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Bluebird Bio, Inc. (BLUE) SEC Filing 10-Q Quarterly Report for the period ending Thursday, September 30, 2021

Bluebird Bio, Inc.

CIK: 1293971 Ticker: BLUE



Exhibit 99.1

bluebird bio Reports Second Quarter Financial Results and Provides Operational Update

– On track to complete planned business separation in 4Q 2021; each company launching with approximately 24 months of runway following separation –
– Severe genetic disease (SGD) business to scale back operations in Europe to focus on the U.S. market –
– ABECMA generates strong performance in first quarter of U.S. launch –
– FDA has placed studies of elivaldogene autotemcel (eli-cel, Lenti-D™) for cerebral adrenoleukodystrophy (CALD) on clinical hold following safety report; other SGD and oncology programs not impacted –
– Ended quarter with $942M in cash, cash equivalents, and marketable securities –
– Company to host conference call today, August 9, 2021 at 8:00 am ET –

CAMBRIDGE, Mass. August 9, 2021 – bluebird bio, Inc. (NASDAQ: BLUE) today reported financial results and business highlights for the second quarter ended June 30, 2021 and provided operational updates, including the announcement that the U.S. Food and Drug Administration (FDA) placed a clinical hold on clinical studies of elivaldogene autotemcel (eli-cel, Lenti-D™) gene therapy (licensed as SKYSONA™ in Europe) for cerebral adrenoleukodystrophy (CALD).

“I’m tremendously proud of what bluebird has accomplished this quarter both operationally and strategically to ready ourselves to launch both bluebird bio and 2seventy bio,” said Nick Leschly, chief bluebird. “Seven months after announcing our intent to split, and thanks to the incredibly hard work by our teams, we have created a solid foundation for both organizations. The ABECMA launch is exceeding expectations, the oncology INDs and severe genetic disease (SGD) biologics license application (BLA) filings are tracking for later this year, and we have established clear visions and leadership teams for each business. Importantly, we have made tough strategic decisions to reshape the overall cost structure to allow both companies to launch in a strong position to execute through important value-creating milestones.”

BUSINESS SEPARATION
In January 2021, bluebird announced its intent to separate into two independent, publicly traded companies (bluebird bio and 2seventy bio). The company expects the separation to be completed by the end of 2021 and to be tax-free to bluebird shareholders.

Key members of the executive teams of both companies have been announced, effective upon completion of the planned separation. This includes Andrew Obenshain as CEO of bluebird and Nick Leschly as CEO of 2seventy.
The full board of directors for both companies will be announced closer to the separation date.
2seventy has confidentially filed its Form 10 Registration Statement with the U.S. Securities and Exchange Commission (SEC), in which it describes the planned tax-free spin-off of 2seventy as a publicly traded company.
bluebird plans to distribute 100% of the outstanding shares of 2seventy common stock to bluebird’s stockholders on a pro-rata basis.
Based on current cash position and the expected $110M upfront payment upon closing of the National Resilience, Inc. strategic collaboration, the Company anticipates having a cash balance of approximately $900M at the time of separation. Together with existing and emerging sources of revenue, we expect our cash balance will be sufficient to fund approximately 24 months of operations for bluebird and 2seventy under current business plans.



The following information was filed by Bluebird Bio, Inc. (BLUE) on Monday, August 9, 2021 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________________________________________________________________
FORM 10-Q
__________________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                    
Commission File Number: 001-35966
__________________________________________________________________
bluebird bio, Inc.
(Exact Name of Registrant as Specified in Its Charter)
__________________________________________________________________
Delaware13-3680878
(State or Other Jurisdiction of
Incorporation or Organization)
(IRS Employer
Identification No.)
60 Binney Street
Cambridge,Massachusetts02142
(Address of Principal Executive Offices)(Zip Code)
(339) 499-9300
(Registrant’s Telephone Number, Including Area Code)
__________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareBLUEThe NASDAQ Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ☐    No  
As of November 1, 2021, there were 70,107,263 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.



This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
the initiation, timing, progress and results of our preclinical and clinical studies, and our research and development programs;
our ability to advance product candidates into, and successfully complete, clinical studies;
our ability to advance our viral vector and drug product manufacturing capabilities, and to ensure adequate supply of our viral vectors and drug products;
the timing or likelihood of regulatory filings and approvals for our betibeglogene autotemcel (beti-cel), elivaldogene autotemcel (eli-cel), and LentiGlobin for SCD;
the timing or success of commercialization of beti-cel, eli-cel, and LentiGlobin for SCD following marketing approval, if and when obtained;
our ability to obtain adequate pricing and reimbursement of beti-cel, eli-cel, and LentiGlobin for SCD following marketing approval, if and when obtained;
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 potential products and technology;
estimates of our expenses, future revenues, capital requirements and our needs for additional financing;
the potential benefits of strategic collaboration agreements and our ability to enter into strategic arrangements;
our ability to maintain and establish collaborations and licenses;
developments relating to our competitors and our industry;
the impact of the COVID-19 pandemic;
the effects, costs, and benefits, including the tax treatment of the spinoff of 2seventy bio, Inc.; 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.


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 limited experience as a commercial company and the marketing and sale of beti-cel, eli-cel, and LentiGlobin for SCD following marketing approval, if and when obtained, may be unsuccessful or less successful than anticipated.
The commercial success of beti-cel, eli-cel, and LentiGlobin for SCD will depend upon the degree of market acceptance by physicians, patients, third-party payers and others in the medical community. Following marketing approval of beti-cel in the European Union, we did not reach agreement with payers on an acceptable price for reimbursement in our priority markets in Europe, and as a consequence, we are focusing on our severe genetic disease business on the U.S. market. If we fail to obtain sufficient pricing or reimbursement approval in the United States for beti-cel, eli-cel, and LentiGlobin for SCD following marketing approval, if and when obtained, our revenues may be adversely affected and our business may suffer.
If the market opportunities for our potential products 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 rely on a complex supply chain for beti-cel, eli-cel, and LentiGlobin for SCD. The manufacture and delivery of our lentiviral vectors and drug products present significant challenges for us, and we may not be able to produce our lentiviral vectors and drug products at the quality, quantities, locations or timing needed to support our clinical programs or commercialization following marketing approval, if and when obtained. In addition, we may encounter challenges with engaging or coordinating with qualified treatment centers needed to support commercialization.
We cannot predict when or if we will obtain marketing approval to commercialize our product candidates, and any marketing approvals that we receive may ultimately be for more narrow indications than we expect.
Insertional oncogenesis is a risk of gene therapies using viral vectors that can integrate into the genome, and our clinical studies of eli-cel are currently on clinical hold due to diagnoses of myelodysplastic syndrome likely mediated by Lenti-D lentiviral vector insertion. We can make no assurances as to when the clinical hold will be lifted, if ever. These insertional oncogenesis events may require us to halt or delay further clinical development of our product candidates, such as eli-cel, or to suspend or cease commercialization following marketing approval, and the commercial potential of our product candidates may be materially and negatively impacted.
We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are more advanced, safer or effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize beti-cel, eli-cel, or LentiGlobin for SCD following marketing approval, if and when obtained. If our competitors obtain orphan drug exclusivity for products that regulatory authorities determine constitute the same drug and treat the same indications as our potential products, we may not be able to have competing products approved by the applicable regulatory authority for a significant period of time.
We may not be successful in our efforts to identify or discover additional product candidates.
We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.
From time to time, 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 product development efforts or other operations.
Our business may be materially and adversely affected by the ongoing COVID-19 pandemic. The COVID-19 pandemic has had, and will likely continue to have, an impact on various aspects of our business and that of third parties on which we rely. The extent to which the COVID-19 pandemic impacts our business will depend in part on future developments, which are uncertain and unpredictable in nature.
The separation of our operations and business into two independent, publicly traded companies is subject to various risks and uncertainties and may not be completed on the terms or timeline currently contemplated, if at all, and will


involve significant time, effort and expense, which could harm our business, results of operations and financial condition.


bluebird bio, Inc.
Table of Contents
Page
CERTIFICATIONS



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
bluebird bio, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except par value amounts)
As of
September 30,
2021
As of
December 31,
2020
Assets
Current assets:
Cash and cash equivalents$402,461 $317,705 
Marketable securities375,140 833,546 
Prepaid expenses30,712 37,472 
Receivables and other current assets23,246 16,116 
Inventory766 10,698 
Total current assets832,325 1,215,537 
Marketable securities193,129 122,891 
Property, plant and equipment, net45,745 162,831 
Intangible assets, net11,009 10,041 
Goodwill12,056 13,128 
Operating lease right-of-use assets174,435 184,019 
Restricted cash and other non-current assets70,945 72,805 
Total assets$1,339,644 $1,781,252 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$21,668 $21,602 
Accrued expenses and other current liabilities203,790 145,406 
Operating lease liability, current portion29,441 25,024 
Deferred revenue, current portion2,530 2,320 
Collaboration research advancement, current portion9,130 9,236 
Total current liabilities266,559 203,588 
Deferred revenue, net of current portion25,761 25,762 
Collaboration research advancement, net of current portion16,767 21,581 
Operating lease liability, net of current portion152,126 167,997 
Other non-current liabilities7,904 7,268 
Total liabilities469,117 426,196 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.01 par value, 5,000 shares authorized; 0 shares issued and outstanding at September 30, 2021 and December 31, 2020
— — 
Common stock, $0.01 par value, 125,000 shares authorized; 70,097 and 66,432 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively
701 665 
Additional paid-in capital4,440,605 4,260,443 
Accumulated other comprehensive loss(5,906)(5,505)
Accumulated deficit(3,564,873)(2,900,547)
Total stockholders’ equity870,527 1,355,056 
Total liabilities and stockholders’ equity$1,339,644 $1,781,252 
See accompanying notes to unaudited condensed consolidated financial statements.
2

bluebird bio, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
(in thousands, except per share data)
For the three months ended September 30,For the nine months ended September 30,
2021202020212020
Revenue:
Service revenue$6,312 $13,352 $17,544 $108,542 
Collaborative arrangement revenue14,831 2,422 18,020 114,398 
Royalty and other revenue1,534 3,499 7,379 17,086 
Total revenues
22,677 19,273 42,943 240,026 
Operating expenses:
Research and development
131,427 140,431 429,614 450,862 
Selling, general and administrative68,277 68,046 229,708 209,922 
Share of collaboration loss
— — 10,071 — 
Cost of royalty and other revenue19,704 1,318 37,286 3,897 
Restructuring expense20,175 — 24,800 — 
Change in fair value of contingent consideration
48 (828)464 (5,591)
Total operating expenses
239,631 208,967 731,943 659,090 
Loss from operations
(216,954)(189,694)(689,000)(419,064)
Interest income, net
319 1,964 1,468 10,258 
Other income (expense), net(294)(6,686)23,375 (9,582)
Loss before income taxes
(216,929)(194,416)(664,157)(418,388)
Income tax benefit (expense)113 (329)(169)(433)
Net loss
$(216,816)$(194,745)$(664,326)$(418,821)
Net loss per share - basic and diluted:
$(3.16)$(2.94)$(9.81)$(6.89)
Weighted-average number of common shares used in computing net loss per share - basic and diluted:
68,621 66,251 67,701 60,762 
Other comprehensive loss:
Other comprehensive loss, net of tax benefit (expense) of $0.0 million and $0.1 million for the three months ended September 30, 2021 and 2020, respectively, and $0.0 million for the nine months ended September 30, 2021 and 2020.
(129)(1,823)(401)(2,330)
Total other comprehensive loss(129)(1,823)(401)(2,330)
Comprehensive loss
$(216,945)$(196,568)$(664,727)$(421,151)
See accompanying notes to unaudited condensed consolidated financial statements.
3

bluebird bio, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
(in thousands)
Common stock
Additional
paid-in
capital
Accumulated
other
comprehensive
loss
Accumulated
deficit
Total
stockholders'
equity
Shares
Amount
Balances at December 31, 202066,432 $665 $4,260,443 $(5,505)$(2,900,547)$1,355,056 
Vesting of restricted stock units
294 (3)— — — 
Exercise of stock options
207 1,217 — — 1,219 
Purchase of common stock under ESPP
67 1,706 — — 1,707 
Stock-based compensation
— — 36,090 — — 36,090 
Issuance of unrestricted stock awards to settle
    accrued employee compensation
422 12,009 — — 12,013 
Other comprehensive income— — — 56 — 56 
Net loss
— — — — (205,808)(205,808)
Balances at March 31, 202167,422 $675 $4,311,462 $(5,449)$(3,106,355)$1,200,333 
Vesting of restricted stock units
127 (1)— — — 
Exercise of stock options
— 36 — — 36 
Stock-based compensation
— — 26,222 — — 26,222 
Other comprehensive loss— — — (328)— (328)
Net loss
— — — — (241,702)(241,702)
Balances at June 30, 202167,551 676 4,337,719 (5,777)(3,348,057)984,561 
Vesting of restricted stock units
80 (1)— — — 
Exercise of stock options
10 — 233 — — 233 
Purchase of common stock under ESPP
53 874 — — 875 
Issuance of common stock for private equity
    placement
2,273 22 37,477 — — 37,499 
Issuance of pre-funded warrants— — 37,477 — — 37,477 
Issuance of unrestricted stock awards to settle
    accrued employee compensation
130 2,474 — — 2,475 
Stock-based compensation
— — 24,352 — — 24,352 
Other comprehensive loss— — — (129)— (129)
Net loss
— — — — (216,816)(216,816)
Balances at September 30, 202170,097$701 $4,440,605 $(5,906)$(3,564,873)$870,527 














