for our treatment, the drug product becoming unusable and loss of medical coverage, which would have a material adverse effect on commercial sales.
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We are required to maintain a complex chain of identity and chain of custody with respect to patient material as it moves through the manufacturing process, from the qualified treatment center to the transduction facility, and back to the patient. Failure to maintain chain of identity and chain of custody could result in adverse patient outcomes, loss of product or regulatory action.
The insurance coverage and reimbursement status of newly-approved products in the United States is uncertain. Due to the novel nature of our technology and the potential for our product to offer lifetime therapeutic benefit in a single administration, we face unique and additional challenges in obtaining adequate coverage and reimbursement for our products. Failure to obtain or maintain adequate coverage and reimbursement for any new or current product could limit our ability to market those products and decrease our ability to generate revenue. 

The availability and extent of reimbursement by governmental and private payers is essential for most patients to be able to afford healthcare, and especially expensive medicines, such as gene therapy products. Sales of our products will depend substantially on the extent to which the price(s) set for our products will be covered 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 payers. There is no assurance that payers will be willing to reimburse providers at the company-established list price or that reimbursement levels that payers will be willing to pay will be acceptable to us. Moreover, given that our therapies are likely to be administered in the inpatient care setting, it will be important that our products are either reimbursed as a separate item from the underlying services incurred during the patient’s hospitalization or that, if reimbursement for our therapies is “bundled” with reimbursement for the hospital stay, the list price of our therapy is used in setting the bundled payment rate. Notably, neither “separate reimbursement” nor bundled payment that appropriately accounts for the invoice cost of the therapy is guaranteed by all payers. Accordingly, the estimation of potential revenues will be complex and it is difficult to predict what payers 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. 

In the U.S., regional Medicare Administrative Contractors (“MACs”) are responsible for making a determination with regard to whether a new therapy meets the federal standard of “reasonable and necessary” such that it is covered and reimbursed by Medicare. For the Medicaid program, each State Medicaid Agency is responsible for establishing coverage criteria, billing policies, and reimbursement rates for FDA-approved drugs. Reimbursement methodologies in Medicare and Medicaid can vary based on the type of therapeutic agent and setting of care, and for Medicaid, the reimbursement methodologies also vary by state. There is uncertainty with this process both in terms of the timing of the decision making process and the coverage decision itself, and we anticipate significant exposure to the Medicaid program given the potential patient population for our products and product candidates. Our exposure to the Medicare program is much more limited given that only a small percentage of our patient population may be Medicare eligible (i.e., a small percentage of patients may be dually eligible for Medicare and Medicaid, in which case Medicare serves as the primary payer and Medicaid as the secondary payer for any service not otherwise covered by Medicare).

Moreover, increasing efforts by governmental and third-party payers to cap or reduce healthcare costs may cause such payers 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 ZYNTEGLO, SKYSONA, or for lovo-cel following marketing approval, if and when obtained. We expect to experience pricing pressures in connection with the sale of our products due to greater scrutiny on list prices and total prescription drug spending across all payer channels as well additional legislative changes at the state and federal level. Net prices for drugs may be reduced by mandatory discounts or rebates required by government or private payers. As a result, increasingly high barriers are being erected to the entry of new products often in the form of limiting the patient population for whom a new therapy is deemed “medically necessary.”  Even if coverage is provided, the amount payers are willing to reimburse may not be a sufficient return on our investment.

Furthermore, because a provider is responsible for costs associated not just with obtaining our medicines but also with the underlying hospital stay in which the administration of our therapies occur, the pricing and reimbursement dynamics that impact patient access are not entirely within our control as providers and payers negotiate separately for the cost of the associated items and services, decisions in which we cannot and do not play a role. These services include the collection of HSCs from the patient, followed by chemotherapy and myeloablative treatments, and inpatient hospital stay following drug product infusion. If our customers are unable to obtain adequate levels of reimbursement, our ability to successfully market and sell our products will be adversely affected. 

