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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a leading gene editing company focused on the development of CRISPR/Cas9-based therapeutics. CRISPR/Cas9 is a revolutionary gene editing technology that allows for precise, directed changes to genomic DNA. The application of CRISPR/Cas9 for gene editing was co-invented by one of our scientific founders, Dr. Emmanuelle Charpentier. Dr. Charpentier and her collaborators published work elucidating how CRISPR/Cas9, a naturally occurring viral defense mechanism found in bacteria, can be adapted for use in gene editing. We are applying this technology to potentially treat a broad set of rare and common diseases. We believe that our scientific expertise, together with our gene editing approach, may enable an entirely new class of highly active and potentially curative therapies for patients, including those for whom current biopharmaceutical approaches have had limited success.

We have established a portfolio of therapeutic programs in a broad range of disease areas across four core franchises: hemoglobinopathies, immuno-oncology, regenerative medicine and in vivo approaches. Our most advanced programs target the genetically defined diseases transfusion-dependent beta thalassemia, or TDT, and severe sickle cell disease, or SCD, two hemoglobinopathies with high unmet medical need. We are also progressing several gene-edited allogeneic cell therapy programs,

including allogeneic chimeric antigen receptor T cell, or CAR T, candidates for the treatment of hematological and solid tumor cancers, and investigational, allogeneic, gene-edited, immune-evasive, stem cell-derived therapies for the treatment of type 1 diabetes,

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or T1D. In addition, we are advancing multiple programs leveraging in vivo editing approaches, initially for the treatment and prevention of cardiovascular disease.

Hemoglobinopathies

Our lead product candidate, exa-cel, is an investigational, autologous, ex vivo CRISPR gene-edited hematopoietic stem cell therapy that is being evaluated for the treatment of TDT and SCD. Exa-cel is being developed under a joint development and commercialization agreement between us and Vertex Pharmaceuticals Incorporated and certain of its subsidiaries, or Vertex. We and Vertex are investigating exa-cel in two ongoing Phase 1/2/3 open-label clinical trials that are designed to assess the safety and efficacy of a single dose of exa-cel in patients ages 12 to 35 with TDT (CLIMB-111) or SCD (CLIMB-121), respectively. Enrollment is complete for both CLIMB-111 and CLIMB-121. We and Vertex have also initiated two additional Phase 3 open-label clinical trials of exa-cel in pediatric patients with TDT (CLIMB-141) and SCD (CLIMB-151). Patients who received exa-cel in CLIMB-111, CLIMB-121, CLIMB-141 or CLIMB-151 will be asked to participate in a long-term, open-label follow-up trial, CLIMB-131, to evaluate the safety and efficacy of exa-cel. CLIMB-131 is designed to follow participants for up to 15 years after exa-cel infusion. In the second and fourth quarters of 2022, at the European Hematology Association Congress and American Society of Hematology Annual Meeting, respectively, we presented updated clinical data from CLIMB-111 and CLIMB-121 for 44 patients with TDT and 31 patients with SCD treated with exa-cel.

Exa-cel has been granted a number of regulatory designations from the U.S. Food and Drug Administration, or FDA, specifically RMAT, Fast Track, Orphan Drug, and Rare Pediatric Disease designations for the treatment of both TDT and SCD. Exa-cel has also been granted Orphan Drug Designation from the European Commission, as well as PRIME designation from the European Medicines Agency, or EMA, for the treatment of both TDT and SCD. In December 2022, we and Vertex completed regulatory submissions for exa-cel with the EMA and MHRA in the EU and the UK, respectively, and both the EMA and the MHRA have validated the MAA, respectively. In addition, we and Vertex initiated the rolling submission of our BLA in the United States in November 2022 and expect to complete the submission by the end of the first quarter of 2023.

Finally, building upon exa-cel, we have next-generation efforts in targeted conditioning and in vivo editing of hematopoietic stem cells, either of which could broaden the number of patients that can benefit from our therapies.

Immuno-Oncology

We believe CRISPR/Cas9 has the potential to create the next generation of CAR T cell therapies that may have a superior product profile compared to current autologous therapies and allow accessibility to broader patient populations. Drawing from the ex vivo gene editing capabilities gained through our lead programs, we are advancing several immuno-oncology cell therapy programs, including allogeneic CAR T programs targeting CD19 and CD70.

CD19 Franchise

CTX110, our lead immuno-oncology product candidate, is a healthy donor-derived gene-edited allogeneic CAR T investigational therapy targeting CD19. We are investigating CTX110 in our CARBON clinical trials, which are designed to assess the safety and efficacy of CTX110 in adult patients with relapsed or refractory CD19-positive B-cell malignancies who have received at least two prior lines of therapy. CTX110 has been granted RMAT designation by the FDA.

The Phase 1 CARBON clinical trial is being conducted in two parts – Part A and Part B. In Phase 1 Part A, patients were infused with a single dose of CTX110 across escalating dose levels following a standard lymphodepletion regimen, with an option to re-dose CTX110 based on clinical benefit. In Phase 1 Part B, patients received CTX110 at Dose Level (DL) 4 following standard lymphodepletion, as well as a consolidation dose of CTX110 at the same dose level between four and eight weeks after the initial dose for patients that demonstrated clinical benefit.

In the fourth quarter of 2022, we presented updated clinical data from Phase 1 Part A for 32 patients treated with CTX110, which showed the potential for CTX110 to achieve long-term durable complete remissions, or CRs, with a positively differentiated safety profile in heavily pre-treated patients, and described emerging data from Phase 1 Part B, which showed an encouraging efficacy profile with the potential to improve efficacy with the use of a consolidation dose. Based on this emerging data from our Phase 1 CARBON clinical trial and discussions with regulatory agencies, we have expanded CARBON to include a Phase 2, potentially registrational, single-arm, multi-center, open-label clinical trial that incorporates consolidation dosing. We have begun dosing patients in this pivotal arm.

In parallel with CTX110, we are advancing CTX112, a next-generation investigational, allogeneic CAR T product candidate targeting CD19. CTX112 incorporates additional edits designed to enhance CAR T potency and reducing CAR T exhaustion; and in the fourth quarter of 2022, the IND for CTX112 was cleared by the FDA.

CD70 Franchise

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CTX130 is a healthy donor-derived gene-edited allogeneic CAR T investigational therapy targeting CD70, an antigen expressed on various solid tumors and hematologic malignancies. CTX130 is being investigated in two ongoing independent Phase 1, single-arm, multi-center, open-label clinical trials, COBALT, that are designed to assess the safety and efficacy of several dose levels of CTX130 in adult patients. The COBALT-LYM trial is evaluating the safety and efficacy of CTX130 for the treatment of relapsed or refractory T or B cell malignancies. The COBALT-RCC trial is evaluating the safety and efficacy of CTX130 for the treatment of relapsed or refractory clear cell renal cell carcinoma. CTX130 has received Orphan Drug Designation from the FDA for the treatment of T cell lymphoma and RMAT designation for the treatment of Mycosis Fungoides and Sézary Syndrome (MF/SS), subtypes of Cutaneous T cell Lymphoma (CTCL). In the second quarter of 2022, at the European Hematology Association Congress, we released initial clinical data from the ongoing COBALT-LYM trial for 18 patients with T cell lymphoma treated with CTX130 who had reached at least 28 days of follow-up. Also, in the fourth quarter of 2022, at the Society of Immuno-therapy in Cancer Annual Meeting, we released initial clinical data from the COBALT-RCC trial for 14 patients.

In parallel with CTX130, we are advancing CTX131, a next-generation investigational allogeneic CAR T product candidate targeting CD70 for the potential treatment of both solid tumors and certain hematologic malignancies. CTX131 incorporates additional edits designed to enhance CAR T potency and reducing CAR T exhaustion; and in the first quarter of 2023, the IND for CTX131 was cleared by the FDA.

Additional candidates. Our CRISPR/Cas9 platform enables us to innovate continuously by incorporating incremental edits into next-generation products. In addition to CTX112 and CTX131, we are advancing several additional investigational CAR T product candidates. In addition, as we previously disclosed, following our June 2022 disclosure of high-level data from our Phase 1 clinical trial investigating CTX120, a healthy donor-derived gene-edited allogeneic CAR T investigational therapy targeting B-cell maturation antigen, or BCMA, for the treatment of relapsed or refractory multiple myeloma, we announced plans to pivot to a next-generation investigational allogeneic CAR T targeting BCMA, CTX121, which incorporates proprietary edits to enhance the potency of the CAR T cells and reducing CAR T exhaustion.

Regenerative Medicine

Regenerative medicine, or the use of stem cells to repair or replace tissue or organ function lost due to disease, damage or age, holds the potential to treat both rare and common diseases. Building upon our ex vivo gene editing expertise, we have expanded our efforts in this field with a focus on allogeneic stem cell-derived therapies gene edited using CRISPR/Cas9 to enable immune evasion, improve cell function, and direct cell fate. Our first major effort in this area is in diabetes, and we and ViaCyte, Inc., or ViaCyte, which was acquired by Vertex in the third quarter of 2022, are advancing a series of programs as part of a strategic collaboration for the discovery, development, and commercialization of gene-edited stem cell therapies for the treatment of diabetes.