4

bluebird bio, Inc.
Condensed Consolidated Statements of Stockholders’ Equity - (continued)
(unaudited)
(in thousands)
Common stock
Additional
paid-in
capital
Accumulated
other
comprehensive
loss
Accumulated
deficit
Total
stockholders'
equity
SharesAmount
Balances at December 31, 201955,368 $554 $3,568,184 $(1,893)$(2,281,852)$1,284,993 
Vesting of restricted stock units
204 (2)— — — 
Exercise of stock options
20 — 750 — — 750 
Purchase of common stock under ESPP
28 — 1,872 — — 1,872 
Stock-based compensation
— — 36,335 — — 36,335 
Other comprehensive loss— — — (906)— (906)
Net loss
— — — — (202,611)(202,611)
Balances at March 31, 202055,620 $556 $3,607,139 $(2,799)$(2,484,463)$1,120,433 
Issuance of common stock upon public offering,
   net of issuance costs of $33,465
10,455 105 541,431 — — 541,536 
Vesting of restricted stock units
114 (1)— — — 
Exercise of stock options
— 347 — — 347 
Stock-based compensation
— — 40,781 — — 40,781 
Other comprehensive income— — — 399 — 399 
Net loss
— — — — (21,465)(21,465)
Balances at June 30, 202066,196 $662 $4,189,697 $(2,400)$(2,505,928)$1,682,031 
Vesting of restricted stock units
62 (1)— — — 
Exercise of stock options
28 — 249 — — 249 
Purchase of common stock under ESPP53 — 1,902 — — 1,902 
Stock-based compensation— — 35,407 — — 35,407 
Other comprehensive loss— — — (1,823)— (1,823)
Net loss
— — — — (194,745)(194,745)
Balances at September 30, 202066,339 $663 $4,227,254 $(4,223)$(2,700,673)$1,523,021 
5

bluebird bio, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
For the nine months ended
September 30,
20212020
Cash flows from operating activities:
Net loss$(664,326)$(418,821)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of contingent consideration464 (5,591)
Depreciation and amortization17,335 14,378 
Stock-based compensation expense101,829 123,640 
(Gain) loss on equity securities(28,765)9,068 
Excess inventory reserve29,712 — 
Other non-cash items13,358 (1,538)
Changes in operating assets and liabilities:
Prepaid expenses and other assets3,287 (2,534)
Inventory(19,007)(9,382)
Operating lease right-of-use assets22,630 16,345 
Accounts payable2,004 (15,420)
Accrued expenses and other liabilities54,774 (13,056)
Operating lease liabilities(24,499)(14,603)
Deferred revenue210 8,558 
Collaboration research advancement(4,920)(6,202)
Net cash used in operating activities(495,914)(315,158)
Cash flows from investing activities:
Purchase of property, plant and equipment(12,944)(21,098)
Purchases of marketable securities(421,416)(964,428)
Proceeds from maturities of marketable securities802,367 722,487 
Proceeds from sales of marketable securities31,318 29,878 
Proceeds from sale of Durham, North Carolina manufacturing facility110,300 — 
Purchase of intangible assets(8,000)— 
Net cash provided by (used in) investing activities501,625 (233,161)
Cash flows from financing activities:
Proceeds from public offering of common stock, net of issuance costs— 541,536 
Proceeds from issuance of common stock and warrants74,982 — 
Proceeds from exercise of stock options and ESPP contributions5,078 3,747 
Net cash provided by financing activities80,060 545,283 
Increase in cash, cash equivalents and restricted cash85,771 (3,036)
Cash, cash equivalents and restricted cash at beginning of period373,728 381,709 
Cash, cash equivalents and restricted cash at end of period$459,499 $378,673 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents$402,461 $324,164 
Restricted cash included in receivables and other current assets$2,530 $— 
Restricted cash included in restricted cash and other non-current assets$54,508 $54,509 
Total cash, cash equivalents and restricted cash$459,499 $378,673 
Supplemental cash flow disclosures from investing and financing activities:
Purchases of property, plant and equipment included in accounts payable and accrued expenses$732 $1,686 
Right-of-use assets obtained in exchange for operating lease liabilities$22,049 $18,909 
Reduction of right of use asset and associated lease liability due to lease reassessment$(9,004)$— 
Issuance of unrestricted stock awards to settle accrued employee compensation$14,488 $— 
See accompanying notes to unaudited condensed consolidated financial statements.
6

bluebird bio, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Description of the business
bluebird bio, Inc. (the “Company” or “bluebird”) was incorporated in Delaware on April 16, 1992, and is headquartered in Cambridge, Massachusetts. The Company is a biotechnology company committed to researching, developing and commercializing, following marketing approval, potentially transformative gene therapies for severe genetic disease. Since its inception, the Company has devoted substantially all of its resources to its research and development efforts relating to its product candidates, including activities to manufacture product candidates, conduct clinical studies of its product candidates, perform preclinical research to identify new product candidates and provide selling, general and administrative support for these operations, including commercial activities in Europe as well as commercial-readiness activities in the United States.
In November 2021, the Company completed the separation of its severe genetic disease and oncology programs into two separate, independent publicly traded companies, bluebird bio, Inc. and 2seventy bio, Inc., a Delaware corporation and wholly-owned subsidiary of the Company prior to the separation. bluebird bio, Inc. intends to retain its severe genetic disease programs, with a focus on the U.S. market. The Company’s programs in severe genetic diseases include programs for transfusion-dependent β-thalassemia, or TDT, sickle cell disease, or SCD, and cerebral adrenoleukodystrophy, or CALD. The Company also expects to make focused investments in research and development efforts on optimizing our existing programs as well as on pipeline programs in severe genetic diseases. 2seventy bio, Inc. is expected to focus on the Company's former oncology programs, including the anti-BCMA CAR T programs for multiple myeloma under the Company’s collaboration arrangement with Bristol-Myers Squibb ("BMS"). Please refer to Note 10, Collaborative arrangements and strategic partnerships, for further discussion of the Company’s collaboration with BMS. The results for the period ended September 30, 2021 reflect the combined results of the Company and 2seventy bio prior to the effectiveness of the separation, and the forward-looking statements contained within pertain to the Company's severe genetic disease operations, unless otherwise noted.
In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The Company has incurred losses since inception and to date has financed its operations primarily through the sale of equity securities and, to a lesser extent, through collaboration agreements and grants from governmental agencies and charitable foundations. As of September 30, 2021, the Company had an accumulated deficit of $3.56 billion. During the nine months ended September 30, 2021, the Company incurred a loss of $664.3 million and used $495.9 million of cash in operations. The Company expects to continue to generate operating losses and negative operating cash flows for the next few years and will need additional funding to support its planned operating activities through profitability. The transition to profitability is dependent upon the successful development, approval, and commercialization of beti-cel, eli-cel, and LentiGlobin for SCD, and the achievement of a level of revenues adequate to support its cost structure.
As of September 30, 2021, the Company had cash, cash equivalents and marketable securities of $970.7 million. Upon separation, the Company funded 2seventy bio with approximately $441.5 million, which has reduced the amount of cash available to the Company as of the date of separation. The Company expects its cash, cash equivalents and marketable securities, subsequent to the amount funded to 2seventy bio, will be sufficient to fund current planned operations for at least the next twelve months from the date of issuance of these financial statements. The Company anticipates reduced 2022 spending, including projected savings through the move of the Company's headquarters to Assembly Row in Somerville, Massachusetts, and the orderly wind down of European operations. This, together with other anticipated cash inflows, which include both the potential sale of priority review vouchers that would be issued with anticipated U.S. regulatory approvals of BLAs for beti-cel and eli-cel, and the pursuit of additional cash resources through public or private equity or debt financings, are expected to further strengthen the Company's financial condition. Management's expectations with respect to its ability to fund current planned operations are based on estimates that are subject to risks and uncertainties. If actual results are different from management's estimates, the Company may need to seek additional cash resources through strategic or financing opportunities sooner than would otherwise be expected. However, there is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders. If the Company is unable to obtain additional cash resources on a timely basis, it may be forced to significantly curtail, delay, or discontinue one or more of its planned research or development programs or be unable to expand its operations or commercialize products following marketing approval.
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2. Basis of presentation, principles of consolidation and significant accounting policies
Basis of presentation
The accompanying condensed consolidated financial statements are unaudited and have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”) as found in the Accounting Standards Codification ("ASC") and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. These condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the Company’s financial position and results of operations for the interim periods ended September 30, 2021 and 2020.
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, 2020, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2021.
Inventory in the prior year’s condensed consolidated financial statements has been reclassified to conform to the current presentation on the condensed consolidated balance sheets and condensed consolidated statements of cash flows.  However, no subtotals in the prior year condensed consolidated financial statements were impacted as a result.
Amounts reported are computed based on thousands. As a result, certain totals may not sum due to rounding.
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, including 2seventy bio, which on November 4, 2021 became an independent, publicly-traded company. All intercompany balances and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to GAAP. The Company views its operations and manages its business in one operating segment.
Significant accounting policies
The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and nine months ended September 30, 2021 are consistent with those discussed in Note 2 to the consolidated financial statements included in the Company’s 2020 Annual Report on Form 10-K, except as noted immediately below and as noted within the "Recent accounting pronouncements - Recently adopted" section.
Collaborative arrangement revenue
The Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements ("ASC 808"), which includes determining whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities.  This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement.  For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and therefore within the scope of ASC 606, Revenue from Contracts with Customers ("Topic 606" or "ASC 606"). For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to Topic 606. 
In arrangements where the Company does not deem its collaborator to be its customer, payments to and from its collaborator are presented in the condensed consolidated statements of operations based on the nature of the payments, as summarized in the table and further described below.
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Nature of PaymentStatement of Operations Presentation
The Company's share of profits in connection with commercialization of productsCollaborative arrangement revenue
The Company's share of losses in connection with commercialization of productsShare of collaboration loss
Net reimbursement of the Company's research and development expensesCollaborative arrangement revenue
Net reimbursement of the collaborator's research and development expensesResearch and development expense
Where the collaborator is the principal in the product sales, the Company recognizes its share of any profits or losses, representing net product sales less cost of goods sold and shared commercial and other expenses, in the period in which such underlying sales occur and costs are incurred by the collaborator. The Company also recognizes its share of costs arising from research and development activities performed by collaborators in the period its collaborators incur such expenses.
Royalty and other revenue
During the nine months ended September 30, 2021, the Company recognized an immaterial amount of product revenue related to the sale of beti-cel (marketed as ZYNTEGLO) in the European Union and the related cost of goods sold, which is included within royalty and other revenue and cost of royalty and other revenue, respectively.
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 regulatory approval. Manufacturing costs incurred prior to regulatory approval for pre-launch inventory that did not qualify for capitalization and clinical manufacturing costs are charged to research and development expense in the Company’s condensed consolidated statements of operations and comprehensive loss as costs are 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 vectors, 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 royalty and other revenue on the Company’s condensed consolidated statements of operations.
Common Stock Warrants
The Company's common stock warrants are evaluated pursuant to ASC 480, Distinguishing Liabilities from Equity ("ASC 480"), and ASC 815, Derivatives and Hedging ("ASC 815"). Management classifies its freestanding warrants as (i) liabilities, if the warrant terms allow settlement of the warrant exercise in cash, or (ii) equity, if the warrant terms only allow settlement in shares of common stock.
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
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preparation of the financial statements. Estimates are used in the following areas, among others: future undiscounted cash flows and subsequent fair value estimates used to assess potential and measure any impairment of long-lived assets, including goodwill and intangible assets, and the measurement of right-of-use assets and lease liabilities, contingent consideration, stock-based compensation expense, accrued expenses, revenue recognition, income taxes, inventory capitalization, excess inventory analyses, and the assessment of the Company's ability to fund its operations for at least the next twelve months from the date of issuance of these financial statements.
Recent accounting pronouncements
Recently adopted
ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The new standard was effective beginning January 1, 2021. The adoption of ASU 2019-12 did not have a material impact on the Company's financial position or results of operations upon adoption.
ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 simplifies the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity's own equity. The Company early adopted the new standard, effective January 1, 2021. The adoption of ASU 2020-06 did not have an impact on the Company's financial position or results of operations upon adoption.
ASU No. 2020-08, Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs
In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs (“ASU 2020-08”) to provide further clarification and update the previously issued guidance in ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20: Premium Amortization on Purchased Callable Debt Securities) (“ASU 2017-08”). ASU 2017-08 shortened the amortization period for certain callable debt securities purchased at a premium by requiring that the premium be amortized to the earliest call date. ASU 2020-08 requires that at each reporting period, to the extent that the amortized cost of an individual callable debt security exceeds the amount repayable by the issuer at the next call date, the excess premium shall be amortized to the next call date. The new standard was effective beginning January 1, 2021. The adoption of ASU 2020-08 did not have a material impact on the Company's financial position or results of operations upon adoption.
ASU No. 2020-10, Codification Improvements
In October 2020, the FASB issued ASU 2020-10, Codification Improvements ("ASU 2020-10"). The amendments in this ASU represent changes to clarify the ASC, correct unintended application of the guidance, or make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. This new standard was effective beginning January 1, 2021. The adoption of ASU 2020-10 did not have a material impact on the Company's financial position or results of operations upon adoption.
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3. Marketable securities
The following table summarizes the marketable securities held at September 30, 2021 and December 31, 2020 (in thousands):
Description
Amortized
cost / Cost
Unrealized
gains
Unrealized
losses
Fair
value
September 30, 2021
U.S. government agency securities and treasuries
$312,483 $67 $(58)$312,492 
Corporate bonds
111,616 (35)111,588 
Commercial paper
141,089 — — 141,089 
Equity securities
4,305 (1,205)3,100 
Total
$569,493 $74 $(1,298)$568,269 
December 31, 2020
U.S. government agency securities and treasuries$675,043 $302 $(74)$675,271 
Corporate bonds
197,171 432 (40)197,563 
Commercial paper
77,949 — 77,950 
Equity securities
20,017 — (14,364)5,653 
Total
$970,180 $735 $(14,478)$956,437 
No available-for-sale debt securities held as of September 30, 2021 or December 31, 2020 had remaining maturities greater than five years.
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4. Fair value measurements
The following table sets forth the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 (in thousands):
Description
Total
Quoted
prices in
active
markets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
September 30, 2021
Assets:
Cash and cash equivalents$402,461 $377,462 $24,999 $— 
Marketable securities:
U.S. government agency securities and treasuries312,492 — 312,492 — 
Corporate bonds111,588 — 111,588 — 
Commercial paper141,089 — 141,089 — 
Equity securities3,100 3,100 — — 
Total$970,730 $380,562 $590,168 $— 
Liabilities:
Contingent consideration$1,973 $— $— $1,973 
Total$1,973 $— $— $1,973 
December 31, 2020
Assets:
Cash and cash equivalents$317,705 $317,705 $— $— 
Marketable securities:
U.S. government agency securities and treasuries675,271 — 675,271 — 
Corporate bonds197,563 — 197,563 — 
Commercial paper77,950 — 77,950 — 
Equity securities5,653 5,653 — — 
Total$1,274,142 $323,358 $950,784 $— 
Liabilities:
Contingent consideration$1,509 $— $— $1,509 
Total$1,509 $— $— $1,509 
Cash and cash equivalents
The Company considers all highly liquid securities with original final maturities of 90 days or less from the date of purchase to be cash equivalents. As of September 30, 2021, cash and cash equivalents comprise funds in cash, money market accounts, U.S. government agency securities and treasuries, and commercial paper. As of December 31, 2020, cash and cash equivalents comprise funds in cash and money market accounts.
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 next call date for premiums or to maturity for discounts. At September 30, 2021 and December 31, 2020, the balance in the Company’s accumulated other comprehensive loss includes activity related to the Company’s available-for-sale debt
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securities. There were no material realized gains or losses recognized on the sale or maturity of available-for-sale debt securities during the three and nine months ended September 30, 2021 or 2020.
Accrued interest receivable on the Company's available-for-sale debt securities totaled $1.2 million and $3.1 million as of September 30, 2021 and December 31, 2020, respectively. No accrued interest receivable was written off during the three and nine months ended September 30, 2021 or 2020.
The following table summarizes available-for-sale debt securities in a continuous unrealized loss position for less than and greater than twelve months, and for which an allowance for credit losses has not been recorded at September 30, 2021 and December 31, 2020 (in thousands):
Less than 12 months12 months or greaterTotal
DescriptionFair valueUnrealized lossesFair valueUnrealized lossesFair valueUnrealized losses
September 30, 2021
U.S. government agency securities
   and treasuries
$124,322 $(58)$— $— $124,322 $(58)
Corporate bonds74,279 (31)11,377 (4)85,656 (35)
Total$198,601 $(89)$11,377 $(4)$209,978 $(93)
December 31, 2020
U.S. government agency securities
   and treasuries
$211,384 $(74)$— $— $211,384 $(74)
Corporate bonds76,598 (40)1,205 — 77,803 (40)
Total$287,982 $(114)$1,205 $— $289,187 $(114)
The Company determined that there was no material change in the credit risk of the above investments during the nine months ended September 30, 2021. As such, an allowance for credit losses was not recognized. As of September 30, 2021, the Company does not intend to sell such securities and it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost bases.
The Company held equity securities with an aggregate fair value of $3.1 million and $5.7 million as of September 30, 2021 and December 31, 2020, respectively, within short-term marketable securities on its condensed consolidated balance sheets. In January 2021, the Company sold a portion of its equity securities for proceeds of $31.3 million. During the three months ended September 30, 2021 and 2020, the Company recorded gains of $0.5 million and losses of $5.8 million, respectively, related to its equity securities. During the nine months ended September 30, 2021 and 2020, the Company recorded gains of $28.8 million and losses of $9.1 million, respectively, related to its equity securities. Gains and losses related to equity securities are included in other income (expense), net on the condensed consolidated statements of operations and comprehensive loss.
Contingent consideration
In connection with its prior acquisition of Precision Genome Engineering, Inc. (“Pregenen”), the Company may be required to pay future consideration that is contingent upon the achievement of specified development, regulatory approvals or sales-based milestone events. Contingent consideration is measured at fair value and is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions the Company believes would be made by a market participant. The Company assesses these estimates on an on-going basis as additional data impacting the assumptions is obtained. Future changes in the fair value of contingent consideration related to updated assumptions and estimates are recognized within the condensed consolidated statements of operations and comprehensive loss. In the absence of new information, changes in fair value will reflect changing discount rates and the passage of time. Contingent consideration is included in accrued expenses and other current liabilities and other non-current liabilities on the condensed consolidated balance sheets. Upon the completion of the separation of its severe genetic disease and oncology programs into two separate, independent publicly traded companies in November 2021, all future obligations related to the contingent consideration described above were assumed by 2seventy bio.
Please refer to Note 9, Commitments and contingencies, for further information.
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5. Inventory
Inventory consists of the following (in thousands):
As of September 30, 2021As of December 31, 2020
Raw materials$— $8,967 
Finished goods766 1,731 
Inventory$766 $10,698 
During the three and nine months ended September 30, 2021, the Company recorded a reserve for excess inventories of $14.6 million and $29.7 million, respectively, which is included within cost of royalty and other revenue within the condensed consolidated statements of operations.
6. Property, plant and equipment, net
Property, plant and equipment, net, consists of the following (in thousands):
As of September 30, 2021As of December 31, 2020
Land
$— $1,210 
Building
— 15,745 
Computer equipment and software
5,699 6,950 
Office equipment
6,686 7,665 
Laboratory equipment
59,673 55,521 
Leasehold improvements
31,579 34,286 
Construction-in-progress
875 92,514 
Total property, plant and equipment
104,512 213,891 
Less accumulated depreciation and amortization
(58,767)(51,060)
Property, plant and equipment, net
$45,745 $162,831 
North Carolina manufacturing facility
In November 2017, the Company acquired a manufacturing facility in Durham, North Carolina for the future manufacture of lentiviral vector for the Company’s gene therapies. In July 2021, the Company and National Resilience, Inc. ("Resilience") announced a strategic manufacturing collaboration aimed to accelerate the early research, development, and delivery of cell therapies. Agreements related to the collaboration were executed in September 2021. As part of the agreement, Resilience acquired the Company's manufacturing facility in Durham and retained all staff currently employed at the site. As a result of the transaction, the Company disposed of $111.2 million of net assets, primarily consisting of the building and laboratory equipment. Please refer to Note 10, Collaborative arrangements and strategic partnerships for further discussion.
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7. Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consist of the following (in thousands):
As of September 30, 2021As of December 31, 2020
Employee compensation$95,505 $55,802 
Manufacturing costs21,809 22,571 
Clinical and contract research organization costs19,017 23,766 
Collaboration costs28,031 20,004 
Property, plant and equipment618 789 
License and milestone fees467 278 
Professional fees2,549 1,541 
Other35,794 20,655 
Accrued expenses and other current liabilities$203,790 $145,406 

Accrued employee compensation includes severance costs associated with the Company's orderly wind down of its European operations. As of September 30, 2021, the Company had accrued expenses of $19.7 million related to these restructuring costs. Please refer to Note 16, Reduction in Workforce, for further discussion.
8. Leases
The Company leases certain office and laboratory space, primarily located in Cambridge, Massachusetts and Seattle, Washington.  Additionally, the Company has embedded leases at various 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 2020 Annual Report on Form 10-K.
60 Binney Street lease
In October 2021, the Company entered into a consent to assignment and amendment to its lease agreement for its 60 Binney Street Lease. The agreement reassigns the Company's interest in the lease to 2seventy bio, Inc. and releases the Company from its obligation to maintain the $13.8 million collateralized letter of credit required under the original lease. Following November 4, 2021, the date on which the separation of the Company and 2seventy bio was completed, the Company will reassess the accounting for this lease under ASC 842, Leases.
Seattle, Washington leases
In October 2021, the Company entered into a consent to assignment and amendment to its lease agreement for office and laboratory space in Seattle, Washington and the related sublease that was executed in September 2020 for a portion of the space. The agreement reassigns the Company's interest in the lease and the sublease to 2seventy bio, Inc. As part of the assignment, the sublease agreement associated with the expanded space was also assigned to 2seventy bio, Inc. Upon separation, the Company removed the related right-of-use asset and liability from its condensed consolidated balance sheets.
Embedded operating leases
In July 2020, 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 a controlled environment room at the facility is designated for the Company's exclusive use during the term of the agreement, with the option to sublease the space if the Company provides notice that it will not utilize it for a specified duration of time. Under the terms of the agreement, the Company will be required to pay up to $5.4 million per year in maintenance fees in addition to the cost of any services provided and may terminate this agreement with eighteen months' notice. The term of the agreement is five years, with the option to extend. The Company recorded a right-of-use asset and lease liability for this operating lease upon lease commencement in March 2021 and is recognizing rent expense on a straight-line basis throughout the remaining term of the embedded lease.
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In November 2016, the Company entered into an agreement for clinical and commercial production of the Company’s beti-cel, LentiGlobin for SCD, and eli-cel drug products with a contract manufacturing organization at an existing facility. In September 2021, the Company reassessed the term of this lease in light of the planned orderly wind down of its operations in Europe. As a result, the Company reduced the right-of-use asset and related lease liability to reflect a shortened expected term of the agreement.
9. Commitments and contingencies
Contingent consideration related to business combinations
In June 2014, the Company acquired Pregenen. The Company may be required to make up to $99.9 million in remaining future contingent cash payments to the former equity holders of Pregenen upon the achievement of certain commercial milestones related to the Pregenen technology. In accordance with accounting guidance for business combinations, contingent consideration liabilities are required to be recognized on the condensed consolidated balance sheets at fair value. Estimating the fair value of contingent consideration requires the use of significant assumptions primarily relating to probabilities of successful achievement of certain clinical and commercial milestones, the expected timing in which these milestones will be achieved, and discount rates. The use of different assumptions could result in materially different estimates of fair value. Upon the completion of the separation of its severe genetic disease and oncology programs into two separate, independent publicly traded companies in November 2021, 2seventy bio assumed all future obligations related to the contingent consideration described above.
Other funding commitments
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. Please refer to Note 10, Collaborative arrangements and strategic partnerships, for further information on the Company's collaboration agreements and to Note 11, Royalty and other revenue, for further information on the Company's license agreements.
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. There have been no material changes in future minimum purchase commitments from those disclosed in Note 9 to the consolidated financial statements included in the Company's 2020 Annual Report on Form 10-K.
While there are no material legal proceedings the Company is aware of, the Company may become party to various claims and complaints arising in the ordinary course of business. 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 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 directors and officers 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 a director may be subject to any proceeding arising out of acts or omissions of such director or officer 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.
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10. Collaborative arrangements and strategic partnerships
Bristol-Myers Squibb
In March 2013, the Company entered into a collaboration agreement with BMS. The details of the collaboration agreements and the payments the Company has received, and is entitled to receive, are further described in Note 11, Collaborative arrangements, to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020. During the third quarter of 2021, there have been no changes to the terms of the Company’s collaboration agreement with BMS. Upon the completion of the separation of its severe genetic disease and oncology programs into two separate, independent publicly traded companies in November 2021, 2seventy bio assumed the collaboration agreement with BMS.
Ide-cel
Under the Company’s collaboration agreement with BMS, the Company shares equally in the profit and loss related to the development and commercialization of ide-cel in the United States. The Company has no remaining financial rights with respect to the development or commercialization of ide-cel outside of the United States. The Company accounts for its collaborative arrangement efforts with BMS in the United States within the scope of ASC 808 given that both parties are active participants in the activities and both parties are exposed to significant risks and rewards dependent on the commercial success of the activities. The calculation of collaborative activity to be recognized for joint ide-cel efforts in the United States is performed on a quarterly basis and is independent of previous quarterly activity. This may result in fluctuations between revenue and expense recognition period over period, depending on the varying extent of effort performed by each party during the period. The Company recognizes revenue related to the combined unit of accounting for the ex-U.S. license and lentiviral vector manufacturing services under Topic 606.
Ide-cel U.S. Share of Collaboration Profit or Loss
In March 2021, BMS received marketing approval from the U.S. Food and Drug Administration for ide-cel as a treatment for adult patients with relapsed or refractory multiple myeloma after four or more prior lines of therapy, including an immunomodulatory agent, a proteasome inhibitor, and an anti-CD38 monoclonal antibody. BMS is primarily responsible for the commercialization of ide-cel and they are the principal for commercial activity. On a quarterly basis, the Company determines its share of collaboration profit or loss for commercial activities. The Company’s share of any collaboration profit for commercial activities is recognized as collaborative arrangement revenue and its share of any collaboration loss for commercial activity is recognized as an operating expense and classified as share of collaboration loss on the Company's condensed consolidated statement of operations. The Company also is responsible for equally sharing in the ongoing ide-cel research and development activities being conducted by BMS in the United States. The net amount owed to BMS for research and development activities is classified as research and development expense on the condensed consolidated statement of operations. If BMS is obligated to reimburse the Company because the Company’s research and development costs exceeds BMS’ research and development costs, the net amount is recorded as collaborative arrangement revenue.
During the three and nine months ended September 30, 2021, the Company recognized $13.0 million, included as a component of collaborative arrangement revenue, on the condensed consolidated statement of operations and comprehensive loss, related to its share of collaboration profit associated with ide-cel commercial activities. During the three and nine months ended September 30, 2021, the Company recognized $0.0 million and $10.1 million, included as a component of share of collaborative arrangement loss, on the condensed consolidated statement of operations and comprehensive loss, related to its share of collaboration loss associated with ide-cel commercial activities. These amounts include the Company’s share of BMS’ ide-cel product revenue, cost of goods sold, and selling costs, offset by any reimbursement of commercial costs incurred by the Company during the three and nine month periods.
The following table summarizes the amounts associated with the research activities under the collaboration included in research and development expense or recognized as collaborative arrangement revenue for the three and nine months ended September 30, 2021, and 2020 (in thousands):
For the three months ended September 30,For the nine months ended September 30,
2021202020212020
ASC 808 ide-cel research and development revenue - U.S. (1)(2)$— $— $— $108,196 
ASC 808 ide-cel research and development expense - U.S. (1)
$(5,660)$(16,084)$(31,678)$(21,164)
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(1)    As noted above, the calculation of collaborative arrangement activity to be recognized for joint ide-cel efforts in the United States is performed on a quarterly basis. The calculation is independent of previous activity, which may result in fluctuations between revenue and expense recognition period over period, depending on the varying extent of effort performed by each party during the period.
(2)    In the second quarter of 2020, the Company recognized $169.2 million as a cumulative catch-up adjustment to revenue recorded in connection with the May 2020 First Amendment to the Amended and Restated Co-Development, Co-Promote and Profit Share Agreement (“Amended Ide-cel CCPS”), a portion of which was recognized as ASC 808 research and development collaboration revenue. Refer to Note 11, Collaborative arrangements, of the Company’s Annual Report on Form 10-K for further discussion on the Amended Ide-cel CCPS.
Ide-cel ex-U.S. Service Revenue
The following table summarizes the revenue recognized related to ide-cel ex-U.S. activities for the three and nine months ended September 30, 2021, and 2020 (in thousands):
For the three months ended September 30,For the nine months ended September 30,
2021202020212020
ASC 606 ide-cel license and manufacturing revenue -
ex-U.S. (1)
$5,314 $6,913 $14,698 $94,733 
(1)    In the second quarter of 2020, the Company recognized $169.2 million as a cumulative catch-up adjustment to revenue recorded in connection with the May 2020 First Amendment to the Amended and Restated Co-Development, Co-Promote and Profit Share Agreement (“Amended Ide-cel CCPS”), a portion of which was recognized as ASC 606 license and manufacturing revenue. Refer to Note 11, Collaborative arrangements, of the Company’s Annual Report on Form 10-K for further discussion on the Amended Ide-cel CCPS.
bb21217
In addition to the activities related to ide-cel, BMS previously exercised its option to obtain an exclusive worldwide license to develop and commercialize bb21217, the second product candidate under the collaboration arrangement with BMS which is further described in Note 11, Collaborative arrangements, to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020.
Under the collaboration arrangement with BMS, the Company has an option to co-develop and co-promote bb21217 within the United States. The Company currently expects it will exercise its option to co-develop and co-promote bb21217 within the United States. The Company’s election to co-develop and co-promote bb21217 within the United States must be made by the substantial completion of CRB-402, the on-going phase 1 clinical trial of bb21217. If elected, the Company expects the responsibilities of the parties to remain largely unchanged, however, the Company expects it will share equally in all profits and losses relating to developing, commercializing and manufacturing bb21217 within the United States and to have the right to participate in the development and promotion of bb21217 within the United States. Under this scenario, the U.S. milestones and royalties payable would be adjusted and the Company would be eligible to receive a $10.0 million development milestone payment related to the development of bb21217 within the United States. The Company would not be eligible for royalties on U.S. sales of bb21217 under this scenario.
In the event the Company does not exercise its option to co-develop and co-promote bb21217, the Company will receive an additional fee in the amount of $10.0 million. Under this scenario, the Company is eligible to receive U.S. milestones of up to $85.0 million for the first indication to be addressed by bb21217 and royalties for U.S. sales of bb21217.
All of the remaining development, regulatory, and commercial milestones related to U.S. development, regulatory and commercialization activities are fully constrained and are therefore excluded from the transaction price. As part of its evaluation of the constraint, the Company considered numerous factors, including the fact that achievement of the milestones is outside the control of the Company and contingent upon the future success of its clinical trials, the licensee’s efforts, or the receipt of regulatory approval. Any consideration related to U.S. sales-based milestones (including royalties) will be recognized when the related sales occur as these amounts have been determined to relate predominantly to the license granted to BMS and therefore are recognized at the later of when the performance obligation is satisfied or the related sales occur.
The transaction price associated with the collaboration arrangement consists of $31.0 million of upfront payments and option payments received from BMS and $1.8 million in variable consideration which represents reimbursement to be received
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from BMS for manufacturing vector and associated payloads through development. The Company has identified two performance obligations with respect to the arrangement with BMS. The initial performance obligation was for research and development services substantially completed in September 2019, associated with the initial phase 1 clinical trial. The Company allocated $5.4 million of consideration to the research and development services performance obligation and fully recognized the consideration through September 2019. The other performance obligation relates to a combined performance obligation for the bb21217 license and vector manufacturing services through development, and the remaining $27.3 million in consideration was allocated to this combined performance obligation. The Company will satisfy this combined performance obligation as the bb21217 manufacturing services are performed. As of September 30, 2021, the Company has not commenced manufacturing and the full amount of the allocated transaction price remains unsatisfied.
The Company re-evaluates the transaction price, including the estimated variable consideration included in the transaction price and all constrained amounts, each reporting period and as uncertain events are resolved or other changes in circumstances occur.
Contract assets and liabilities – ide-cel and bb21217
The Company receives payments from its collaborative partners based on billing schedules established in each contract. Up-front payments and fees are recorded as deferred revenue upon receipt or when due until such time as the Company satisfies its performance obligations under these arrangements. A contract asset is a conditional right to consideration in exchange for goods or services that the Company has transferred to a customer.  Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional.
The following table presents changes in the balances of the Company’s BMS receivables and contract liabilities during the nine months ended September 30, 2021 (in thousands):

Balance at December 31,
2020
Additions
Deductions
Balance at
September 30, 2021
Receivables
$400 $12,661 $(400)$12,661 
Contract liabilities:
Deferred revenue
$26,582 $— $(820)$25,762 
The increase in the receivables balance for the nine months ended September 30, 2021 is driven by amounts owed to the Company from BMS in the period under the settlement terms of the collaboration agreement.
The decrease in deferred revenue during the nine months ended September 30, 2021 is driven by the release of the remaining $0.8 million of deferred revenue associated with the combined performance obligation consisting of the ide-cel license and manufacturing services.
Regeneron
Regeneron Collaboration Agreement
In August 2018, the Company entered into a Collaboration Agreement (the “Regeneron Collaboration Agreement”) with Regeneron pursuant to which the parties will apply their respective technology platforms to the discovery, development, and commercialization of novel immune cell therapies for cancer. In August 2018, following the completion of required regulatory reviews, the Regeneron Collaboration Agreement became effective. Under the terms of the agreement, the parties will leverage Regeneron’s proprietary platform technologies for the discovery and characterization of fully human antibodies, as well as T cell receptors directed against tumor-specific proteins and peptides and the Company will contribute its field-leading expertise in gene therapy. Upon the completion of the separation of its severe genetic disease and oncology programs into two separate, independent publicly traded companies in November 2021, the collaboration agreement with Regeneron was assumed by 2seventy bio.
In accordance with the Regeneron Collaboration Agreement, the parties jointly selected six initial targets and intend to equally share the costs of research up to the point of submitting an IND application for a potential gene therapy product directed to a particular target. Additional targets may be selected to add to or replace any of the initial targets during the five-year research collaboration term as agreed to by the parties.
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Regeneron will accrue a certain number of option rights exercisable against targets as the parties reach certain milestones under the terms of the agreement.  Upon the acceptance of an IND for the first product candidate directed to a target, Regeneron will have the right to exercise an option for co-development/co-commercialization of product candidates directed to such target on a worldwide or applicable opt-in territory basis, with certain exceptions. Where Regeneron chooses to opt-in, the parties will share equally in the costs of development and commercialization and will share equally in any profits or losses therefrom in applicable opt-in territories.  Outside of the applicable opt-in territories, the target becomes a licensed target and Regeneron would be eligible to receive, with respect to any resulting product, milestone payments of up to $130.0 million per product and royalties on net sales outside of the applicable opt-in territories at a rate ranging from the mid-single digits to low-double digits.  A target would also become a licensed target in the event Regeneron does not have an option to such target, or Regeneron does not exercise its option with respect to such target.
Either party may terminate a given research program directed to a particular target for convenience, and the other party may elect to continue such research program at its expense, receiving applicable cross-licenses. The terminating party will receive licensed product royalties and milestone payments on the potential applicable gene therapy products. Where the Company terminates a given research program for convenience, and Regeneron elects to continue such research program, the parties will enter into a transitional services agreement. Under certain conditions, following its opt-in, Regeneron may terminate a given collaboration program and the Company may elect to continue the development and commercialization of the applicable potential gene therapy products as licensed products.
Regeneron Share Purchase Agreement
A Share Purchase Agreement (“SPA”) was entered into by the parties in August 2018.  In August 2018, the closing date of the transaction, the Company issued Regeneron 0.4 million shares of the Company’s common stock, subject to certain restrictions, for $238.10 per share, or $100.0 million in the aggregate.  The purchase price represents $63.0 million worth of common stock plus a $37.0 million premium, which represents a collaboration research advancement, or credit to be applied to Regeneron’s initial 50 percent funding obligation for collaboration research, after which the collaborators will continue to fund ongoing research equally. The collaboration research advancement only applies to pre-IND research activities and is not refundable or creditable against post-IND research activities for any programs where Regeneron exercises their opt-in rights.
Accounting analysis – Regeneron
At the commencement of the arrangement, two units of accounting were identified, which are the issuance of 0.4 million shares of the Company’s common stock and joint research activities during the five-year research collaboration term. The Company determined the total transaction price to be $100.0 million, which comprises $54.5 million attributed to the equity sold to Regeneron and $45.5 million attributed to the joint research activities. In determining the fair value of the common stock at closing, the Company considered the closing price of the common stock on the closing date of the transaction and included a lack of marketability discount because Regeneron received shares subject to certain restrictions.
The Company analyzed the joint research activities to assess whether they fall within the scope of ASC 808, and will reassess this throughout the life of the arrangement based on changes in the roles and responsibilities of the parties. Based on the terms of the arrangement as outlined above, for the collaboration research performed prior to submission of an IND application for a potential gene therapy product, both parties are deemed to be active participants in the collaboration. Both parties are performing research and development activities and will share equally in these costs through IND. Additionally, Regeneron and the Company are exposed to significant risks and rewards dependent on the commercial success of any product candidates that may result from the collaboration.  As such, the collaboration arrangement is deemed to be within the scope of ASC 808.
The $45.5 million attributed to the joint research activities includes the $37.0 million creditable against amounts owed to the Company by Regeneron. The collaboration research advancement will be reduced over time for amounts due to the Company by Regeneron as a result of the parties agreeing to share in the costs of collaboration research equally. The remainder of the amount attributed to the joint research activities will be recognized over the five-year research collaboration term.
Consistent with its collaboration accounting policy, the Company will recognize collaborative arrangement revenue or research and development expense related to the joint research activities in future periods depending on the amounts incurred by each party in a given reporting period.  That is, if the Company’s research costs incurred exceed those research costs incurred by Regeneron in a given quarter, the Company will record collaborative arrangement revenue and reduce the original $37.0 million advance by the amount due from Regeneron until such advancement is fully utilized, after which the Company would record an amount due from Regeneron.  If Regeneron’s research costs incurred exceed those research costs incurred by the Company in a given quarter, the Company will record research and development expense and record a liability for the
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amount due to Regeneron. As of September 30, 2021 and December 31, 2020, the Company has $25.9 million and $30.8 million, respectively, of the amount attributed to the joint research activities remaining to be recognized, which is classified as collaboration research advancement, current portion and collaboration research advancement, net of current portion on the condensed consolidated balance sheets.
The Company recognized $1.7 million and $4.9 million of collaborative arrangement revenue from the Regeneron Collaboration Agreement during the three and nine months ended September 30, 2021, respectively. The Company recognized $2.4 million and $6.2 million of collaborative arrangement revenue from the Regeneron Collaboration Agreement during the three and nine months ended September 30, 2020, respectively.
Resilience
Background
In July 2021, the Company and Resilience US, Inc. (formerly known as Resilience Boston, Inc.), an affiliate of National Resilience, Inc. ("Resilience"), signed an Asset Purchase Agreement (the “Agreement”). As part of the Agreement, and upon the closing of the transaction which occurred in September 2021, Resilience acquired the Company's lentiviral vector manufacturing facility located in Durham, North Carolina and retained staff currently employed at the site. In exchange, the Company received $110.3 million for the facility and related fixed assets.
Upon closing, the Company entered into certain ancillary agreements, including two manufacturing agreements and a license agreement (the “License Agreement”), among others (together referred to as the “Ancillary Agreements”). One manufacturing agreement will support the future manufacturing of lentiviral vector for the Company’s commercial product in collaboration with BMS, ide-cel (the “Commercial Supply Agreement”), while the other will support ongoing manufacturing for lentiviral vector for the Company's development candidates (the “Development Manufacturing Agreement”). The Company also agreed to reimburse Resilience for an amount equal to 50% of the net operating losses of and relating to the manufacturing facility’s business incurred during the twelve-month period ending on the first anniversary of the closing of the transaction, as calculated in accordance with the Agreement, subject to a cap of $15.0 million. In exchange, under the terms of the Development Manufacturing Agreement, the Company will receive up to eight batches of lentiviral vector during the twelve-month period ending on the first anniversary of the closing of the transaction. The License Agreement grants Resilience a worldwide, co-exclusive license to intellectual property controlled by the Company to perform Resilience’s obligations and exercise Resilience’s rights under the supply agreements, and a worldwide, nonexclusive right to offer certain manufacturing services to third-party customers under certain of the Company's intellectual property. Under the terms of the License Agreement, the Company may receive a high single-digit to low double-digit percentage tiered royalty based on Resilience’s gross margins for transactions entered into with parties other than the Company and which the Company's proprietary intellectual property is utilized as part of such transaction.
Under the Commercial Supply Agreement, the Company will pay fully burdened manufacturing cost plus a markup for production of vector. Under the Development Manufacturing Agreement, services, manufacture, and delivery of batches of lentiviral vector during the first twelve months from the execution of this agreement will be free of cost, as the costs of these services are represented by the net operating loss sharing arrangement outlined within the Agreement. As such, the Company has committed to a minimum purchase of at least the Company's 50% share of the net operating losses during the first twelve months from the execution of such agreement. After the first twelve months, the Company will pay Resilience the fully burdened manufacturing cost plus a markup for production of vector.
Upon the completion of the separation of its severe genetic disease and oncology programs into two separate, independent publicly traded companies in November 2021, 2seventy bio was assigned the Agreement and the Ancillary Agreements described above.

Accounting analysis - Resilience
The Company determined that the sale of the manufacturing facility was a sale of a business, as defined by ASC 805, Business Combinations (“ASC 805”). As such, the Company calculated the gain or loss associated with the sale of the business under ASC 810 Consolidations (“ASC 810”). As the sale meets the definition of a business, the Company calculated the gain or loss under ASC 810 as the consideration received less the carrying amount of the net assets and liabilities, including any allocated goodwill, acquired and assumed by Resilience as part of the sale. As part of the computation, the Company determined that approximately $1.1 million of the goodwill balance was attributable to the portion of the reporting unit related to the Durham, North Carolina facility. As such, this amount was disposed of and is reflected in the Company’s condensed, consolidated balance sheets as of September 30, 2021, as part of the sale of the facility.
The Company measured the fair value of the consideration received as the $110.3 million payment received from Resilience, future royalties under the License Agreement and any off-market component of the Ancillary Agreements. This
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assessment was made by comparing the consideration received to comparable transactions for each of the identified Ancillary Agreements. The Company recognized a loss of $2.0 million for the three and nine months ended September 30, 2021, which is reflected within other income (expense) on the condensed, consolidated statements of operations and comprehensive loss related to the sale. In accordance with ASC 450, the Company will recognize future royalties received under the License Agreement in the period the contingencies are resolved and recognized as an adjustment to the consideration received as other income in the condensed, consolidated statements of operations. All future consideration has been excluded from the loss recognized in during the quarter.
11. Royalty and other revenue
The Company has out-licensed intellectual property to various third parties. Under the terms of these agreements, the Company may be entitled to royalties and milestone payments.
In April 2017, the Company entered into a worldwide license agreement with Novartis, which is further described in Note 12, Royalty and other revenue, to the consolidated financial statements included in the Company’s 2020 Annual Report on Form 10-K. Beginning in the fourth quarter of 2017, the Company began recognizing royalty revenue from sales of tisagenlecleucel under the agreement. This license agreement was terminated effective March 2021, at which point in time Novartis was no longer required to pay the Company royalty or other payments on net sales of tisagenlecleucel or any future products. Royalty revenue recognized from sales of tisagenlecleucel is included within royalty and other revenue on the condensed consolidated statement of operations and comprehensive loss.
In April 2017, the Company entered into a worldwide license agreement with GlaxoSmithKline Intellectual Property Development Limited ("GSK"), which was assigned by GSK to Orchard Therapeutics Limited ("Orchard"), effective April 2018. The terms of this license agreement are further described in Note 12, Royalty and other revenue, to the consolidated financial statements included in the Company’s 2020 Annual Report on Form 10-K. During the second quarter of 2021, the Company and Orchard amended this license agreement to remove the potential milestone payments related to marketing authorization of covered products. In addition, the Company and Orchard entered into a new license agreement, under which the Company licensed to Orchard certain lentiviral vector-based technologies. Financial terms of the agreement include a potential milestone payment upon the first commercial sale of a licensed product in a territory, as well as low single-digit royalties on net sales of covered products.
In May 2020, the Company entered into a non-exclusive license agreement with Juno Therapeutics, Inc. (“Juno”), a wholly-owned subsidiary of BMS, related to lentiviral vector technology to develop and commercialize CD-19-directed CAR T cell therapies. Upon regulatory approval of lisocabtagene maraleucel during the first quarter of 2021, the Company received a $2.5 million milestone payment from Juno, which is included within royalty and other revenue. Royalty revenue recognized from sales of lisocabtagene maraleucel is also included within royalty and other revenue on the condensed consolidated statement of operations and comprehensive loss.
The Company may also be obligated to pay third-party licensors as a result of revenue recognized under out-license agreements, which is included within cost of royalty and other revenue on the condensed consolidated statement of operations and comprehensive loss.
During the nine months ended September 30, 2021, the Company recognized an immaterial amount of product revenue related to the sale of beti-cel in the European Union and the related cost of goods sold, which is included within royalty and other revenue and cost of royalty and other revenue, respectively.

12. Equity
In September 2021, the Company entered into an equity purchase agreement with certain investors, pursuant to which the Company agreed to sell and issue, in a private placement offering of securities, an aggregate of (i) 2.3 million shares of the Company’s common stock at a purchase price per share of $16.50 and (ii) pre-funded warrants to purchase up to 2.3 million shares of common stock (the “Pre-Funded Warrants”) at an effective price of $16.49 per share ($16.49 paid to the Company upon the closing of the offering and $0.01 to be paid upon exercise of such Pre-Funded Warrants). This resulted in aggregate gross proceeds to the Company of approximately $75.0 million, before deducting placement agent fees and other offering expenses payable by the Company. The Pre-Funded Warrants can be exercised at any time or times on or after September 7, 2021, until exercised in full. The warrants have been evaluated to determine the appropriate accounting and classification pursuant to ASC 480 and ASC 815. Based on the terms of the Pre-Funded Warrants, management concluded that they should
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be classified within stockholder's equity on its condensed consolidated balance sheets, with no subsequent remeasurement as long as the underlying warrant agreements are not modified or amended.
13. Stock-based compensation
In January 2021 and 2020, the number of shares of common stock available for issuance under the 2013 Stock Option and Incentive Plan (“2013 Plan”) was increased by approximately 2.7 million and 2.2 million shares, respectively, as a result of the automatic increase provision of the 2013 Plan. As of September 30, 2021, the total number of shares of common stock available for issuance under the 2013 Plan was approximately 2.5 million.
Stock-based compensation expense
The Company recognized stock-based compensation expense totaling $28.3 million and $101.9 million for the three and nine months ended September 30, 2021, respectively. The Company recognized stock-based compensation expense totaling $38.8 million and $123.6 million for the three and nine months ended September 30, 2020, respectively. Stock-based compensation expense by award type included within the condensed consolidated statements of operations and comprehensive loss was as follows (in thousands):
For the three months ended September 30,For the nine months ended September 30,

2021202020212020
Stock options
13,688 22,723 51,671 73,236 
Restricted stock units
10,335 11,935 33,601 37,931 
Employee stock purchase plan and other4,315 4,160 16,591 12,473 
28,338 38,818 101,863 123,640 
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 September 30,For the nine months ended September 30,
2021202020212020
Research and development$13,688 $18,837 $49,324 $58,204 
Selling, general and administrative14,650 19,981 52,539 65,436 
$28,338 $38,818 $101,863 $123,640 
Stock-based compensation of $0.1 million and $0.8 million was capitalized into inventory for the three and nine months ended September 30, 2021, respectively. Stock-based compensation of $0.3 million and $0.4 million was capitalized into inventory for the three and nine months ended September 30, 2020, respectively. As of September 30, 2021, the Company had approximately $179.1 million of unrecognized stock-based compensation expense, which is expected to be recognized over a weighted-average period of approximately 2.1 years.
Unrestricted stock awards
During the first quarter of 2021, the Company granted 0.4 million unrestricted stock awards to employees as part of its 2020 annual incentive program. In addition, the Company implemented a retention program designed to incentivize and retain employees through the separation of its severe genetic disease and oncology programs. Under the retention program, employees are entitled to a one-time bonus payment, consisting of both a cash payment and unrestricted stock awards, with the condition that the employee remains employed at the end of 2021. For the three and nine months ended September 30, 2021, respectively, the Company recognized $3.1 million and $27.1 million in expense related to this program, which includes $1.6 million and $13.6 million in stock compensation expense related to the anticipated grants of stock. During the third quarter of 2021, the Company granted 0.1 million unrestricted stock awards, related to the retention program, to those employees impacted by the orderly wind down of the Company's operations in Europe.
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Stock option activity
The following table summarizes the stock option activity under the Company’s equity award plans:
Shares
(in thousands)
Weighted-
average
exercise price
per share
Outstanding at December 31, 20206,262 $105.02 
Granted
1,188 $27.85 
Exercised
(219)$6.82 
Canceled, forfeited, or expired
(1,557)$104.89 
Outstanding at September 30, 20215,674 $92.68 
Exercisable at September 30, 20213,527 $111.09 
Vested and expected to vest at September 30, 20215,373 $92.68 
During the nine months ended September 30, 2021, 0.2 million stock options were exercised, resulting in total proceeds to the Company of $1.5 million.
Restricted stock unit activity
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 balance at December 31, 20201,495 $102.34 
Granted
3,268 $26.81 
Vested
(501)$114.58 
Forfeited
(724)$60.33 
Unvested balance at September 30, 20213,538 $39.43 
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 include an additional 1.4 million shares of the Company’s common stock available to participating employees. During the nine months ended September 30, 2021 and 2020, respectively, 0.1 million shares and less than 0.1 million shares of common stock were issued under the 2013 ESPP.
14. 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 and expense recognized during the three and nine months ended September 30, 2021 is due to income taxes associated with foreign earnings.
In March 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted. This law temporarily suspends and adjusts certain law changes enacted in the Tax Cuts and Jobs Act in 2017. In December 2020, the Consolidated Appropriations Act was enacted. This law modified the employee retention credit under the CARES Act and created credit extenders for certain credits. In March 2021, the American Rescue Plan Act (“ARPA”) was enacted and contained extenders to the refundable employee retention credit and provided further limitations to executive compensation effective for tax years beginning after 2026. The Company has concluded that the provisions in the CARES Act, Consolidated Appropriations Act, and ARPA have an immaterial impact on the Company’s income tax expense due to its cumulative losses and full valuation allowance position.
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15. 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 and nine months ended September 30,
20212020
Outstanding stock options
5,674 6,363 
Restricted stock units
3,538 1,519 
ESPP shares and other946 285 
10,158 8,167 