We have entered into and continue to engage with payers across all channels around outcomes-based contracts for ZYNTEGLO. In the event that a payer opts for the outcomes-based contract, we will need to reserve a certain portion of revenue from each sale to account for the potential that a rebate will be owed if the patient fails to meet the pre-established outcome metric over a one or two year evaluation period following drug product administration. These contracts also may result in the timing of revenue recognition not corresponding to the timing of cash collection. Despite our efforts to engage with CMS and work with experts to ensure all of our payer contracting efforts comply with relevant federal and state regulations, including
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government price reporting obligations, given the complexity of these arrangements, we may not be able to satisfy the compliance requirements, which may result in significant fines and liability.  

Collectively, these factors could affect our ability to successfully commercialize our products and generate or recognize revenues, which would adversely impact our business, financial condition, results of operations and prospects. 

Risks related to the research and development of our product candidates
Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of lovo-cel or other product candidates.
Before obtaining marketing approval from regulatory authorities for the commercialization of our product candidates, we must conduct extensive clinical studies to demonstrate the safety, purity and potency, and efficacy, of the product candidates in humans. Clinical testing is expensive, time-consuming and uncertain as to outcome. There is a high failure rate for therapies proceeding through clinical studies. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in later stage clinical studies even after achieving promising results in earlier stage clinical studies. 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 of lovo-cel or any other product candidate include:
inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical trials;
delays or failure in obtaining regulatory authorization to commence a trial;
delays in reaching agreement on acceptable terms with prospective contract research organizations (“CROs”), and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites;
delays in identifying, recruiting and training suitable clinical investigators;
delays in obtaining required IRB or ethics committee approvals at each clinical trial site;
delays in manufacturing, testing, releasing, validating or importing/exporting sufficient stable quantities of our product candidates for use in clinical trials or the inability to do any of the foregoing;
insufficient or inadequate supply or quality of product candidates or other materials necessary for use in clinical trials, or delays in sufficiently developing, characterizing or controlling a manufacturing process suitable for clinical trials;
imposition of a clinical hold by regulatory agencies, including after review of an IND or amendment or equivalent foreign application or amendment, as a result of a new safety finding that presents unreasonable risk to clinical trial participants or after an inspection of our clinical study operations or study sites or due to unforeseen safety issues;
failure by our CROs, other third parties or us to adhere to clinical trial protocols or failure to perform in accordance with the FDA’s or any other regulatory authority’s good clinical practice requirements (“GCPs”) or applicable regulatory guidelines in other countries;
occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits, or occurrence of adverse events in trial of the same class of agents conducted by other companies, particularly due to the fact that we are required to follow patients in our clinical studies for an extended period of time (up to 15 years);
changes to the clinical trial protocols;
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clinical sites deviating from trial protocol or dropping out of a trial;
changes in the standard of care on which a clinical development plan was based, which may require new or additional trials;
selection of clinical endpoints that require prolonged periods of observation or analyses of resulting data;
the cost of clinical trials of our product candidates being greater than we anticipate;
clinical trials of our product candidates producing negative or inconclusive results, which may result in our deciding, or regulators requiring us, to conduct additional clinical trials or abandon development of such product candidates;
transfer of manufacturing processes to larger-scale facilities operated by a contract manufacturing organization (“CMO”) and delays or failure by our CMOs or us to make any necessary changes to such manufacturing process (please see "Risk Factors—Changes in our manufacturing processes may cause delays in our clinical development and commercialization plans" of this Quarterly Report on Form 10-Q for further information); or
changes in regulatory requirements and guidance that require amending or submitting new clinical protocols.
Clinical trials must be conducted in accordance with the FDA and other applicable regulatory authorities’ legal requirements, regulations or guidelines, and are subject to oversight by these governmental agencies and ethics committees or IRBs at the medical institutions where the clinical trials are conducted.
Further, conducting clinical trials in foreign countries, as we may do for our product candidates, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled patients in foreign countries to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries.
Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or comparable foreign regulatory authorities. The FDA or comparable foreign regulatory authority may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA or comparable foreign regulatory authority may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or comparable foreign regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.