We have a multi-staged product strategy that leverages our CRISPR/Cas9 platform to advance multiple product candidates incorporating incremental edits designed to increase benefit. Our initial product candidate, VCTX210, is an investigational, allogeneic, gene-edited, immune-evasive, stem cell-derived product candidate for the treatment of type 1 diabetes, or T1D, developed by applying our gene editing technology to ViaCyte’s proprietary stem cell capabilities. VCTX210 has gene edits designed to promote immune evasion and cell fitness. We and ViaCyte are investigating VCTX210 in an ongoing Phase 1 clinical trial that is designed to assess VCTX210’s safety, tolerability, and immune evasion in patients with T1D, and we are in the follow-up stage for this clinical trial. Our next generation product candidate, VCTX211, is an investigational, allogeneic, gene-edited, stem cell-derived product candidate for the treatment of T1D, which incorporates additional gene edits that aim to further enhance cell fitness. In the fourth quarter of 2022, the Clinical Trial Application for VCTX211 was cleared by Health Canada and the Phase 1/2 clinical trial is ongoing.

In Vivo

Our in vivo gene editing strategy focuses on gene disruption and whole gene correction – the two technologies required to address the vast majority of the most prevalent severe monogenic diseases. We have established a leading platform for in vivo gene disruption, starting in the liver. We plan to advance a broad portfolio of programs across both rare and common diseases with this platform, starting with CVD. Our lead investigational in vivo programs, CTX310 and CTX320, target angiopoietin-related protein 3 (ANGPTL3) and lipoprotein(a), respectively, two validated targets for CVD. Gene editing has the potential to shift the treatment paradigm for CVD by recapitulating the proven benefit of natural human genetic variants in a single-dose format. In addition, we continue to develop an expansive whole gene correction platform, starting with using LNPs, and adeno-associated viral vectors, or AAV, in the liver and advancing to AAV-free, HDR-independent methodologies.

CRISPR-X

While we have made significant progress with our current portfolio of programs, we recognize that we need to continue to innovate to unlock the full potential of CRISPR gene editing and bring the potential of transformative therapies to even more patients. In 2022, we launched a new early-stage research team known as CRISPR-X that focuses on innovative research to develop next-generation editing modalities. CRISPR-X focuses on technologies to enable whole gene correction and insertion without requiring HDR or viral delivery of DNA, such as all-RNA gene correction, non-viral delivery of DNA and novel gene insertion techniques.

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Partnerships

Given the numerous potential therapeutic applications for CRISPR/Cas9, we have partnered strategically to broaden the indications we can pursue and accelerate development of programs by accessing specific technologies and/or disease-area expertise. We maintain broad partnerships to develop gene editing-based therapeutics in specific disease areas.

Vertex. We established our initial collaboration agreement in 2015 with Vertex, which focused on TDT, SCD, cystic fibrosis and select additional indications. In December 2017, we entered into a joint development and commercialization agreement with Vertex pursuant to which, among other things, we are co-developing and preparing to co-commercialize exa-cel for TDT and SCD. In April 2021, we and Vertex amended and restated our existing joint development and commercialization agreement, pursuant to which, among other things, we will continue to develop and prepare to commercialize exa-cel for TDT and SCD in partnership with Vertex. We also entered into a strategic collaboration and license agreement with Vertex in June 2019 for the development and commercialization of products for the treatment of Duchenne muscular dystrophy and myotonic dystrophy type 1.

ViaCyte. We entered into a research and collaboration agreement in September 2018 with ViaCyte to pursue the discovery, development and commercialization of gene-edited allogeneic stem cell therapies for the treatment of diabetes, and in July 2021, we entered into a joint development and commercialization agreement with ViaCyte, or the ViaCyte JDCA. In connection with entering into the ViaCyte JDCA, our existing research collaboration agreement with ViaCyte expired in accordance with its terms. Under the ViaCyte JDCA, we and ViaCyte are jointly developing and will commercialize product candidates and shared products for use in the treatment of diabetes type 1, diabetes type 2 and insulin dependent/requiring diabetes, or the ViaCyte Collaboration Field, throughout the world. The ViaCyte JDCA includes, among other things, provisions relating to collaboration and program governance, clinical activities for the product candidates and shared products under the agreement and continuing research by the parties in the ViaCyte Collaboration Field. Unless otherwise mutually agreed, research costs incurred by a party will be solely borne by such party. The program expenses, as originally set forth in the research and collaboration agreement, as applicable, incurred through the date of first commercial sale of a shared product will be allocated 60% to us and 40% to ViaCyte. Following first commercial sale of a shared product, such program expenses will be shared equally between us and ViaCyte. Shared product revenues will be shared equally by us and ViaCyte. In the third quarter of 2022, Vertex announced it had acquired ViaCyte and the rights to the ViaCyte Collaboration Field.

Bayer. We entered into an option agreement in the fourth quarter of 2019 with Bayer pursuant to which Bayer has an option to co-develop and co-commercialize two products that we advance for the diagnosis, treatment, or prevention of certain autoimmune disorders, eye disorders, or hemophilia A disorders for a specified period of time, or, under certain circumstances, exclusively license such optioned products.

Other Partnerships. We have entered into a number of additional collaborations and license agreements to support and complement our hematopoietic stem cell, immuno-oncology, regenerative medicine and in vivo programs and platform, including agreements with: Nkarta, Inc. to co-develop and co-commercialize two donor-derived, gene-edited CAR-NK cell product candidates and a product candidate combining NK and T cells; Capsida Biotherapeutics, Inc. to develop in vivo gene editing therapies delivered with engineered AAV vectors for the treatment of amyotrophic lateral sclerosis and Friedreich’s ataxia; Moffitt Cancer Center and Roswell Park Comprehensive Cancer Center to advance autologous CAR T programs against new targets; MaxCyte, Inc. on ex vivo delivery for our hemoglobinopathy and immuno-oncology programs; CureVac AG on optimized mRNA constructs and manufacturing for certain in vivo programs; and KSQ Therapeutics, Inc. on intellectual property for our allogeneic immuno-oncology programs.

For additional information regarding the key terms of these arrangements, please see "Business—Strategic Partnerships and Collaborations".

Impacts of Coronavirus and Market Conditions on Our Business

We have been actively monitoring the coronavirus pandemic situation and its impact globally. We believe our financial results for the years ended December 31, 2022, 2021 and 2020 were not significantly impacted by the outbreak of the coronavirus. We believe our hybrid and remote working arrangements have had limited impact on our ability to maintain internal operations during the years ended December 31, 2022, 2021 and 2020. Further, disruption of global financial markets and a recession or market correction, including as a result of the coronavirus pandemic, the ongoing military conflict between Russia and Ukraine and the related sanctions imposed against Russia, and other global macroeconomic factors such as inflation, could reduce our ability to access capital, which could, in the future, negatively affect our business and the value of our common shares.

Financial Overview

Since our inception in October 2013, we have devoted substantially all of our resources to our research and development efforts, undertaking drug discovery and preclinical development activities, building and protecting our intellectual property estate, organizing and staffing our company, business planning, raising capital and providing general and administrative support for these operations. To date, we have primarily financed our operations through private placements of our preferred shares, common share issuances, convertible loans and collaboration agreements with strategic partners.

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While we were in a net income position in certain previous years due to upfronts associated with our collaborations with Vertex, we have a history of recurring losses and expect to continue to incur losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase significantly as we continue our current research programs and development activities; seek to identify additional research programs and additional product candidates; conduct initial drug application supporting preclinical studies and initiate clinical trials for our product candidates; initiate preclinical testing and clinical trials for any other product candidates we identify and develop; maintain, defend, protect and expand our intellectual property estate; further develop our gene editing platform; hire additional research, clinical and scientific personnel; incur facilities costs associated with such personnel growth; develop manufacturing infrastructure and conduct related regulatory validation activities; and incur additional costs associated with operating as a public company.

Revenue Recognition

We have not generated any revenue to date from product sales and do not expect to do so in the near future. During the years endedDecember 31, 2022, 2021 and 2020, we recognized $0.4 million, $913.1 million and $0.5 million, respectively, of revenue related to our collaboration agreements with Vertex.

For the years ended December 31, 2022, 2021 and 2020, we generated $0.8 million, $1.9 million and $0.2 million, respectively, of grant revenue related to certain contracts with not-for-profit entities.

For additional information about our revenue recognition policy, see Note 2 and Note 8 of the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our product discovery efforts and the development of our product candidates, which include:

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employee-related expenses, including salaries, benefits and equity-based compensation expense;

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costs of services performed by third parties that conduct research and development and preclinical activities on our behalf;

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costs of purchasing lab supplies and non-capital equipment used in our preclinical activities and in manufacturing preclinical and clinical study materials;

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consultant fees;

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facility costs, including rent, depreciation and maintenance expenses; and

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fees and other payments related to acquiring and maintaining licenses under our third-party licensing agreements.