16. Reduction in Workforce
In April 2021, the Company announced its decision to withdraw ZYNTEGLO from the German market because reimbursement negotiations in Germany did not result in a price for ZYNTEGLO that reflects the value of the one-time gene therapy with potential life-long benefit for people living with TDT. A total of approximately 50 employees were impacted by this reduction. During the three months ended June 30, 2021, the Company substantially completed the implementation of this reduction and, in accordance with ASC 420, Exit and Disposal Activities, and ASC 712, Nonretirement Postemployment Benefits, recorded approximately $4.6 million of costs including severance, the portion of the employees' 2021 retention bonuses to be paid in cash, and the pro rata portion of the employees' 2021 performance bonus.
In July 2021, the Company made the decision to focus its efforts on the U.S. market for beti-cel, eli-cel, and LentiGlobin for SCD and is executing an orderly wind down of its European operations. A total of approximately 90 employees were impacted by the reduction in workforce associated with this decision. The Company recorded $20.2 million of expense, in accordance with the related accounting standards mentioned above, for the affected employees. This amount includes expense for severance, the pro rata portion of the employees' 2021 performance bonus, the portion of the European employees' 2021 retention bonuses to be paid in cash, and the portion of retention bonuses to be paid in unrestricted stock awards, which were granted on September 30, 2021. As described in Note 13, Stock-based compensation, the Company recorded $2.5 million of costs associated with the grant of unrestricted stock awards to affected employees as a one time payment. All costs associated with the April 2021 and July 2021 reductions are reflected within restructuring expenses in the Company's condensed consolidated statements of operations and comprehensive loss.
The Company expects that substantially all accrued restructuring charges will be paid in cash by March 31, 2022.
The following table summarizes the accrued liabilities activity recorded in connection with the reduction in workforce for the nine months ended September 30, 2021:
ChargesAmount paidAmounts accrued at September 30, 2021
April 2021 reduction$4,625 $(4,602)$23 
July 2021 reduction20,175 (546)19,629 
Total$24,800 $(5,148)$19,652 
During the three and nine months ended September 30, 2021, the Company recorded approximately $20.2 million and approximately $24.8 million, respectively, in restructuring expenses. During the three months ended September 30, 2021, the Company recorded $2.5 million in research and development expenses and selling, general and administrative expenses related to the grant of unrestricted stock awards to affected employees.
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17. Subsequent events
On November 4, 2021, the Company completed the separation of its oncology portfolio and programs from its severe genetic disease portfolio and programs into a separate publicly traded company, 2seventy bio. The separation was effected by means of a distribution of all of the outstanding shares of common stock of 2seventy bio on the basis of one share of 2seventy bio common stock for every three shares of bluebird bio common stock issued and outstanding on October 19, 2021, the record date for the distribution. The distribution was effected at 12:01 a.m. on November 4, 2021. On November 3, 2021, in connection with the separation, bluebird bio and 2seventy bio executed a separation agreement, a tax matters agreement, an employee matters agreement, an intellectual property license agreement, and transition services agreements, under which both companies will temporarily provide and receive certain services from each other. These agreements effectuated the separation and govern 2seventy bio's relationship with bluebird bio after the distribution. As a result of the distribution and the separation, 2seventy bio is an independent, publicly traded company, effective as of November 4, 2021.
In November 2021, the Company entered into a lease agreement with Assembly Row 5B, LLC ("Landlord") for office space located at 455 Grand Union Boulevard in Somerville, Massachusetts to serve as the Company's future headquarters. Under the terms of the arrangement, the Company will lease approximately 61,180 square feet starting at an annual rate of $45 per square foot, subject to annual increases of 2.5%, plus operating expenses and taxes. In addition, the Company will be eligible for a tenant work allowance of $160 per rentable square foot of the premises. The lease will commence on the date on which the Landlord tenders possession of the premises to the Company with any tenant work required to be performed by the Landlord substantially completed, which is anticipated to occur in the first quarter of 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, which was filed with the Securities and Exchange Commission, or the SEC, on February 23, 2021.
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. 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, 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, following marketing approval, potentially transformative gene therapies for severe genetic diseases. We believe that gene therapy for severe genetic diseases has the potential to change the way patients living with these diseases are treated by addressing the underlying genetic defect that is the cause of their disease, rather than offering treatments that only address their symptoms. Our gene therapy programs in severe genetic diseases include programs for transfusion-dependent β-thalassemia (TDT), sickle cell disease (SCD), and cerebral adrenoleukodystrophy (CALD). We also expect to make focused investments in research and development efforts on optimizing our existing programs as well as on pipeline programs in severe genetic diseases
Based on our discussions with the FDA, we believe that we may be able to seek approval for eli-cel for the treatment of patients with CALD on the basis of our clinical data from our ongoing Starbeam study, safety data from our ongoing ALD-104 study, and the completed ALD-103 observational study. Our clinical studies of eli-cel are currently on clinical hold due to diagnoses of myelodysplastic syndrome likely mediated by Lenti-D lentiviral vector insertion. We believe that eli-cel continues to present a favorable benefit-risk profile for patients with CALD and, the BLA filing for eli-cel for the treatment of patients with CALD is expected for the end of 2021.
Based on our discussions with the FDA, we believe that we may be able to seek approval for beti-cel for the treatment of patients with TDT on the basis of our clinical data from our HGB-207 and HGB-212 studies supported by data from the long-term follow up protocol, as well as the earlier HGB-205 and HGB-204 studies. In September 2021, we completed the submission of our BLA to the FDA for beti-cel in adult, adolescent, and pediatric patients with β-thalassemia who require regular blood cell transfusions, across all genotypes. Based on our discussions with the FDA, we believe that we may be able to seek accelerated approval for LentiGlobin for SCD in the United States on the basis of clinical data from Group C of our ongoing HGB-206 clinical study, and with our ongoing HGB-210 clinical study providing confirmatory data for full approval.
In August 2021 we announced that we intend to focus our severe genetic disease business on the U.S. market and further invest in research and development for our core programs in TDT, SCD, and CALD in that market. As part of our strategy to focus on the U.S. market, we are executing an orderly wind down of our European operations, which we anticipate will result in a reduction of selling, general and administrative costs and will have an impact on our excess inventory analysis, which is based on forecasted consumption levels driven by sales forecasts.
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On November 4, 2021, we completed the separation of our severe genetic disease and oncology programs into two separate, independent publicly traded companies, bluebird bio, Inc. and 2seventy bio, Inc., a Delaware corporation and wholly-owned subsidiary prior to the separation. bluebird bio, Inc. intends to retain focus on our severe genetic disease programs and 2seventy bio, Inc. is expected to focus on the separated oncology programs. In collaboration with BMS, 2seventy bio is commercializing ide-cel and developing bb21217 as treatments for multiple myeloma, a hematologic malignancy that develops in the bone marrow and is fatal if untreated. 2seventy bio is co-developing and co-promoting ide-cel as ABECMA in the United States with BMS and has exclusively licensed to BMS the development and commercialization rights for ide-cel outside of the United States. It has exclusively licensed the development and commercialization rights for the bb21217 product candidate to BMS, with an option for 2seventy bio to elect to co-develop and co-promote bb21217 within the United States. In March 2021, BMS received marketing approval from the FDA for ide-cel, marketed as ABECMA, as a treatment of adult patients with relapsed or refractory multiple myeloma after four or more prior lines of therapy, including an immunomodulatory agent, a proteasome inhibitor, and an anti-CD38 monoclonal antibody. Sales of ABECMA by BMS began in the second quarter of 2021. The results for the period ended September 30, 2021 reflect the combined results of the Company and 2seventy bio prior to the effectiveness of the separation, and the forward-looking statements contained within this quarterly report on Form 10-Q pertain solely to the Company, unless otherwise noted.
Since our inception in 1992, we have devoted substantially all of our resources to our development efforts relating to our product candidates, including activities to manufacture product candidates in compliance with good manufacturing practices, or GMP, to conduct clinical studies of our product candidates, to provide selling, general and administrative support for these operations and to protect our intellectual property. We have generated immaterial revenues 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, and through collaborations.
As of September 30, 2021, we had cash, cash equivalents and marketable securities of approximately $970.7 million. We have never been profitable and have incurred net losses in each year since inception. Our net loss was $216.8 million and $664.3 million for the three and nine months ended September 30, 2021, respectively, and our accumulated deficit was $3.56 billion as of September 30, 2021. 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. We expect our expenses will increase in connection with our ongoing and planned activities, as we:
fund activities related to the potential commercial launches of our late-stage product candidates in the United States;
add personnel to support our product development and any future commercialization efforts;
seek regulatory approval for our product candidates;
manufacture clinical study materials and establish the infrastructure necessary to support and develop large-scale manufacturing capabilities;
conduct clinical studies for our clinical programs in β-thalassemia and SCD, and advance our preclinical programs into clinical development;
increase research and development-related activities for the discovery and development of product candidates and technologies in severe genetic diseases; and
incur costs related to the separation of our portfolio of programs and product in severe genetic disease and oncology into two separate, independent publicly traded companies.
In March 2021, we placed a portion our internal lentiviral vector manufacturing facility into service, while still completing qualification of the remaining portion. In September 2021, we completed the sale of this lentiviral vector manufacturing facility to National Resilience, Inc. Currently all of our manufacturing activities are contracted out to third parties. Additionally, we currently utilize third-party contract research organizations, or CROs, to carry out our clinical development activities. As we seek to obtain regulatory approval for our product candidates and begin commercialization following marketing approval if obtained, we expect to incur significant commercialization expenses as we prepare for and begin product sales, marketing, commercial manufacturing, and distribution at such time. Accordingly, until we generate significant revenues from product sales at such time, we will 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.
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Because of the numerous risks and uncertainties associated with product development, 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. Even if we are able to generate revenues from the sale of our products when and if approved in the United States, 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.
Business update
Beginning in late 2019, the outbreak of a novel strain of coronavirus (COVID-19) has evolved into a global pandemic. As a result, we continue to experience disruptions and increased risk in our operations and those of third parties upon whom we rely, which may materially and adversely affect our business. These include disruptions and risks related to the conduct of our clinical trials, manufacturing, and commercialization efforts, as policies at various clinical sites and federal, state, local and foreign laws, rules and regulations continue to evolve, including quarantines, travel restrictions, and direction of healthcare resources toward pandemic response efforts. The COVID-19 pandemic has impacted the timing of our ongoing clinical studies, with the result of slower patient enrollment and treatment in our clinical studies and delays in post-treatment follow up visits, the impact of which has varied by clinical study and by program. It has also affected our activities with and operations at our third party manufacturers. It is unknown how long these disruptions could continue. The COVID-19 pandemic has also impacted the timing of our regulatory interactions for marketing approval across our programs. As a result of the demands upon healthcare regulatory authorities, review, inspection, and other activities related to review of regulatory submissions in drug development may be impacted, and may result in delays for an unknown period of time.
We continue to evaluate the impact of the COVID-19 global pandemic on patients, healthcare providers and our employees, as well as our operations and the operations of our business partners and healthcare communities. However, the ultimate impact of the COVID-19 pandemic on our business operations is highly uncertain and subject to change and will depend on future developments which are difficult to predict.
As of September 30, 2021, we had cash, cash equivalents and marketable securities of $970.7 million. As of completion of the separation, we had restricted cash, cash and cash equivalents, and marketable securities of approximately $518.5 million. We expect our cash, cash equivalents and marketable securities, subsequent to the amount funded to 2seventy bio, will be sufficient to fund current planned operations for at least the next twelve months from the date of issuance of these financial statements. We anticipate reduced 2022 spending, including projected savings through the move of our headquarters to Assembly Row in Somerville, Massachusetts, and the orderly wind down of our European operations. This, together with other anticipated cash inflows, which include both the potential sale of priority review vouchers that would be issued with anticipated U.S. regulatory approvals for BLAs for beti-cel and eli-cel, and the pursuit of additional cash resources through public or private equity or debt financings, are expected to further strengthen our financial condition.
Financial operations overview
Revenues
To date, we have generated immaterial revenues from the sale of products. Our revenues have primarily been derived from collaboration arrangements, out-licensing arrangements, research fees, and grant revenues.
To date, revenue recognized under our collaborative arrangements has been primarily generated from collaboration arrangement with BMS which has been assigned to 2seventy bio as part of the separation. The terms of the arrangement with respect to ide-cel contain multiple promised goods or services, which include at inception: (i) research and development services, (ii) a license to ide-cel, and (iii) manufacture of vectors and associated payload for incorporation into ide-cel under the license.  These performance obligations were fully satisfied during the first quarter of 2021. As of September 2017, the collaboration also included the following promised goods or services with respect to bb21217: (i) research and development services, (ii) a license to bb21217, and (iii) manufacture of vectors and associated payload for incorporation into bb21217 under the license.  We entered into an agreement with BMS to co-develop and co-promote ide-cel in March 2018, which was subsequently amended in May 2020, in which both parties will share equally in U.S. costs and profits.  Revenue from our collaborative arrangements is recognized as the underlying performance obligations are satisfied.
We analyze our collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities.  This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement.  For collaboration arrangements within the scope of ASC 808, we first determine which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-
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customer relationship and therefore within the scope of ASC 606, Revenue from Contracts with Customers (“Topic 606” or "ASC 606"). For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to Topic 606.  
In arrangements where we do not deem our collaborator to be our customer, payments to and from our collaborator are presented in our condensed consolidated statements of operations based on the nature of the payments, as summarized in the table and further described below.
Nature of PaymentStatement of Operations Presentation
Our share of profits in connection with commercialization of productsCollaborative arrangement revenue
Our share of losses in connection with commercialization of productsShare of collaboration loss
Net reimbursement of our research and development expensesCollaborative arrangement revenue
Net reimbursement of our research and development expensesResearch and development expense
Where our collaborator is the principal in the product sales, we recognize our share of any profits or losses, representing net product sales less cost of goods sold and shared commercialization and other expenses, in the period in which such underlying sales occur and costs are incurred by our collaborator. We also recognize our share of costs arising from research and development activities performed by our collaborators in the period our collaborators incur such expenses.
Non-refundable license fees paid to us are recognized as revenue upon delivery of the license provided there are no unsatisfied performance obligations in the arrangement.  License revenue has historically been generated from out-license agreements, under which we may also recognize revenue from potential future milestone payments and royalties.
For arrangements with licenses of intellectual property that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which the royalty has been allocated has been satisfied.
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 CROs and clinical sites that conduct our clinical studies;
costs of acquiring, developing, and manufacturing inventory;
reimbursable costs to our partners for collaborative activities;
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 up-front license payments;
costs associated with our regulatory, quality assurance and quality control operations; and
amortization of intangible assets.
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 if, when, or to what extent we will generate revenues from the commercialization and sale of 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:
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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 lentiviral vector 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 invest in research and development for the foreseeable future as we continue to advance the development of beti-cel, eli-cel, and LentiGlobin for SCD, and conduct research and development activities in severe genetic diseases. Our research and development expenses include expenses associated with the following activities:
for the clinical studies of beti-cel, including our Northstar-2 Study (HGB-207), our Northstar-3 Study (HGB-212), and the associated long-term follow-up protocol;
for the clinical studies of LentiGlobin for SCD, including our HGB-206 study, our HGB-210 study, and the associated long-term follow-up protocol;
for the clinical studies of eli-cel, including our ALD-102 study, our ALD-104 study, and the associated long-term follow-up protocol; and
research and development activities for pipeline programs and technologies in our severe genetic disease platform.
The costs of conducting these studies include the costs related to the manufacture of clinical study materials.
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, costs associated with our general discovery platform improvements, 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:
For the
three months ended September 30,
For the
nine months ended September 30,
2021202020212020
(in thousands)
(in thousands)
beti-cel$13,541 $12,083 $41,901 $49,077 
LentiGlobin for SCD14,365 14,851 43,557 45,611 
eli-cel11,774 11,228 41,877 34,260 
ide-cel10,879 25,856 56,451 78,097 
bb212171,125 7,080 5,737 20,106 
Preclinical programs17,304 13,401 45,522 41,547 
Total direct research and development expense68,988 84,499 235,045 268,698 
Employee-and contractor-related expenses23,957 15,360 69,635 49,170 
Stock-based compensation expense13,688 18,837 49,324 58,204 
Laboratory and related expenses(1)
3,063 2,747 9,668 8,329 
License and other collaboration expenses(1)
1,181 1,053 3,386 11,980 
Facility expenses19,900 16,668 60,885 51,221 
Other expenses650 1,267 1,671 3,260 
Total other research and development expenses62,439 55,932 194,569 182,164 
Total research and development expense$131,427 $140,431 $429,614 $450,862 
(1)Prior to the fourth quarter of 2020, costs within these categories were disclosed in the aggregate as "platform-related expenses."
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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.
Share of collaboration loss
Share of collaboration loss represents our share of net loss arising from product sales less cost of goods sold and shared commercial costs and other expenses related to the commercialization of a product where the collaborator is the principal in the product sales.
Cost of royalty and other revenue
Cost of royalty and other revenue consists of expense associated with amounts owed to third party licensors as a result of revenue recognized under our out-license arrangements, reserves for excess inventory, and an immaterial amount of impairment of in-licensed rights and cost of goods sold related to product revenue.
Restructuring expenses
We record costs and liabilities associated with exit and disposal activities in accordance with ASC 420, Exit and Disposal Cost Obligations, and other costs and liabilities 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 liabilities are incurred. We evaluate and adjust costs as appropriate for changes in circumstances as additional information becomes available.
Change in fair value of contingent consideration
In June 2014, we acquired Precision Genome Engineering, Inc., or Pregenen.  The agreement provided for up to $135.0 million in future contingent cash payments by us upon the achievement of certain preclinical, clinical and commercial milestones related to the Pregenen technology.
As of September 30, 2021, there are $99.9 million in future contingent cash payments related to commercial milestones. We estimate future contingent cash payments have a fair value of $2.0 million as of September 30, 2021, which are classified within accrued expenses and other current liabilities and other non-current liabilities on our condensed consolidated balance sheets.
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 gains and losses on equity securities held by us, gains and losses on disposal of assets, and gains and losses on foreign currency.
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. 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
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assumptions or conditions. In making estimates and judgments, management employs critical accounting policies. During the nine months ended September 30, 2021, there were no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 23, 2021, 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.
Results of Operations
Comparison of the three months ended September 30, 2021 and 2020:
For the three months ended
September 30,
20212020
Change
(in thousands)
Revenue:
Service revenue$6,312 $13,352 $(7,040)
Collaborative arrangement revenue14,831 2,422 12,409 
Royalty and other revenue1,534 3,499 (1,965)
Total revenues22,677 19,273 3,404 
Operating expenses:
Research and development131,427 140,431 (9,004)
Selling, general and administrative68,277 68,046 231 
Cost of royalty and other revenue19,704 1,318 18,386 
Restructuring expenses20,175 — 20,175 
Change in fair value of contingent consideration48 (828)876 
Total operating expenses239,631 208,967 30,664 
Loss from operations(216,954)(189,694)(27,260)
Interest income, net319 1,964 (1,645)
Other expense, net(294)(6,686)6,392 
Loss before income taxes(216,929)(194,416)(22,513)
Income tax benefit (expense)113 (329)442 
Net loss$(216,816)$(194,745)$(22,071)
Revenues. Total revenue was $22.7 million for the three months ended September 30, 2021, compared to $19.3 million for the three months ended September 30, 2020. The increase of $3.4 million was primarily attributable to collaborative arrangement revenue recognized under our collaboration arrangement with BMS, driven by our share of ide-cel profits for the third quarter of 2021.
Research and development expenses. Research and development expenses were $131.4 million for the three months ended September 30, 2021, compared to $140.4 million for the three months ended September 30, 2020. The overall decrease of $9.0 million was primarily attributable to the following:
$10.1 million of decreased collaboration research funding costs, primarily driven by a decrease in expense recognized under our collaboration arrangement with BMS due to decreased research and development costs as a result of ide-cel commercialization;
$5.4 million of decreased stock-compensation expense due to attrition and an overall decrease in the value of awards;
$4.4 million of decreased clinical trial costs; and
$3.4 million of decreased manufacturing expenditures, primarily driven by an overall decrease in manufacturing activity and partially offset by increased manufacturing capacity and maintenance fees incurred under an agreement with one of our contract manufacturing organizations.
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These decreased costs were partially offset by:
$6.6 million of increased employee compensation, benefit, and other headcount related expenses, primarily driven by our employee retention program which commenced during the first quarter of 2021;
$5.2 million of increased license and milestone fees; and
$4.0 million of increased information technology and facility-related costs.
Selling, general and administrative expenses. Selling, general and administrative expenses were $68.3 million for the three months ended September 30, 2021, compared to $68.0 million for the three months ended September 30, 2020. The overall increase of $0.2 million was primarily attributable to $6.8 million of increased consulting and professional fees associated with the on-going project to separate our severe genetic disease and oncology programs into two separate, independent publicly traded companies.
These increased costs were partially offset by:
$4.4 million of decreased stock-based compensation expense due to attrition and an overall decrease in the value of awards; and
$1.9 million of decreased commercial-readiness costs due to our decision to focus our efforts on the U.S. market for beti-cel, eli-cel, and LentiGlobin for SCD.
Cost of royalty and other revenue. Cost of royalty and other revenue was $19.7 million for the three months ended September 30, 2021, compared to $1.3 million for the three months ended September 30, 2020. The increase is primarily attributable to reserves for excess inventory recognized during the second and third quarters of 2021 based on forecasted consumption levels as of September 30, 2021.
Restructuring expenses. The increase in restructuring expenses is primarily related to the costs associated with the reduction in workforce as a result of our decision to wind down our European operations.
Change in fair value of contingent consideration. The change in fair value of contingent consideration was primarily due to the change in significant unobservable inputs used in the fair value measurement of contingent consideration, including the probabilities of successful achievement of clinical and commercial milestones and discount rates.
Interest income, net. The decrease in interest income, net was primarily related to decreased interest income earned on investments due to an overall decrease in investments.
Other expense, net. The decrease in other expense, net was primarily related to changes in fair value of equity securities.