Delays in the completion of any clinical trial of our product candidates will increase our costs, slow down our product candidate development and approval process and delay or potentially jeopardize our ability to commence product sales and generate product revenue. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates. Any delays to our clinical trials that occur as a result could shorten any period during which we may have the exclusive right to commercialize our product candidates and our competitors may be able to bring products to market before we do, and the commercial viability of our product candidates could be significantly reduced. Any of these occurrences may harm our business, financial condition and prospects significantly.
We depend on enrollment of patients in our clinical trials for our product candidates. If we experience delays or difficulties enrolling in our clinical trials, our research and development efforts and business, financial condition, and results of operations could be materially adversely affected.
Successful and timely completion of clinical trials, including additional trials which the FDA may require we complete prior to or as part of approval of our product and product candidates, will require that we enroll a sufficient number of patient candidates. These trials and other trials we conduct may be subject to delays for a variety of reasons, including as a result of patient enrollment taking longer than anticipated, patient withdrawal or adverse events. These types of developments could cause us to delay the trial or halt further development.
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Our clinical trials will compete with other clinical trials that are in the same therapeutic areas as our product candidates, and this competition reduces the number and types of patients available to us, as some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Because the number of qualified clinical investigators and clinical trial sites is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites. In addition, there may be limited patient pools from which to draw for clinical studies. In addition to the rarity of some diseases, the eligibility criteria of our clinical studies will further limit the pool of available study participants as we will require that patients have specific characteristics that we can measure or to assure their disease is either severe enough or not too advanced to include them in a study.
Patient enrollment depends on many factors, including:
the size and nature of the patient population;
the severity of the disease under investigation;
eligibility criteria for the trial;
the proximity of patients to clinical sites;
the design of the clinical protocol;
the ability to obtain and maintain patient consents;
the ability to recruit clinical trial investigators with the appropriate competencies and experience;
the risk that patients enrolled in clinical trials will drop out of the trials before the administration of our product candidates or trial completion;
the availability of competing clinical trials;
the availability of new drugs approved for the indication the clinical trial is investigating; and
clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies.
These factors may make it difficult for us to enroll enough patients to complete our clinical trials in a timely and cost-effective manner. Delays in the completion of any clinical trial of our product candidates will increase our costs, slow down our product candidate development and approval process and delay or potentially jeopardize our ability to commence product sales and generate revenue. In addition, some of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.
Data from our clinical trials that we announce or publish from time to time may change as more patient data become available either through long-term patient follow-up and/or as such data is audited and verified, which could result in material changes to clinical and safety profiles for our products.
From time to time, we may disclose data from our preclinical studies and clinical trials. Such data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available or as patients from our clinical trials continue other treatments for their disease. In addition, the clinical trials evaluating our products and product candidates generally require that we continue to monitor and evaluate safety and efficacy in patients over an extended period of time following treatment, including for up to fifteen years for some studies, which may result in the safety or efficacy profile to change over time. Changes in the efficacy and safety profile of our product or product candidates over time could significantly harm our business prospects including resulting in volatility in the price of our common stock.
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Additionally, from time to time, we may publicly disclose preliminary or top-line data from our preclinical studies and clinical trials, which are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the top-line or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Top-line data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, top-line data should be viewed with caution until the final data are available.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our Company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure. If others, including regulatory authorities, disagree with the conclusions reached with respect to such information and assessments, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.
Even if we have received or will receive accelerated approval from the FDA, if our confirmatory trials do not verify clinical benefit, or if we do not comply with rigorous post-marketing requirements, the FDA may seek to withdraw any accelerated approval we have obtained.