Our external research and development expenses support our various preclinical and clinical programs, and as such we do not break down external research and development expenses further. Our internal research and development expenses consist of payroll and benefits expenses, facilities expense, and other indirect research and development expenses incurred in support of overall research and development activities and as such are not allocated to a specific development stage or therapeutic area. Research and development costs are expensed as incurred. Nonrefundable advance payments for research and development goods or services to be received in the future are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed. At this time, we cannot reasonably estimate or know the nature, timing or estimated costs of the efforts that will be necessary to complete the development of any product candidates we may identify and develop. This is due to the numerous risks and uncertainties associated with developing such product candidates, including the uncertainty of:

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successful completion of preclinical studies and IND-enabling studies;

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successful enrollment in, and completion of, clinical trials;

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receipt of marketing approvals from applicable regulatory authorities;

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establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;

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obtaining and maintaining patent and trade secret protection and non-patent exclusivity;

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launching commercial sales of the product, if and when approved, whether alone or in collaboration with others;

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acceptance of the product, if and when approved, by patients, the medical community and third-party payors;

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effectively competing with other therapies and treatment options;

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a continued acceptable safety profile following approval;

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enforcing and defending intellectual property and proprietary rights and claims; and

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achieving desirable medicinal properties for the intended indications.

A change in the outcome of any of these variables with respect to the development of any product candidates or the subsequent commercialization of any product candidates we may successfully develop could significantly change the costs, timing and viability associated with the development of that product candidate.

Research and development activities are central to our business model. We expect our research and development costs to increase significantly for the foreseeable future as our current development programs progress, new programs are added and as we continue to prepare regulatory filings. These increases will likely include the costs related to the implementation and expansion of clinical trial sites and related patient enrollment, monitoring, program management and manufacturing expenses for current and future clinical trials.

General and Administrative Expenses

General and administrative expenses consist primarily of employee related expenses, including salaries, benefits and equity-based compensation, for personnel in executive, finance, accounting, business development and human resources functions. Other significant costs include facility costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters and fees for accounting and consulting services.

We expect to continue to incur general and administrative expenses consistent with research and development at companies of our size and stage of development, which may increase in the future to support continued research and development activities, and potential commercialization of our product candidates. In addition, we anticipate ongoing expenses related to the reimbursements of third-party patent related expenses in connection with certain of our in-licensed intellectual property.

Collaboration Expense, Net

Collaboration expense, net, consists of operating expenses related to exa-cel under our collaboration with Vertex. The A&R Vertex JDCA allows us to defer a portion of our share of costs under the arrangement if spending on the exa-cel program exceeds specified amounts. Any deferred amounts are only payable to Vertex as an offset against future profitability of the exa-cel program and the amounts payable are capped at a specified maximum amount per year.

Other Income

Other income consists primarily of interest income earned on investments.

Critical Accounting Policies and Significant Judgments and Estimates

This discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as critical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used. On an ongoing basis, we evaluate our estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in the notes to our financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations.

Revenue

Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, or ASC 606, applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases and collaboration arrangements. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps:

1) Identify the contract with the customer

A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the related payment terms, (ii) the contract has commercial substance

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and (iii) we determine that collection of substantially all consideration for goods and services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

2) Identify the performance obligations in the contract

Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other available resources, and are distinct in the context of the contract, whereby the transfer of the good or service is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods and services, we must apply judgment to determine whether promised goods and services are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation.

3) Determine the transaction price

The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods and services to the customer. To the extent the transaction price includes variable consideration, such as research, development, regulatory and commercial milestones, we determine if it is probable that we will receive such amounts and there is no risk of a significant revenue reversal. When we cannot conclude that receipt of such amounts is probable, we constrain the related variable consideration resulting in its exclusion from transaction consideration. In determining the portion of the transaction consideration to be constrained, we consider the probability and uncertainty that the related research, developmental, regulatory and commercial milestones will be achieved given the nature of research and clinical development and the stage of the underlying programs. This assessment is performed at each reporting period. In making this evaluation, we consider both internal and external information available, including information from industry publications and other relevant factors. Changes to the constraint of variable consideration can have a material effect on the amount of revenue recognized in the period.

4) Allocate the transaction consideration to performance obligations in the contract

If the contract contains a single performance obligation, the entire transaction consideration is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction consideration to each performance obligation on a relative standalone selling price basis unless the transaction consideration is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The consideration to be received is allocated among the separate performance obligations based on relative standalone selling prices. In determining these estimated standalone selling prices, we make a number of significant judgements including, for licenses, management’s assumptions regarding probability weighted projected discounted cash flows for each of the collaboration development programs. The estimated standalone selling prices are sensitive to changes in assumptions, such as probabilities of scientific success, discount rate and certain assumptions that form the basis of forecasted cash flows. In developing these assumptions, management considers both internal and external information available, including information from other guideline companies within the same industry and other relevant factors. Changes to these assumptions can have a material effect on the allocation of the transaction consideration to performance obligations, as well as the amount and timing of revenue recognized.

5) Recognize revenue when or as we satisfy a performance obligation

We satisfy performance obligations over time or at a point in time, depending on the nature of the performance obligation. Revenue is recognized over time if the customer simultaneously receives and consumes the benefits provided by the entity’s performance, the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. If the entity does not satisfy a performance obligation over time, the related performance obligation is satisfied at a point in time by transferring the control of a promised good or service to a customer.

Collaboration Arrangements

We record the elements of our collaboration agreements that represent joint operating activities in accordance with ASC 808, Collaborative Arrangements, or ASC 808. Accordingly, the elements of the collaboration agreements that represent activities in which both parties are active participants and to which both parties are exposed to the significant risks and rewards that are dependent on the commercial success of the activities, are recorded as collaborative arrangements.

We evaluate the proper presentation of the commercial activities and the profit and loss sharing associated with the collaboration agreements. ASC 808 states that when payments between parties in a collaborative arrangement are not within the scope of other authoritative accounting literature, the income statement classification should be based on the nature of the arrangement, the nature of its business operations and the contractual terms of the arrangement. To the extent that these payments are not within the scope of other authoritative accounting literature, the income statement classification for the payments shall be based on an analogy to authoritative accounting literature or if there is no appropriate analogy, a reasonable, rational, and consistently applied accounting policy election.

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Accrued research and development expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:

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CROs in connection with clinical studies;

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investigative sites in connection with clinical studies;

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vendors in connection with preclinical development activities; and

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vendors related to development, manufacturing and distribution of clinical trial materials.

We base our expenses related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs that conduct and manage clinical studies on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of subjects and the completion of clinical study milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period and adjust accordingly.

Equity-Based Compensation

Our share-based compensation programs grant awards that have included stock options, restricted stock units and restricted stock awards. Grants are awarded to employees and non-employees, including directors.

We account for our stock-based compensation awards in accordance with ASC Topic 718, Compensation—Stock Compensation, or ASC 718. ASC 718 requires all stock-based payments to employees and non-employee directors, including grants of employee stock options and restricted stock units and modifications to existing stock options, to be recognized in the consolidated statements of operations and comprehensive loss based on their fair values. We use the Black-Scholes option pricing model to determine the fair value of options granted.

We account for forfeitures as they occur instead of estimating forfeitures at the time of grant and revising those estimates in subsequent periods if actual forfeitures differ from its estimates. Stock-based compensation expense recognized in the financial statements is based on awards for which performance or service conditions are expected to be satisfied.

Our stock-based awards are subject to service or performance-based vesting conditions. Compensation expense related to awards to employees, directors and non-employees with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting term. Compensation expense related to awards to employees with performance-based vesting conditions is recognized based on the grant date fair value over the requisite service period using the accelerated attribution method to the extent achievement of the performance condition is probable.

We expense restricted stock unit awards to employees based on the fair value of the award on a straight-line basis over the associated service period of the award.

We estimate the fair value of our option awards to employees, directors and non-employees using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including (i) the expected stock price volatility, (ii) the calculation of expected term of the award, (iii) the risk-free interest rate and (iv) expected dividends. Due to the lack of complete company-specific historical and implied volatility data for the full expected term of the stock-based awards, we base our estimate of expected volatility on a representative group of publicly traded companies in addition to our own volatility data. For these analyses, we selected companies with comparable characteristics to our own, including enterprise value, risk profiles, position within the industry and with historical share price information sufficient to meet the expected life of the stock-based awards. We compute historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available. We have estimated the expected term of our employee stock options using the “simplified” method, whereby, the expected term equals the arithmetic average of the vesting term and the original contractual term of the option due to its lack of sufficient historical data. The risk-free interest rates for periods within the expected term of the option are based on the U.S. Treasury securities with a maturity date commensurate with the expected term of the associated award. We have never paid, and do not expect to pay, dividends in the foreseeable future.

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Recent Accounting Pronouncements

Refer to Note 2 of the notes to our consolidated financial statements included in this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.

Results of Operations

The following is a discussion of the components of results of operations. This section generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed on February 15, 2022.

Comparison of Years Ended December 31, 2022 and 2021

The following table summarizes our results of operations for the years ended December 31, 2022 and 2021, together with the dollar change in those items:

Years Ended December 31, Period to

(in thousands)

Revenue:

Operating expenses:

Collaboration Revenue

Collaboration revenuewas $0.4 million for the year ended December 31, 2022, compared to $913.1 million for the year ended December 31, 2021. Collaboration revenue for the year ended December 31, 2021 was primarily associated with the $900.0 million upfront payment from Vertex in connection with the A&R Vertex JDCA, as well as the achievement of a $12.5 million milestone under the 2019 Collaboration Agreement with Vertex, of which $12.0 million was recorded as revenue in 2021. Refer to Note 8 of the notes to our consolidated financial statements included in this Annual Report on Form 10-K for a description of revenue recognized related to Vertex.

Grant Revenue

Grant revenue was $0.8 million and $1.9 million, respectively, for the years ended December 31, 2022 and 2021.

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Research and Development Expenses

Research and development expenses were $461.6 million for the year ended December 31, 2022, compared to $340.6 million for the year ended December 31, 2021. The following table summarizes our research and development expenses for the years ended December 31, 2022 and 2021, together with the changes in those items in dollars (in thousands):

Years Ended December 31, Period to Period

The increase of approximately $121.1 million was primarily attributable to the following:

•

$79.0 million of increased external research and development costs, primarily associated with production of drug product and increased clinical trial expense associated with our immuno-oncology programs;

•

$28.6 million of increased employee-related expenses primarily due to reallocation of resources from the exa-cel program, which are presented within “collaboration expense, net” in the consolidated statements of operations and comprehensive (loss) income, to our wholly-owned programs; and

•

$15.3 million of increased facility expenses due to the opening of our U.S. headquarters for research and development in Boston, MA.

General and Administrative Expenses

General and administrative expenses were $102.5 million for the year ended December 31, 2022, compared to $99.7 million for the year ended December 31, 2021. The increase of $2.8 million was primarily attributable to increased employee compensation, benefit and other headcount-related expenses.

Collaboration Expense, net

Collaboration expense, net, was $110.3 million for the year ended December 31, 2022, compared to $101.2 million for the year ended December 31, 2021. The increase of approximately $9.1 million was primarily attributable to increased manufacturing and other pre-commercial costs.

Under the A&R Vertex JDCA, we have an option to defer our portion of specified costs on the exa-cel program in excess of $110.3 million for the years ended December 31, 2022, 2023 and 2024. Vertex may only recover any such deferred amounts as an offset against future profitability of the exa-cel program, determined on an annual basis in accordance with the A&R Vertex JDCA. Any such deferred amounts are capped at a specified maximum amount per year.

For the year ended December 31, 2022, we exercised our option to defer $36.1 million of our share of costs incurred under the A&R Vertex JDCA. These deferred costs will be recognized by us when recoverability of such deferred amounts by Vertex is probable and the amount can be reasonably estimated. As of December 31, 2022, no such deferred amounts have been recognized.

Other Income, net

Other income, net, was $22.7 million for the year ended December 31, 2022, compared to $6.0 million for the year ended December 31, 2021. Other income, net, for the year ended December 31, 2022 consisted primarily of interest income earned on cash, cash equivalents and marketable securities during the year.

Liquidity and Capital Resources

Sources of Liquidity

As of December 31, 2022, we had cash, cash equivalents and marketable securities of approximately $1,868.4million, of which $5.1 million was held outside of the United States.

With our cash on hand as of December 31, 2022, we expect cash, cash equivalents and marketable securities to be sufficient to fund our current operating plan through at least the next 24 months.

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We have predominantly incurred losses and cumulative negative cash flows from operations since our inception, and as of December 31, 2022, we had an accumulated deficit of $846.1 million. We anticipate that we will continue to incur losses for at least the next several years. We expect to continue to incur operating expenses consistent with research and development at companies of our size and stage of development, which may increase in the future to support continued research and development activities, and potential commercialization of our product candidates.

Since our initial public offering, we have primarily financed our operations through common share issuances and collaboration agreements with strategic partners. Recent sources of equity financing include:

Public Offerings

In July 2020, we sold 7.4 million common shares through an underwritten public offering (inclusive of shares sold pursuant to the exercise of the underwriters’ option to purchase additional shares) at a public offering price of $70.00 per share for aggregate net proceeds of $489.7 million, which were net of equity issuance costs of $27.6 million. Additional equity issuance costs of $4.9 million for stamp taxes were accrued as of December 31, 2020 and paid in 2021.

At-the-Market Offerings

•

In August 2019, we entered into an Open Market Sale AgreementSM with Jefferies under which we are able to offer and sell, from time to time at our sole discretion through Jefferies, as our sales agent, our common shares, par value of CHF 0.03 per share, or the August 2019 Sales Agreement. In August 2019, in connection with the August 2019 Sales Agreement, we filed a prospectus supplement with the SEC to offer and sell, from time to time, common shares having aggregate gross proceeds of up to $200.0 million, or the 2019 ATM. In connection with our entry into the August 2019 Sales Agreement, our August 2018 Open Market Sale AgreementSM with Jefferies was mutually terminated by us and Jefferies. During the year ended December 31, 2020, we issued and sold an aggregate of 2.2 million common shares under the 2019 ATM at an average price of $89.47 per share for aggregate proceeds of $195.5 million, which were net of equity issuance costs of $4.5 million.

•

In December 2020, in connection with the August 2019 Sales Agreement, we filed a prospectus supplement with the SEC to offer and sell from time to time common shares having aggregate gross proceeds of up to $350.0 million, or the 2020 ATM. During the year ended December 31, 2020, we issued and sold an aggregate of 1.8 million common shares under the 2020 ATM at an average price of $169.57 per share for aggregate proceeds of $298.0 million, which were net of equity issuance costs of $4.5 million. Additional equity issuance costs for stamp taxes related to shares sold in 2020 related to the 2019 and 2020 ATM were $4.9 million, of which $4.0 million was accrued as of December 31, 2020 and paid in 2021.

•

In January 2021, we issued and sold under the 2020 ATM an aggregate of 0.3 million common shares at an average price of $162.46 per share with aggregate proceeds of $46.7 million, which were net of equity issuance costs of $0.7 million. An additional $0.5 million of stamp taxes on this amount was paid in 2021.

•

In January 2021, in connection with the August 2019 Sales Agreement, we filed a prospectus supplement with the SEC to offer and sell from time to time common shares having aggregate gross proceeds of up to $600.0 million. In July 2021, we filed a new prospectus supplement with the SEC, which replaced the previous prospectus supplement filed in January 2021, to offer and sell, from time to time, the common shares remaining under the original prospectus supplement having aggregate gross proceeds of up to $419.8 million, or, together with the January 2021 prospectus supplement, the 2021 ATM. As of December 31, 2022, we have issued and sold an aggregate of 1.1 million common shares under the 2021 ATM at an average price of $168.79 per share for aggregate proceeds of $178.8 million, which were net of equity issuance costs of $2.4 million.

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Sources of Liquidity

Cash Flows

Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed on February 15, 2022.

The following table provides information regarding our cash flows for each of the periods below:

Years Ended December 31,

(in thousands)

Net cash (used in) provided by operating activities $ (495,741 ) $ 538,972

Net cash provided by financing activities 38,592 250,945

Effect of exchange rate changes on cash (80 ) (11 )

(Decrease) increase in cash and restricted cash $ (715,884 ) $ (245,524 )

Operating Activities

Net cash used in operating activities was $495.7 million for the year ended December 31, 2022, compared to cash provided by operating activities of $539.0 million for the year ended December 31, 2021. The increase in cash used in operating activities was primarily driven by an increase in net loss of $1,027.8 million, from net income of $377.7 million for the year ended December 31, 2021 to net loss of $650.2 million for the year ended December 31, 2022, as well as a $7.0 million decrease in net changes of operating assets and liabilities.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2022 was $258.7 million and consisted of purchases of marketable securities, net of maturities, of $221.5 million, as well as $37.2 million in purchases of property and equipment for use in research and development activities.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2022 was $38.6 million and consisted of net proceeds of $37.6 million from stock option exercises and ESPP contributions.

Funding Requirements

Our primary uses of capital are, and we expect will continue to be, research and development activities, manufacturing activities, compensation and related expenses, laboratory and related supplies, legal and other regulatory expenses, patent prosecution filing, defense and intellectual property maintenance costs, and general overhead costs, including costs associated with operating as a public company. We expect to continue to incur operating expenses consistent with research and development at companies of our size and stage of development, which may increase in the future to support continued research and development activities, and potential commercialization of our product candidates.

Because most of our programs are still in early stages of development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development, manufacture and commercialization of any current or future product candidates, if approved, or whether, or when, we may achieve profitability. Until such time as we can generate substantial product revenues, if ever, we expect to finance our cash needs through a combination of equity financings, debt financings and payments received in connection with our collaboration agreements. We intend to consider opportunities to raise additional funds through the sale of equity or debt securities when market conditions are favorable to us to do so. However, the trading prices for our common shares and other biopharmaceutical companies have been highly volatile. As a result, we may face difficulties raising capital through sales of our common shares or such sales may be on unfavorable terms. In addition, a recession, depression or other sustained adverse market event, including resulting from the continued spread of the coronavirus, could materially and adversely affect our business and the value of our common shares. To the extent that we raise additional capital through the future sale of equity or debt securities, the ownership interests of our shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing shareholders. If we raise additional funds through collaboration arrangements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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Outlook

Based on our research and development plans and our timing expectations related to the progress of our programs, we expect our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditures for at least the next 24 months without giving effect to any additional proceeds we may receive under our collaboration with Vertex and any other capital raising transactions we may complete. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect. Given our need for additional financing to support the long-term clinical development of our programs, we intend to consider additional financing opportunities when market terms are favorable to us.

Our ability to generate revenue and achieve profitability depends significantly on our success in many areas, including: developing our delivery technologies and our gene editing technology platform; selecting appropriate product candidates to develop; completing research and preclinical and clinical development of selected product candidates; obtaining regulatory approvals and marketing authorizations for product candidates for which we complete clinical trials; developing a sustainable and scalable manufacturing process for product candidates; launching and commercializing product candidates for which we obtain regulatory approvals and marketing authorizations, either directly or with a collaborator or distributor; obtaining market acceptance of our product candidates, if approved; addressing any competing technological and market developments; negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter; maintaining good relationships with our collaborators and licensors; maintaining, defending, protecting and expanding our estate of intellectual property rights, including patents, trade secrets and know-how; and attracting, hiring and retaining qualified personnel.

Contractual and Other Obligations

Operating lease and sublease obligations

Our operating lease obligations primarily consist of lease payments on our office and laboratory facility in Boston, Massachusetts, as well as lease payments on our cell manufacturing facility in Framingham, Massachusetts, which are described in further detail in Note 7 of our consolidated financial statements included in this Annual Report on Form 10-K. Future contractual payments on operating lease and sublease obligations due within one year of December 31, 2022 are $29.3 million, and future contractual payments on operating lease and sublease obligations due greater than one year from December 31, 2022 are $310.9 million.

Other obligations

Under the Invention Management Agreement signed on December 15, 2016, we are obligated to share costs related to patent maintenance, defense and prosecution for the CRISPR/Cas9 gene editing intellectual property with California, Vienna and their licensees including Caribou, and Caribou’s licensee Intellia Therapeutics. Such costs are not quantifiable at this time.

Under the A&R Vertex JDCA, we are allowed to defer a portion of our share of costs under the arrangement if spending on the exa-cel program exceeds specified amounts. Any deferred amounts are only payable to Vertex as an offset against future profitability of the exa-cel program and the amounts payable are capped at a specified maximum amount per year. Deferred costs associated with the exa-cel program have not been accrued as of December 31, 2022 because a reasonable estimate of future payments against future profitability cannot be made.

In the normal course of business, we enter into agreements with contract research organizations for clinical trials and clinical supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes. These contracts are generally cancelable at any time by us upon less than 180 days’ prior written notice. Certain of these agreements require us to pay milestones to such third parties upon achievement of certain development, regulatory or commercial milestones as further described in Note 9 of our consolidated financial statements included in this Annual Report on Form 10-K. Amounts related to contingent milestone payments are not considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory approval and commercial milestones, which may not be achieved.

We also have obligations to make future payments to third parties that become due and payable on the achievement of certain milestones, including future payments to third parties with whom we have entered into research, development and commercialization agreements. We have not included these commitments on our balance sheet because the achievement and timing of these milestones is not fixed and determinable.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Sensitivity

We are exposed to market risk related to changes in interest rates. As of December 31, 2022, we had cash, cash equivalents and marketable securities of $1,868.4 million, primarily invested in U.S. treasury securities and government agency securities, corporate bonds, commercial paper and money market accounts invested in U.S. government agency securities. Due to the conservative nature of these instruments, we do not believe that we have a material exposure to interest rate risk. If interest rates were to increase or decrease by 1%, the fair value of our investment portfolio would increase or decrease by an immaterial amount.

Foreign Currency Exchange Rate Risk

As a result of our foreign operations, we face exposure to movements in foreign currency exchange rates, primarily the Swiss Franc and British Pound, against the U.S. dollar. The current exposures arise primarily from cash, accounts payable and intercompany receivables and payables. Changes in foreign exchange rates affect our consolidated statement of operations and distort comparisons between periods. To date, foreign currency transaction gains and losses have not been material to our financial statements, and we have not engaged in any foreign currency hedging transactions.

Inflation

Inflation generally affects us by increasing our cost of labor, clinical trial and manufacturing costs. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the years ended December 31, 2022, 2021 and 2020.

Item 8. Financial Statements and Supplementary Data.

The consolidated financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial statements is found in Item 15.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

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Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Annual Report on Form 10-K, have concluded that, based on such evaluation, our disclosure controls and procedures were effective. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Management's Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

•

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of the assets;

•

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

•

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022. In making this assessment, it used the criteria set forth in the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)(COSO). Based on its assessment, our management has concluded that, as of December 31, 2022, the Company’s internal control over financial reporting is effective based on those criteria.

Our independent registered public accounting firm, Ernst & Young LLP, issued an attestation report on our internal control over financial reporting. See below.

Changes in Internal Control Over Financial Reporting

There have been 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, during the fourth quarter of 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of CRISPR Therapeutics AG

Opinion on Internal Control Over Financial Reporting

We have audited CRISPR Therapeutics AG’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, CRISPR Therapeutics AG (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021 the related consolidated statements of operations and comprehensive (loss) income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 21, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Boston, Massachusetts

February 21, 2023

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Item 9B. Other Information.

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this item is incorporated by reference to our Proxy Statement for our 2023 Annual General Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2022.

Item 11. Executive Compensation.

The information required by this item is incorporated by reference to our Proxy Statement for our 2023 Annual General Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2022.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item is incorporated by reference to our Proxy Statement for our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2022.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is incorporated by reference to our Proxy Statement for our 2023 Annual General Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2022.

Item 14. Principal Accountant Fees and Services.

The information required by this item is incorporated by reference to our Proxy Statement for our 2023 Annual General Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2022.

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PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)(1) Financial Statements.

See the “Index to Consolidated Financial Statements” on page F-1 below for the list of financial statements filed as part of this report.

Schedules other than that listed above have been omitted because of the absence of conditions under which they are required or because the required information is included in the financial statements or the notes thereto.

(a)(2) Exhibits.

The exhibits listed in the Exhibit Index below are filed or incorporated by reference as part of this Annual Report on Form 10-K.

Exhibit Index

ExhibitNumber Description

4.1* Description of Capital Shares

124

125

126

21.1* Subsidiaries of the Registrant

23.1* Consent of Ernst & Young LLP

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

+ Furnished herewith.

† Certain portions of this exhibit have been omitted because they are not material and the registrant customarily and actually treats that information as private or confidential.

# A management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(a)(3) of Form 10-K.

^ Certain exhibits and schedules to these agreements have been omitted pursuant to Item 601 of Regulation S-K. The registrant will furnish copies of any of the exhibits and schedules to the Securities and Exchange Commission upon request.

127

Item 16. Form 10-K Summary

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

CRISPR Therapeutics AG

Date: February 21, 2023 By: /s/ Samarth Kulkarni

Samarth Kulkarni

Chief Executive Officer

SIGNATURES AND POWER OF ATTORNEY

We, the undersigned directors and officers of CRISPR Therapeutics AG (the “Company”), hereby severally constitute and appoint Rodger Novak, Samarth Kulkarni, Brendan Smith and James R. Kasinger, and each of them singly, our true and lawful attorneys, with full power to them, and to each of them singly, to sign for us and in our names in the capacities indicated below, any and all amendments to this Annual Report on Form 10-K, and to file or cause to be filed the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as each of us might or could do in person, and hereby ratifying and confirming all that said attorneys, and each of them, or their substitute or substitutes, shall do or cause to be done by virtue of this Power of Attorney.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name Title Date

/s/ Samarth Kulkarni Chief Executive Officer and Director February 21, 2023

Samarth Kulkarni (Principal Executive Officer)

/s/ Brendan Smith Chief Financial Officer February 21, 2023

Brendan Smith (Principal Financial and Accounting Officer)

/s/ Rodger Novak President and Director February 21, 2023

Rodger Novak

/s/ Ali Behbahani Director February 21, 2023

Ali Behbahani

/s/ Bradley Bolzon Director February 21, 2023

Bradley Bolzon

/s/ Maria Fardis Director February 21, 2023

Maria Fardis

/s/ H. Edward Fleming, Jr. Director February 21, 2023

H. Edward Fleming, Jr.

/s/ Simeon J. George Director February 21, 2023

Simeon J. George

/s/ John Greene Director February 21, 2023

John Greene

/s/ Katherine High Director February 21, 2023

Katherine High

/s/ Douglas Treco Director February 21, 2023

Douglas Treco

Brendan Smith

129

130

CRISPR Therapeutics AG

Index to Consolidated Financial Statements Pages

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 42) F-1

Consolidated Balance Sheets F-3

Consolidated Statements of Operations and Comprehensive (Loss) Income F-4

Consolidated Statements of Equity F-5

Consolidated Statements of Cash Flows F-6

Notes to Consolidated Financial Statements F-7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of CRISPR Therapeutics AG

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of CRISPR Therapeutics AG (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive (loss) income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 21, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

F-1

Estimation of Variable Consideration for ongoing Collaboration Agreements

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2015.

Boston, Massachusetts

February 21, 2023

F-2

CRISPR Therapeutics AG

Consolidated Balance Sheets

(in thousands, except share and per share data)

December 31,

Assets

Current assets:

Accounts receivable — 305

Prepaid expenses and other current assets 37,708 38,079

Marketable securities, non-current 53,130 —

Intangible assets, net 71 125

Liabilities and Shareholders’ Equity

Current liabilities:

Deferred revenue, current — 1,011

Accrued tax liabilities 135 724

Other current liabilities 20 171

Operating lease liabilities, net of current portion 228,179 212,872

Other non-current liabilities 5,969 7,339

Commitments and contingencies (Note 9)

Shareholders’ equity:

Accumulated other comprehensive loss (15,647 ) (5,067 )

See accompanying notes to these consolidated financial statements.

F-3

CRISPR Therapeutics AG

Consolidated Statements of Operations and Comprehensive (Loss) Income

(In thousands, except share and per share data)

Years Ended December 31,

Revenue:

Operating expenses:

Other income:

Benefit (provision) for income taxes 325 (1,870 ) (809 )

Foreign currency translation adjustment (80 ) (11 ) 40

Unrealized loss on marketable securities (10,500 ) (4,973 ) (130 )

Net (loss) income per common share — basic $ (8.36 ) $ 4.97 $ (5.29 )

Net (loss) income per common share — diluted $ (8.36 ) $ 4.70 $ (5.29 )

See accompanying notes to these consolidated financial statements.

F-4

CRISPR Therapeutics AG

Consolidated Statements of Shareholders’ Equity

(In thousands, except share and per share data)

Common Shares Treasury Shares Additional

Vesting of restricted shares 204,650 7 — — — — — 7

Purchase of common stock under ESPP 13,410 — — — 694 — — 694

Stock-based compensation expense — — — — 66,018 — — 66,018

Other comprehensive loss — — — — — — (90 ) (90 )

Vesting of restricted shares 455,440 15 — — — — — 15

Other comprehensive loss — — — — — — (4,984 ) (4,984 )

Vesting of restricted shares 237,932 8 — — — — — 8

Stock-based compensation expense — — — — 97,947 — — 97,947

Other comprehensive loss — — — — — — (10,580 ) (10,580 )

See accompanying notes to these consolidated financial statements.

F-5

CRISPR Therapeutics AG

Consolidated Statements of Cash Flows

(In thousands)

Years Ended December 31,

Operating activities

Reconciliation of net (loss) income to net cash used in operating activities:

Changes in:

Investing activities

Financing activities

Effect of exchange rate changes on cash (80 ) (11 ) 40

Supplemental disclosure of non-cash investing and financing activities

Prepaid expenses and other current assets 540 — —

See accompanying notes to these consolidated financial statements.

F-6

CRISPR Therapeutics AG

Notes to Consolidated Financial Statements

1. Organization and Operations

CRISPR Therapeutics AG (“CRISPR” or the “Company”) was incorporated on October 31, 2013 in Basel, Switzerland. The Company was established to translate CRISPR/Cas9, a genome editing technology, into transformative gene-based medicines for the treatment of serious human diseases. The foundational intellectual property underlying the Company’s operations was licensed to the Company in April 2014. The Company devotes substantially all of its efforts to product research and development activities, initial market development and raising capital. The Company’s principal offices are in Zug, Switzerland, with the U.S. headquarters for research and development in Boston, Massachusetts, additional research and development based in San Francisco, CA, and a cell therapy manufacturing facility in Framingham, Massachusetts.

The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations and ability to transition from pilot-scale manufacturing to large-scale production of products.

The Company had an accumulated deficit of $846.1 million as of December 31, 2022 and has financed its operations to date from a series of preferred shares and convertible loan issuances, proceeds obtained from its initial public offering, subsequent public offerings of its common shares, as well as upfront fees and milestones received under its collaboration and joint venture arrangements. The Company will require additional capital to fund its research and development and ongoing operating expenses.

As of December 31, 2022, the Company had cash, cash equivalents and marketable securities of $1,868.4 million. While the Company was in a net income position in certain previous years due to upfronts associated with the Company's collaborations with Vertex Pharmaceuticals Incorporated and certain of its subsidiaries, or Vertex, the Company has a history of recurring losses and expects to continue to incur losses for the foreseeable future. The Company expects its cash and cash equivalents will be sufficient to fund current planned operations for at least the next twenty-four months.

The full extent of the impact of the coronavirus pandemic on the Company’s business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict. See Item 1A: "Risk Factors" section set forth in this Annual Report on Form 10-K for additional details. At this stage, the impact on the Company’s results has not been significant.

2. Summary of Significant Accounting Policies and Basis of Presentation

Basis of Presentation and Use of Estimates

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP, and include the accounts of the Company and its wholly-owned subsidiaries as of December 31, 2022. All intercompany accounts and transactions have been eliminated. Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification, or ASC, and Accounting Standards Updates, or ASUs, of the Financial Accounting Standards Board.

Beginning in 2022, collaboration costs under the Vertex Agreements accounted for under ASC 808, Collaborative Agreements, or ASC 808, are presented within “collaboration expense, net” in the consolidated statements of operations and comprehensive (loss) income. As a result, collaboration costs under the Vertex Agreements accounted for under ASC 808 for years ended December 31, 2021 and 2020 have been reclassified to conform to the current presentation. No subtotals in the prior period’s consolidated financial statements were impacted. Refer to Note 8 to these consolidated financial statements for further discussion on the Vertex Agreements.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to, revenue recognition, equity-based compensation expense and reported amounts of research and development expenses during the period. Significant estimates in these consolidated financial statements have been made in connection with revenue recognition and equity-based compensation expense. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

F-7

Segment Information

The Company and the Company’s chief operating decision maker, namely, the chief executive officer, view the Company’s operations and manage its business as one operating segment, which is the business of discovering, developing and commercializing therapies derived from or incorporating genome-editing technology.

Foreign Currency Translation and Transactions

The majority of the Company’s operations occur in entities that have the U.S. dollar as their functional currency. Non-U.S. dollar denominated functional currency subsidiaries have assets and liabilities translated into U.S. dollars at rates of exchange in effect at the end of the year. Revenue and expense amounts are translated using the average exchange rates for the period. Net unrealized gains and losses resulting from foreign currency translation are included in “Accumulated other comprehensive (loss) income.” Net foreign currency exchange transaction gains or losses are included in “Other income, net” on the Company’s consolidated statement of operations, the impact of which is not significant.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less from the purchase date to be cash equivalents. As of December 31, 2022 and 2021, the Company had $211.9 million and $923.0 million in cash and cash equivalents, respectively.

Restricted Cash

As of December 31, 2022 and 2021, the Company had $12.2 million and $16.9 million, respectively, in restricted cash representing letters of credit securing the Company’s obligations under certain leased facilities, as well as certain credit card arrangements. The letters of credit are secured by cash held in a restricted depository account, with $0.5 million and $0.0 million, respectively, included in prepaid expenses and other current assets in the accompanying consolidated balance sheets as of December 31, 2022 and 2021, and $11.6 million and $16.9 million, respectively, included in restricted cash in the accompanying consolidated balance sheets as of December 31, 2022 and 2021.

Marketable Securities

As of December 31, 2022 and 2021, the Company had $1,656.6 million and $1,456.1 million, respectively in marketable securities. The Company’s investment strategy is focused on capital preservation. The Company invests in instruments that meet the credit quality standards outlined in the Company’s investment policy. The Company classifies marketable securities with a remaining maturity, when purchased, of greater than three months as available-for-sale. Marketable securities are classified as current assets on the consolidated balance sheets if the marketable securities are available to be converted into cash to fund current operations. Marketable securities in an unrealized loss position for greater than one year with a remaining maturity date greater than one year are classified as non-current assets.

Marketable securities classified as Level 2 within the valuation hierarchy generally consist of U.S. treasury securities and government agency securities, corporate bonds, and commercial paper. Debt securities are carried at fair value with the unrealized gains and losses included in other comprehensive (loss) income as a component of stockholders’ equity until realized. Any premium arising at purchase is amortized to interest expense over the period of the earliest call date, and any discount arising at purchase is accreted to interest income over the life of the instrument. Realized gains and losses on debt securities are determined using the specific identification method and are included in other income, net.

The Company assesses its available-for-sale debt securities under the available-for-sale debt security impairment model in ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements, or ASC 326, as of each reporting date in order to determine if a portion of any decline in fair value below carrying value recognized on its available-for-sale debt securities is the result of a credit loss. The Company records credit losses in the consolidated statements of operations and comprehensive loss as credit loss expense within other expense, net, which is limited to the difference between the fair value and the amortized cost of the security. To date, the Company has not recorded any credit losses on its available-for-sale debt securities.

F-8

Other Receivables

Amounts due from collaboration partners where an arrangement is accounted for under ASC 808 are considered other receivables and are included within prepaid and other current assets in the consolidated balance sheets. Other receivables consisted of $11.2 million and $8.4 million as of December 31, 2022 and 2021, respectively and are due from Vertex. Other receivables are recorded at invoiced amounts due under the Vertex collaboration agreement, as described further in Note 8. Vertex is a creditworthy entity that maintains an ongoing relationship with the Company and as such, the Company does not have an allowance for estimated credit losses recorded related to these other receivables.

Concentrations of Credit Risk and Off-balance Sheet Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash, cash equivalents and marketable securities. The Company’s cash is held in accounts with financial institutions that management believes are creditworthy. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds. The Company has no financial instruments with off-balance sheet risk of loss.

Fair Value of Financial Instruments

The Company has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements:

Level 1 — Quoted prices in active markets that are accessible at the market date for identical unrestricted assets or liabilities.

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs for which all significant inputs are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Items measured at fair value on a recurring basis include marketable securities (see Note 3, Marketable Securities, and Note 4, Fair Value Measurement).The carrying amount of accounts receivable, other receivables, accounts payable and accrued expenses as reported on the consolidated balance sheets as of December 31, 2022 and 2021, approximate fair value, due to the short-term duration of these instruments.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed to operations as incurred. Upon disposal, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is included in the results of operations. Depreciation is recorded using the straight-line method over the estimated useful lives of the respective assets, which are as follows:

Asset Estimated useful life

Computer equipment 3 years

Furniture, fixtures and other 5 years

Laboratory equipment 5 years

Leasehold improvements Shorter of useful life or remaining lease term

Impairment of Long-lived Assets

The Company reviews long-lived assets when events or changes in circumstances indicate the carrying value of the assets may not be recoverable. Recoverability is measured by comparison of the book values of the assets to future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the book value of the assets exceed their fair value, which is measured based on the projected discounted future net cash flows arising from the assets.

F-9

Revenue Recognition

The Company records revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, or ASC 606. ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases and collaboration arrangements. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps:

1) Identify the contract with the customer

A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the related payment terms, (ii) the contract has commercial substance and (iii) the Company determines that collection of substantially all consideration for goods and services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

2) Identify the performance obligations in the contract

Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other available resources, and are distinct in the context of the contract, whereby the transfer of the good or service is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods and services, the Company must apply judgment to determine whether promised goods and services are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation.

3) Determine the transaction price

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods and services to the customer. To the extent the transaction price includes variable consideration such as research, development, regulatory and commercial milestones, the Company determines if it is probable that it will receive such amounts and there is no risk of a significant revenue reversal. When the Company cannot conclude that receipt of such amounts is probable, the Company constrains the related variable consideration resulting in its exclusion from transaction consideration. In determining the portion of the transaction consideration to be constrained, the Company considers the probability and uncertainty that the related research, developmental, regulatory and commercial milestones will be achieved given the nature of research and clinical development and the stage of the underlying programs. This assessment is performed at each reporting period. In making this evaluation, the Company considers both internal and external information available, including information from industry publications and other relevant factors. Changes to the constraint of variable consideration can have a material effect on the amount of revenue recognized in the period.

4) Allocate the transaction consideration to performance obligations in the contract

If the contract contains a single performance obligation, the entire transaction consideration is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction consideration to each performance obligation on a relative standalone selling price basis unless the transaction consideration is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The consideration to be received is allocated among the separate performance obligations based on relative standalone selling prices. In determining these estimated standalone selling prices, the Company makes a number of significant judgements including, for licenses, management’s assumptions regarding probability weighted projected discounted cash flows for each of the collaboration development programs. The estimated standalone selling prices are sensitive to changes in assumptions, such as probabilities of scientific success, discount rate and certain assumptions that form the basis of forecasted cash flows. In developing these assumptions, management considers both internal and external information available, including information from other guideline companies within the same industry and other relevant factors. Changes to these assumptions can have a material effect on the allocation of the transaction consideration to performance obligations, as well as the amount and timing of revenue recognized.

5) Recognize revenue when or as the Company satisfies a performance obligation

The Company satisfies performance obligations over time or at a point in time, depending on the nature of the performance obligation. Revenue is recognized over time if the customer simultaneously receives and consumes the benefits provided by the entity’s performance, the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. If the entity does not satisfy a performance obligation over time, the related performance obligation is satisfied at a point in time by transferring the control of a promised good or service to a customer.

F-10

Contract Balances

The Company recognizes a contract asset when the Company transfers goods or services to a customer before the customer pays consideration or before payment is due, excluding any amounts presented as an account or other receivable. A contract asset is an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer. The contract liabilities, or deferred revenue, primarily relate to contracts where we have received payment, but we have not yet satisfied the related performance obligations. Contract assets are not significant as of December 31, 2022 and 2021. Contract liabilities recorded as deferred revenue as of December 31, 2022 are $12.3 million, which was unchanged from December 31, 2021. The contract liability recorded as deferred revenue is related to the collaboration agreement with Vertex described in Note 8.

Collaboration Arrangements

The Company records the elements of its collaboration agreements that represent joint operating activities in accordance with ASC 808. Accordingly, the elements of the collaboration agreements that represent activities in which both parties are active participants and to which both parties are exposed to the significant risks and rewards that are dependent on the commercial success of the activities, are recorded as collaborative arrangements.

The Company evaluates the proper presentation of the commercial activities and the profit and loss sharing associated with the collaboration agreements. ASC 808 states that when payments between parties in a collaborative arrangement are not within the scope of other authoritative accounting literature, the income statement classification should be based on the nature of the arrangement, the nature of its business operations and the contractual terms of the arrangement. To the extent that these payments are not within the scope of other authoritative accounting literature, the income statement classification for the payments shall be based on an analogy to authoritative accounting literature or if there is no appropriate analogy, a reasonable, rational and consistently applied accounting policy election.

Collaboration costs under the Vertex Agreements accounted for under ASC 808 are presented within “collaboration expense, net” in the consolidated statements of operations and comprehensive (loss) income. Refer to Note 8 to these consolidated financial statements for further discussion on the Vertex Agreements.

Research and Development Expenses

Research and development costs are charged to expense as costs are incurred in performing research and development activities, including salaries and benefits, facilities costs, overhead costs, clinical study and related clinical manufacturing costs, license and milestone fees, contract services and other related costs. Research and development costs, including up-front fees and milestones paid to collaborators, are also expensed as incurred. In circumstances where amounts have been paid in excess of costs incurred, the Company records a prepaid expense. The Company accrues costs for clinical trial activities based upon estimates of the services received and related expenses incurred that have yet to be invoiced by the contract research organizations, clinical study sites, laboratories, consultants or other clinical trial vendors that perform the activities. The Company recognizes the reimbursement associated with collaborative activities to its collaborative partners, excluding collaboration costs under the Vertex Agreements accounted for under ASC 808, as a reduction to research and development expense in the period the services are provided. Costs associated with collaborative activities to collaborative partners accounted for under ASC 808 and included in research and development expense was not significant for the years ended December 31, 2022, 2021 and 2020

Leases

The Company accounts for its leases in accordance with ASC 842, Leases, or ASC 842. At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable. The Company does not have financing leases.

Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term. Certain adjustments to the right-of-use asset may be required for items such as incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. Prospectively, the Company will adjust the right-of-use assets for straight-line rent expense or any incentives received and remeasure the lease liability at the net present value using the same incremental borrowing rate that was in effect as of the lease commencement or transition date.

F-11

The Company has elected not to recognize leases with an original term of one year or less on the balance sheet. The Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty of renewal.

Assumptions made by the Company at the commencement date are re-evaluated upon occurrence of certain events, including a lease modification. A lease modification results in a separate contract when the modification grants the lessee an additional right of use not included in the original lease and when lease payments increase commensurate with the standalone price for the additional right of use. When a lease modification results in a separate contract, it is accounted for in the same manner as a new lease.

Equity Based Compensation Expense

The Company’s share-based compensation programs grant awards that have included stock options, restricted stock units and restricted stock awards. Grants are awarded to employees and non-employees, including directors.

The Company accounts for its stock-based compensation awards in accordance with ASC Topic 718, Compensation—Stock Compensation, or ASC 718. ASC 718 requires all stock-based payments to employees and non-employee directors, including grants of employee stock options and restricted stock units and modifications to existing stock options, to be recognized in the consolidated statements of operations and comprehensive (loss) income based on their fair values. The Company uses the Black-Scholes option pricing model to determine the fair value of options granted.

The Company accounts for forfeitures as they occur instead of estimating forfeitures at the time of grant and revising those estimates in subsequent periods if actual forfeitures differ from its estimates. Stock-based compensation expense recognized in the financial statements is based on awards for which performance or service conditions are expected to be satisfied.

The Company’s stock-based awards are subject to service or performance-based vesting conditions. Compensation expense related to awards to employees, directors and non-employees with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting term. Compensation expense related to awards to employees with performance-based vesting conditions is recognized based on the grant date fair value over the requisite service period using the accelerated attribution method to the extent achievement of the performance condition is probable.

The Company expenses restricted stock unit awards to employees based on the fair value of the award on a straight-line basis over the associated service period of the award.

The Company estimates the fair value of its option awards to employees, directors and non-employees using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including (i) the expected stock price volatility, (ii) the calculation of expected term of the award, (iii) the risk-free interest rate and (iv) expected dividends. Due to the lack of complete company-specific historical and implied volatility data for the full expected term of the stock-based awards, the Company bases its estimate of expected volatility on a representative group of publicly traded companies in addition to its own volatility data. For these analyses, the Company selected companies with comparable characteristics to its own, including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards. The Company computes historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available. The Company has estimated the expected term of its employee stock options using the “simplified” method, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option, due to its lack of sufficient historical data. The risk-free interest rates for periods within the expected term of the option are based on the U.S. Treasury securities with a maturity date commensurate with the expected term of the associated award. The Company has never paid, and does not expect to pay, dividends in the foreseeable future.

Patent Costs

Costs to secure and prosecute patent applications and other legal costs related to the protection of the Company’s intellectual property are expensed as incurred and are classified as general and administrative expenses in the Company’s consolidated statements of operations.

F-12

Income Taxes

Income taxes are recorded in accordance with ASC Topic 740, Income Taxes, or ASC 740, which provides for deferred taxes using an asset and liability approach. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax reporting basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has evaluated available evidence and concluded that the Company may not realize all the benefit of its deferred tax assets; therefore, a valuation allowance has been established for the amount of the deferred tax assets that the Company does not believe is more likely than not to be realized.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of December 31, 2022 and 2021, the Company does not have any significant uncertain tax positions. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. See Note 14 for further details.

Comprehensive (Loss) Income

Comprehensive (loss) income consists of net income or loss and other comprehensive (loss) income. Other comprehensive (loss) income consists of foreign currency translation adjustments and unrealized losses on marketable securities.

Net (Loss) Income Per Share Attributable to Common Shareholders

Basic net (loss) income per share is calculated by dividing net (loss) income attributable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net (loss) income per share is calculated by dividing the net (loss) income attributable to common shareholders by the weighted-average number of common equivalent shares outstanding for the period, including any dilutive effect from outstanding stock options and restricted stock units using the treasury stock method. See Note 12 for further details.

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. The Company does not believe that the adoption of recently issued standards have or may have a material impact on its consolidated financial statements and disclosures.

3. Marketable Securities

A summary of the Company’s cash equivalents and marketable securities as of December 31, 2022 and 2021, which are recorded at fair value (and excludes $159.3 million and $405.6 million of cash at December 31, 2022 and 2021, respectively) is shown below (in thousands):

F-13

Cash equivalents:

Certificates of deposit — — — —

Marketable securities:

U.S. Treasury securities — — — —

Cash equivalents:

Corporate debt securities — —

Certificates of deposit — — — —

Marketable securities:

Government-sponsored enterprise securities 13,334 — (77 ) 13,257

As of December 31, 2022 and 2021, the aggregate fair value of marketable securities that were in an unrealized loss position for less than twelve months was $628.4 million and $1,311.6 million, respectively. As of December 31, 2022 and 2021, the aggregate fair value of marketable securities that were in an unrealized loss position for more than twelve months was $619.2 million and $4.6 million, respectively. Of this amount, securities totaling $53.1 million as of December 31, 2022 will mature beyond one year. No securities in an unrealized loss position for more than twelve months as of December 31, 2021 will mature beyond one year. The Company has recorded a net unrealized loss of $10.5 million and $5.0 million, respectively, during the years ended December 31, 2022 and 2021 related to its marketable securities, which is included in comprehensive (loss) income on the consolidated statements of operations and comprehensive (loss) income.

The Company determined that there was no material credit risk of the above investments as of December 31, 2022 and 2021. The Company has the intent and ability to hold such securities until recovery. As a result, the Company did not record any charges for credit-related impairments for its marketable securities for the years ended December 31, 2022 and 2021. No available-for-sale debt securities held as of December 31, 2022 had remaining maturities greater than thirty months.

4. Fair Value Measurement

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicate the fair value hierarchy classification of such fair values as of December 31, 2022 and 2021 (in thousands):

F-14

Fair Value Measurements at

Total Level 1 Level 2 Level 3

Cash and cash equivalents:

Corporate debt securities 2,149 — 2,149 —

Certificates of deposit — — — —

Marketable securities:

U.S. Treasury securities — — — —

Government-sponsored enterprise securities 79,045 — 79,045 —

Fair Value Measurements at

Total Level 1 Level 2 Level 3

Cash and cash equivalents:

Corporate debt securities — — — —

Certificates of deposit — — — —

Marketable securities:

Government-sponsored enterprise securities 13,257 — 13,257 —

Marketable securities classified as Level 2 within the valuation hierarchy generally consist of U.S. treasury securities and government agency securities, 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.

The Company holds equity securities classified as Level 3 which are not material to the Company’s financial position.

5. Property and Equipment, net

Property and equipment, net, consists of the following (in thousands):

As of December 31,

Furniture, fixtures, and other 8,109 4,371

Depreciation expense for the year ended December 31, 2022, 2021 and 2020 was $24.1 million, $17.9 million, and $9.1 million, respectively.

F-15

6. Accrued Expenses

Accrued expenses consist of the following (in thousands):

As of December 31,

Payroll and employee-related costs $ 19,241 $ 23,661

Accrued property and equipment 1,244 7,113

7. Leases

In June 2015, the Company entered into a lease agreement for the lease of research facility space in Cambridge, Massachusetts, with a commencement date of November 15, 2015. The lease was subsequently amended in both 2017 and 2020 and expired in 2022.

In May 2016, the Company entered into a sublease agreement for its primary office and research facility in Cambridge, Massachusetts, with a commencement date of December 23, 2016. The sublease was subsequently amended in 2021 and expired in 2022.

In May 2019, the Company entered into a lease agreement for office facility space in Cambridge, Massachusetts, with a commencement date of June 1, 2019, or the 2019 Lease. The lease expires in November 2026, and the Company has an option to extend the term of the lease for an additional five-year period based on certain conditions within the Company’s control. The 2019 Lease contains escalating rent clauses which require higher rent payments in future years. The right-of-use asset and corresponding lease liability does not include the additional five-year period under the renewal option as the Company is not reasonably certain to exercise that option.

In December 2019, Casebia Therapeutics, Limited Liability Partnership, or Casebia, became a wholly-owned subsidiary of the Company. In connection therewith, Casebia assigned its sublease for an office and research facility in Cambridge, Massachusetts to the Company. The sublease was subsequently amended in 2021 and expired in 2022.

In May 2020, the Company entered into a lease agreement for a cell therapy manufacturing facility in Framingham, Massachusetts, or the Framingham Lease, for clinical and commercial production of the Company’s investigational cell therapy product candidates. The Framingham Lease expires in March 2036 and the Company has an option to extend the term of the lease for two additional seven-year periods. The right-of-use asset and corresponding lease liability does not include the additional seven-year periods under the renewal option as the Company is not reasonably certain to exercise that option.

In July 2020, the Company entered into a lease agreement for an office and laboratory facility in Boston, Massachusetts, with a commencement date of June 1, 2021, or the 2020 Lease. At lease commencement, the Company recorded a right-of-use asset of $149.8 million and a corresponding operating lease liability of $147.9 million. Tenant incentives of $49.2 million were recorded as a reduction to the operating lease asset and liability at lease commencement. The lease expires in March 2034 and the Company has an option to extend the term of the lease for two additional five-year periods. The right-of-use asset and corresponding lease liability does not include the additional five-year periods under the renewal option as the Company is not reasonably certain to exercise that option.

The Company also rents certain office space in Zug, Switzerland, on a short-term basis for which a right-of-use asset and liability are not recorded, in accordance with the practical expedient elected.

The Company has embedded leases in certain research and license agreements for which the Company has recorded a right of use asset and liability. These arrangements are not significant in comparison to the Company’s total operating lease assets and liabilities. In addition, the Company has identified certain short-term leases embedded within its manufacturing contracts which are not recorded on the Company’s balance sheet in accordance with the practical expedient elected.

F-16

The Company identified and assessed the following estimates in recognizing the right-of-use asset and corresponding liability:

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Expected lease term: The expected lease term includes noncancelable lease periods and, when applicable, periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option, as well as periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option.

•

Incremental borrowing rate: As the discount rates in the Company’s leases are not implicit, the Company estimated the incremental borrowing rate based on the rate of interest the Company would have to pay to borrow a similar amount on a collateralized basis over a similar term.

The following table summarizes the lease assets and liabilities as of December 31, 2022 and 2021 (in thousands):

As of December 31,

Assets

Liabilities

Current

Non-current

Operating lease liabilities, net of current portion 228,179 212,872

The following table summarizes operating lease costs included in research and development and general and administrative expense, as well as sublease income for the twelve months ended December 31, 2022, 2021 and 2020 (in thousands):

Years Ended December 31,