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Comparison of the nine months ended September 30, 2021 and 2020:
For the nine months ended September 30,
20212020
Change
(in thousands)
Revenue:
Service revenue$17,544 $108,542 $(90,998)
Collaborative arrangement revenue18,020 114,398 (96,378)
Royalty and other revenue7,379 17,086 (9,707)
Total revenues42,943 240,026 (197,083)
Operating expenses:
Research and development429,614 450,862 (21,248)
Selling, general and administrative229,708 209,922 19,786 
Share of collaboration loss10,071 — 10,071 
Cost of royalty and other revenue37,286 3,897 33,389 
Restructuring expenses24,800 — 24,800 
Change in fair value of contingent consideration464 (5,591)6,055 
Total operating expenses731,943 659,090 72,853 
Loss from operations(689,000)(419,064)(269,936)
Interest income, net1,468 10,258 (8,790)
Other income (expense), net23,375 (9,582)32,957 
Loss before income taxes(664,157)(418,388)(245,769)
Income tax expense(169)(433)264 
Net loss$(664,326)$(418,821)$(245,505)
Revenues. Total revenue was $42.9 million for the nine months ended September 30, 2021, compared to $240.0 million for the nine months ended September 30, 2020. The decrease of $197.1 million was primarily attributable to a cumulative catch-up adjustment to revenue recorded in connection with the May 2020 BMS contract modification in the second quarter of 2020.
Research and development expenses. Research and development expenses were $429.6 million for the nine months ended September 30, 2021, compared to $450.9 million for the nine months ended September 30, 2020. The overall decrease of $21.2 million was primarily attributable to the following:
$37.5 million of decreased manufacturing-related expenditures, primarily driven by the capitalization of commercial inventory in the first half of 2021 and an overall decrease in manufacturing activity. This decrease was partially offset by increased manufacturing capacity and maintenance fees incurred under an agreement with one of our contract manufacturing organizations;
$9.3 million of decreased stock-based compensation expense due to attrition and an overall decrease in the value of awards; and
$8.8 million of decreased clinical trial costs, primarily driven by the clinical hold from February 2021 to June 2021 in our studies of LentiGlobin for SCD.
These decreased costs were partially offset by:
$19.5 million of increased employee compensation, benefit, and other headcount related expenses, primarily driven by our employee retention program which commenced during the first quarter of 2021; and
$14.8 million of increased collaboration research funding costs, which represents our share of research and development costs under our collaboration with BMS. The increase is also attributable to our recognition of collaborative arrangement revenue rather than collaboration expense in the second quarter of 2020 as a result of the May 2020 contract modification with BMS.
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Selling, general and administrative expenses. Selling, general and administrative expenses were $229.7 million for the nine months ended September 30, 2021, compared to $209.9 million for the nine months ended September 30, 2020. The overall increase of $19.8 million was primarily attributable to the following:
$16.5 million of increased employee compensation, benefit, and other headcount related expenses, primarily driven by our employee retention program which commenced during the first quarter of 2021; and
$21.0 million of increased consulting and professional fees associated with the on-going project to separate our severe genetic disease and oncology programs into two separate, independent publicly traded companies.
These increased costs were partially offset by:
$11.0 million of decreased stock-based compensation expense due to attrition and an overall decrease in the value of awards; and
$3.8 million of decreased commercial readiness costs, driven by the temporary suspension of the marketing of beti-cel in light of safety events reported in February 2021 in the HGB-206 study of LentiGlobin for SCD.
Share of collaboration loss. Share of collaboration loss represents our share of net loss arising from the commercialization of ide-cel, under the BMS collaboration. BMS is the principal seller in the sales of ide-cel and they received marketing approval for ide-cel in March 2021. Net loss from commercialization represents our share of gross product revenue from product sales less cost of goods sold and selling costs offset by the reimbursement of a portion of commercial related costs incurred by us during the quarter.
Cost of royalty and other revenue. Cost of royalty and other revenue was $37.3 million for the nine months ended September 30, 2021, compared to $3.9 million for the nine months ended September 30, 2021. The increase is primarily attributable to reserves for excess inventory recognized during the second and third quarters of 2021 based on forecasted consumption levels as of September 30, 2021.
Restructuring expenses. The increase in restructuring expenses is primarily related to the costs associated with the reduction in workforce as a result of our decision to wind down our European operations.
Change in fair value of contingent consideration. The change in fair value of contingent consideration was primarily due to the change in significant unobservable inputs used in the fair value measurement of contingent consideration, including the probabilities of successful achievement of clinical and commercial milestones and discount rates.
Interest income, net. The decrease in interest income, net was primarily related to decreased interest income earned on investments due to an overall decrease in investments.
Other income (expense), net. The change in other income (expense), net was primarily related to the gain recognized on equity securities.
Liquidity and Capital Resources
As of September 30, 2021, we had cash, cash equivalents and marketable securities of approximately $970.7 million. As of completion of the separation, we had restricted cash, cash and cash equivalents, and marketable securities of approximately $518.5 million. We expect our cash, cash equivalents, and marketable securities, net of the amount funded to 2seventy bio, will be sufficient to fund planned operations for at least the next twelve months from the date of issuance of these financial statements. We anticipate reduced 2022 spending, including projected savings through the move of our headquarters to Assembly Row in Somerville, Massachusetts, and the orderly wind down of our European operations. This, together with other anticipated cash inflows, which include both the potential sale of priority review vouchers that would be issued with anticipated U.S. regulatory approvals of BLAs for beti-cel and eli-cel, and the pursuit of additional cash resources through public or private equity or debt financings, are expected to further strengthen our financial condition. 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 September 30, 2021, our funds are primarily held in U.S. Treasury securities, U.S. government agency securities, equity securities, corporate bonds, commercial paper, and money market accounts.
We have incurred losses and cumulative negative cash flows from operations since our inception in April 1992, and as of September 30, 2021 we had an accumulated deficit of $3.56 billion. We expect that our research and development and selling, general and administrative expenses will continue to increase and, as a result, we will need additional capital to fund our operations, which we may raise through public or private equity or debt financings, strategic collaborations, or other sources.
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The likelihood of our long-term success must be considered in light of the expenses, difficulties, and potential delays to be encountered in the development and commercialization of new pharmaceutical products, competitive factors in the marketplace and the complex regulatory environment in which we operate. We may never achieve significant revenue or profitable operations.
Sources of Liquidity
Cash Flows
The following table sets forth the primary sources and uses of cash for each of the periods below:
For the nine months ended September 30,
20212020
(in thousands)
Net cash used in operating activities
$(495,914)$(315,158)
Net cash provided by (used in) investing activities501,625 (233,161)
Net cash provided by financing activities
80,060 545,283 
Net increase in cash, cash equivalents and restricted cash$85,771 $(3,036)
Cash Flows from Operating Activities. The $180.8 million increase in cash used in operating activities for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was primarily due to the increase in net loss during this period of $245.5 million, which was driven by a cumulative catch-up adjustment to revenue recorded in connection with the May 2020 BMS contract modification in the second quarter of 2020. Cash used in operating activities was also driven by changes in operating assets and liabilities.
Cash Flows from Investing Activities. The $734.8 million increase in cash provided by investing activities for the nine months ended September 30, 2021 was primarily due to a decrease in cash used to purchase marketable securities of $543.0 million, and increase in proceeds from maturities of marketable securities of $79.9 million compared to the nine months ended September 30, 2020. It was also driven by the sale of the Durham, North Carolina manufacturing facility, which resulted in proceeds of $110.3 million.
Cash Flows from Financing Activities. The $465.2 million decrease in cash provided by financing activities was primarily driven by a decrease of $541.5 million in proceeds from public offering of common stock, net of issuance costs, offset by an increase in proceeds from issuance of common stock and warrants of $75.0 million during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.
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, there have been no material changes to our contractual obligations and commitments as included in our Annual Report on Form 10-K, which was filed with the SEC on February 23, 2021.
Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
We are exposed to market risk related to changes in interest rates. As of September 30, 2021 and December 31, 2020, we had cash, cash equivalents and marketable securities of $970.7 million and $1.27 billion, respectively, primarily invested in U.S. government agency securities and Treasuries, equity securities, corporate bonds, commercial paper and money market accounts invested in U.S. government agency securities. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments 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 September 30, 2021, the net fair value of our interest-sensitive marketable securities would have resulted in a hypothetical decline of approximately $4.1 million.
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Item 4. Controls and Procedures
Management’s Evaluation of our Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
As of September 30, 2021, our management, with the participation of our principal executive officer and principal financial officer, 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). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive officer and principal financial officer have concluded based upon the evaluation described above that, as of September 30, 2021, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
During the quarter ended September 30, 2021 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. While the outcome of these proceedings and claims cannot be predicted with certainty, as of September 30, 2021, we were not party to any legal or arbitration proceedings that may have, or have had in the recent past, significant effects on our financial position. 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 executive 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.
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 Annual Report on Form 10-K, 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 Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on February 23, 2021.
*Our business may be materially and adversely affected by the ongoing COVID-19 pandemic. The COVID-19 pandemic has had, and may continue to have, an impact on various aspects of our business and that of third parties on which we rely. The extent to which the COVID-19 pandemic impacts our business will depend in part on future developments, which are uncertain and unpredictable in nature.
In December 2019, a novel strain of coronavirus (COVID-19) was reported and in March 2020, the World Health Organization characterized COVID-19 as a pandemic. The COVID-19 pandemic, which has continued to spread, and the related adverse public health developments, including orders to shelter-in-place, travel restrictions, and the imposition of additional requirements on businesses, have adversely affected workforces, organizations, healthcare communities, economies, and financial markets globally, leading to an economic downturn and increased market volatility. It has also disrupted the normal operations of businesses across industries, including ours. As a result of the COVID-19 pandemic, we are experiencing disruptions in our operations and business, and those of third parties upon whom we rely. For instance, we have experienced disruptions in the conduct of our clinical trials, manufacturing and commercialization efforts, including the commercial launch of beti-cel in Europe and the treatment of patients in the commercial context. We cannot reasonably assess or predict at this time the full extent of the negative impact that the COVID-19 pandemic and related effects may have on our business, financial condition, results of operations and cash flows. We expect to continue experiencing these disruptions in our operations and those of our third parties for an unknown period of time, as the trajectory of the COVID-19 pandemic remains uncertain and continues to evolve in the United States and globally. These impacts, which may materially and adversely affect our business, include the following:
We are conducting a number of clinical studies across our programs in geographies which are affected by the COVID-19 pandemic. The COVID-19 pandemic has had, and will likely continue to have, an impact on various aspects of our clinical studies. Policies at various clinical sites and federal, state, local and foreign laws, rules and regulations are continuing to evolve, including through the implementation of quarantines and travel restrictions, and direction of healthcare resources toward pandemic response efforts. For instance, the availability of intensive care unit beds and related healthcare resources available to support activities unrelated to COVID-19 response have fluctuated with the incidence of severe cases of COVID-19 in the surrounding communities, and we anticipate that the availability of healthcare resources will continue to fluctuate and may become significantly constrained, with variability across geographies. The COVID-19 pandemic has disrupted the conduct of our ongoing clinical studies, with the result of slower patient enrollment and treatment as well as delays in post-treatment patient follow-up visits. These impacts have varied by clinical study, with the most significant impacts being on our ongoing HGB-210 study for LentiGlobin for SCD. It is possible that these delays may impact the timing of our regulatory submissions. It is unknown how long these disruptions could continue.
We currently rely on third parties to manufacture, perform quality testing, and ship our lentiviral vectors and drug products for our clinical studies and support commercialization efforts. The third parties in our supply chain have been, may continue to be, and in the future may be, subject to restrictions in operations arising from the COVID-19
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pandemic, and in addition, a number of these third parties have experienced operational disruptions, which have affected activities necessary for our research, development, and commercialization efforts. These restrictions and disruptions in operations have also given rise to staffing shortages from time to time, which may result in production slowdowns and/or disruptions in delivery systems, potentially interrupting our supply chain and limiting our ability to manufacture our lentiviral vectors and drug products for our clinical studies and for commercial use. At this time, it is unknown how long these disruptions may continue, or the full extent of their impacts.
The operations of health regulatory agencies globally have been impacted as a result of the COVID-19 pandemic. They have communicated slower response times to regulatory interactions and submissions and, in the future, may lack resources to continue to monitor our clinical studies or to engage in other activities related to review of regulatory submissions in drug development. As a result, timelines for the review of regulatory submissions for our programs have been impacted, and we may experience other delays of unknown duration in the review, inspection, and other regulatory interactions. Any de-prioritization of our clinical studies or delay in regulatory review or interaction resulting from such disruptions could materially affect the development of our product candidates. In addition, we have been engaging in reimbursement discussions with governmental health programs as part of our commercial preparation activities.
The trading prices for our shares of common stock and other biopharmaceutical companies have been highly volatile as a result of the economic volatility and uncertainty caused by the COVID-19 pandemic. As a result, we may face difficulties raising capital through sales of shares of our common stock or such sales may be on unfavorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the spread of, or failure to manage or contain, the COVID-19 pandemic will materially and adversely affect our business, the value of our common stock, and our ability to operate under our operating plan and e