In September 2022, SKYSONA received accelerated approval from the FDA, and we may in the future receive accelerated approval for our one or more of our product candidates. Under the accelerated approval program, the FDA may grant accelerated approval to a product candidate designed to treat a serious or life-threatening condition that provides meaningful therapeutic benefit over available therapies upon a determination that the product candidate has an effect on a surrogate endpoint or intermediate clinical endpoint that is reasonably likely to predict clinical benefit. The FDA considers a clinical benefit to be a positive therapeutic effect that is clinically meaningful in the context of a given disease, such as irreversible morbidity or mortality. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. An intermediate clinical endpoint is a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit.
The accelerated approval pathway may be used in cases in which the advantage of a new drug over available therapy may not be a direct therapeutic advantage, but is a clinically important improvement from a patient and public health perspective. If granted, accelerated approval is usually contingent on the sponsor’s agreement to conduct, in a diligent manner, one or more additional confirmatory studies to verify and describe the drug’s clinical benefit. If such post-approval studies fail to confirm the drug’s clinical benefit or are not completed in a timely manner, the FDA may withdraw its approval of the drug on an expedited basis. For example, we agreed to provide confirmatory long-term clinical data to the FDA as a condition of the SKYSONA accelerated approval, and continued approval for the approved indication will be contingent upon verification and description of clinical benefit in a confirmatory trial. Moreover, certain payers, including state medicaid agencies, may scrutinize therapies that reach the market through accelerated approval, which can lead to delays in broader access after approval and require additional company resources to address any concerns.
In addition, in December 2022, President Biden signed an omnibus appropriations bill to fund the U.S. government through fiscal year 2023. Included in the omnibus bill is the Food and Drug Omnibus Reform Act of 2022, which among other things, introduced reforms intended to expand the FDA’s ability to regulate products receiving accelerated approval, including by increasing the FDA’s oversight over the conduct of confirmatory trials; however, the ultimate impact of these reforms remains unclear.
A Regenerative Medicine Advanced Therapy designation by the FDA, even if granted for any of our product candidates, may not lead to a faster development or regulatory review or approval process and does not increase the likelihood that our product candidates will receive marketing approval.
We have obtained Regenerative Medicine Advanced Therapy (“RMAT”) designation for lovo-cel for the treatment of SCD, and we may seek additional RMAT designations for our product candidates. A biological product candidate is eligible for RMAT designation if: (1) it meets the definition of a regenerative medicine therapy, which the FDA defines as a cell therapy,
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therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, with limited exceptions; (2) the candidate is intended to treat, modify, reverse, or cure a serious disease or condition; and (3) preliminary clinical evidence indicates that the candidate has the potential to address unmet medical needs for such disease or condition. RMAT designation provides potential benefits that include more frequent meetings with FDA to discuss the development plan for the product candidate, and eligibility for rolling review and priority review of BLAs. Product candidates granted RMAT designation may also be eligible for accelerated approval on the basis of a surrogate or intermediate endpoint reasonably likely to predict long-term clinical benefit, or through reliance upon data obtained from a meaningful number of sites, including through expansion to a sufficient number of sites, as appropriate. RMAT-designated product candidates that receive accelerated approval may, as appropriate, be able to fulfill their post-approval requirements through the submission of clinical evidence, clinical studies, patient registries, or other sources of real-world evidence (such as electronic health records); through the collection of larger confirmatory data sets; or via post-approval monitoring of all patients treated with such therapy prior to approval of the therapy.
RMAT designation is within the sole discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for RMAT designation, the FDA may disagree and instead determine not to make such designation. RMAT designation does not change the standards for product approval, and there is no assurance that such designation or eligibility for such designation will result in expedited review or approval or that the approved indication will not be narrower than the indication covered by the RMAT designation. Additionally, RMAT designation can be revoked if the product candidate fails to meet the qualifications as clinical data continue to emerge.
We have obtained and may seek orphan drug designation for our product candidates, but we may be unable to obtain such designation or to obtain or maintain the benefits associated with orphan drug designation, including market exclusivity, which may cause our product revenue, if any, to be reduced.
We have obtained orphan drug designations for certain diseases or conditions for beti-cel, lovo-cel and eli-cel. Under the Orphan Drug Act, the FDA may designate a biological product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation t