Voyager Therapeutics, Inc. (VYGR)

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. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this report, including those set forth under Item 1A. “Risk Factors” and under “Forward-Looking Statements” in this Annual Report on Form 10-K.

We are a biotechnology company whose mission is to leverage the power of human genetics to modify the course of and ultimately cure neurological diseases. Our pipeline includes programs for Alzheimer’s disease, or AD; Friedreich’s ataxia, or FA; Parkinson’s disease; and multiple other diseases of the central nervous system, or CNS. Many of our programs are derived from our TRACER™ (Tropism Redirection of AAV by Cell-type-specific Expression of RNA) adeno-associated virus, or AAV, capsid discovery platform, which we have used to generate novel capsids, or TRACER Capsids, and identify associated receptors to potentially enable high brain penetration with genetic medicines following intravenous, or IV, dosing. Some of our programs are wholly-owned, and some are advancing with licensees and collaborators including Alexion, AstraZeneca Rare Disease, or Alexion; Novartis Pharma AG, or Novartis; and Neurocrine Biosciences, Inc., or Neurocrine.

We are advancing our own proprietary pipeline of drug candidates for neurological diseases, with a focus on AD, and particularly on tau, which we view as a critically important AD target. Our wholly-owned prioritized pipeline includes two tau targeting programs: VY7523 (which we formerly referred to as VY-TAU01), an anti-tau antibody for AD and VY1706, a tau silencing gene therapy for AD. The murine version of VY7523 reduced tau spread by more than 60% in preclinical studies. VY7523 demonstrated an acceptable safety, tolerability, and immunogenicity profile as well as expected pharmacokinetic results in a Phase 1, single ascending dose, or SAD, clinical trial in healthy volunteers. In February 2025, we initiated a Phase 1 multiple ascending dose, or MAD, clinical trial of VY7523 in early AD patients. We believe this trial has the potential to generate proof-of-concept data for slowing the spread of pathological tau via tau positron emission tomography imaging in the second half of 2026. VY1706 was selected as the development candidate for the tau silencing gene therapy in November 2024. In a non-human primate, or NHP, study, a single 1.3E13 vector genomes per kilogram dose of VY1706 delivered intravenously resulted in reductions in tau mRNA levels of 50% to 73% across the cerebral cortex, including in areas of the brain where tau accumulates during progression of AD. We anticipate submission of an investigational new drug, or IND, for the VY1706 program in 2026. Our proprietary pipeline also includes early research initiatives to develop a vectorized anti-amyloid antibody for AD and a vectorized superoxide dismutase 1, or SOD1, knockdown gene therapy for SOD1 amyotrophic lateral sclerosis.

We are also working with our collaboration partners on multiple programs. We are advancing seven gene therapy programs with Neurocrine. Development candidates were selected for three of these programs in 2024, resulting in milestone payments to us. We expect that Neurocrine will submit IND filings in 2025 for the two most advanced of these programs, a glucosylceramidase beta 1, or GBA1, gene therapy program for Parkinson’s disease and other GBA1-mediated diseases, or the GBA1 Program, and a frataxin, or FXN, gene therapy program for FA, or the FA Program. These two programs are particularly significant to us for two reasons: the subsequent clinical trials of these programs have the potential to establish human proof-of-concept for the TRACER Capsids, and we have the option to opt-in on co-development and co-commercialization in the United States. for both products. In addition to the Neurocrine collaborations, we have partnered with Novartis on TRACER Capsid-based gene therapies for spinal muscular atrophy

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and Huntington’s disease. We have also licensed capsids to Novartis for three undisclosed CNS targets and to Alexion for one undisclosed rare neurological disease target. In total, these partnerships have delivered more than $500.0 million in non-dilutive funding to us to date, including upfront fees, development milestone payments, option exercise fees, license fees, and research and development expense reimbursement. Looking forward, we have the potential to earn up to $8.2 billion in milestone payments across the partnered portfolio, including $2.9 billion in potential development milestone payments, as well as royalties.

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All of the gene therapies in our wholly-owned and collaborative pipeline leverage TRACER. TRACER is a broadly applicable, RNA-based screening platform that enables rapid discovery of AAV capsids with robust penetration of the blood-brain barrier, or BBB, and enhanced CNS tropism in multiple species, including NHPs. We are also developing a second non-viral therapeutics platform focused on non-viral receptor-mediated transport across the BBB.

Despite reporting $132.3 million in net income for the year ended December 31, 2023, we have a history of incurring significant losses. We reported a net loss of $65.0 million for the year ended December 31, 2024, and we reported a net loss of $46.4 million for the year ended December 31, 2022. As of December 31, 2024, we had an accumulated deficit of $326.2 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase substantially in the long term in connection with our ongoing activities, as we:

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Financial Operations Overview

Revenue

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To date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales for the foreseeable future. For the year ended December 31, 2024, we recognized $49.7 million of collaboration revenue from the 2023 Neurocrine Collaboration Agreement, $15.0 million of collaboration revenue from an amendment, or the Novartis Amendment, to our option and license agreement with Novartis entered into in March 2022, or the 2022 Novartis Option and License Agreement, $10.4 million of collaboration revenue from the 2019 Neurocrine Collaboration Agreement, and $4.9 million of collaboration revenue from the 2023 Novartis Collaboration Agreement. For additional information about our revenue recognition policy, see the section titled “Summary of significant accounting policies and basis of presentation.”

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For the foreseeable future, we expect substantially all of our revenue will be generated from the 2019 Neurocrine Collaboration Agreement, the 2023 Neurocrine Collaboration Agreement, the 2023 Novartis Collaboration Agreement, the 2022 Novartis Option and License Agreement, and our option and license agreement with Alexion entered into on October 1, 2021, or the Alexion Agreement, and any other strategic collaborations and out-licensing arrangements we may enter into in the future. If our development efforts are successful, we may also generate revenue from product sales.

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Expenses

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Research and Development Expenses

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Research and development expenses consist primarily of costs incurred for our research activities, including our program discovery efforts, and the development of our proprietary antibody, gene therapy, vectorized antibody, and non-viral therapeutic platforms and programs which include:

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Research and development costs are expensed as incurred. Costs for certain activities, such as manufacturing, preclinical studies, and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators.

Research and development activities are central to our business model. We are in the early stages of development of our product candidates. During the year ended December 31, 2024, our research and development expenses have increased as compared to the amounts recorded in the same period in the prior year. As our research and development programs progress and as we identify product candidates and initiate preclinical studies and clinical trials, including our clinical trials to evaluate VY7523, we expect research and development costs to continue to increase. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of our product candidates.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses. Our expenses will increase if:

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General and Administrative Expenses

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

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During the year ended December 31, 2024, our general and administrative expenses have remained consistent with the amount recorded in the same period in prior year.

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Other Income, Net

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Other income, net consists primarily of interest income on our marketable securities.

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Critical Accounting Policies and Estimates

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Our management’s discussion and analysis of our consolidated financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates, if any, will be reflected in the financial statements prospectively from the date of change in estimates.

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While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe that certain aspects of our accounting policy on revenue recognition require the most significant judgments and estimates in the preparation of our financial statements.

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Revenue Recognition – ASC 606

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We recognize revenue in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 606 Revenue from Contracts with Customers, or ASC 606.

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We enter into license, option, and collaboration agreements which are within the scope of ASC 606, under which we license or provide options to license certain of our product candidates and, in certain cases, perform research and development. The terms of these arrangements typically include payment of one or more of the following: non-refundable, upfront fees; reimbursement of research and development costs; development, regulatory and commercial milestone payments; option exercise fees; and royalties on net sales of licensed products.

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We estimate the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include fixed consideration and/or variable consideration. At the inception of each arrangement that includes variable consideration, we evaluate the amount of potential payment and the likelihood that the payments will be received. We utilize either the most likely amount method or expected amount method to estimate the amount expected to be received based on which method best predicts the amount expected to be received. The amount of variable consideration which is included in the transaction price may be constrained, and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

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Our contracts often include development and regulatory milestone payments which are assessed under the most likely amount method and constrained if it is probable that a significant revenue reversal would occur. Milestone payments that are not within our control or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each reporting period, we re-evaluate the probability of achievement of such development milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Given the nature of the milestone payments in our contracts with customers, most of the variable consideration is subject to a constraint that does not involve significant judgement.

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We allocate the transaction price based on the estimated stand-alone selling price of each of the performance obligations. We must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. We utilize key assumptions to determine the stand-alone selling price for performance obligations, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs. Additionally, in determining the standalone selling price for material rights, we utilize comparable transactions, industry standards for product development and clinical trial success probabilities and estimates of option exercise likelihood. We do not believe that reasonable changes in the assumptions used to determine stand-alone selling price for our performance obligations would materially impact the amount of revenue we recognize.

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The consideration allocated to each performance obligation is recognized as revenue when control is transferred for the related goods or services. For performance obligations which consist of licenses and other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

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A significant portion of revenue recognized from the 2019 Neurocrine Collaboration Agreement and the 2023 Neurocrine Collaboration Agreement is related to performance obligations pursuant to which revenue is recognized using a proportional performance model. Revenue is recognized using input-based measurements, which involves the measurement of progress toward each performance obligation based on the actual costs incurred compared to total projected costs. We use judgement in estimating the expected remaining costs to complete the research and development services for each performance obligation based on discussions with the Joint Steering Committee for the program and discussions with our collaboration partners. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure and related revenue recognition. Changes in our estimates of the expected remaining costs to complete the research and development services for our performance obligations can result in significant changes to the amount of revenue we recognize each period.

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Results of Operations

Comparison of the years ended December 31, 2024 and 2023:

The following table summarizes our results of operations for the years ended December 31, 2024 and 2023, respectively, together with the changes in those items in dollars:

Collaboration Revenue

Collaboration revenue was $80.0 million and $250.0 million for the years ended December 31, 2024 and 2023, respectively. During the year ended December 31, 2024, we recognized collaboration revenue in connection with the following agreements:

During the year ended December 31, 2023, we recognized collaboration revenue in connection with the following agreements:

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Research and Development Expense

Research and development expense increased by $35.2 million from $92.2 million for the year ended December 31, 2023, to $127.4 million for the year ended December 31, 2024. The following table summarizes our research and development expenses for the years ended December 31, 2024 and 2023. All amounts for the year ended December 31, 2023, have been reclassified to conform to the current year’s presentation.

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The increase in research and development expense for the year ended December 31, 2024 was primarily attributable to the following:

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General and Administrative Expense

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General and administrative expense balance remained consistent for the year ended December 31, 2024, compared to December 31, 2023.

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Other Income, Net

Other income, net of approximately $19.0 million was recognized during the year ended December 31, 2024, as compared to $11.7 million during the year ended December 31, 2023. Other income, net during the year ended December 31, 2024, was primarily related to interest income due to increased interest rates on increased balances of marketable securities, as our marketable securities increased during the year ended December 31, 2024, as compared to the year ended December 31, 2023.

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Liquidity and Capital Resources

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Sources of Liquidity

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We have funded our operations primarily through private placements of redeemable convertible preferred stock, public offerings and private placements of our common stock, strategic collaborations and option and license arrangements, including our 2019 Neurocrine Agreement, 2023 Neurocrine Collaboration Agreement, 2022 Novartis Agreement, 2023 Novartis Collaboration Agreement, Alexion Agreement, and with our prior collaboration agreements.

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As of December 31, 2024, we had cash, cash equivalents, and marketable securities of $332.4 million. Based upon our current operating plan, we expect that our existing cash, cash equivalents, and marketable securities at December 31, 2024, along with amounts expected to be received as reimbursement for development costs under our collaboration and license agreements with Neurocrine and Novartis and interest income, to be sufficient to meet our planned operating expenses and capital expenditure requirements into mid-2027.

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Cash Flows

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The following table provides information regarding our cash flows:

Cash Flows from Operating Activities

Net cash used in operating activities was $15.3 million during the year ended December 31, 2024. The cash used in operating activities for the year ended December 31, 2024, was primarily driven by our net loss for the year ended December 31, 2024, of $65.0 million and a decrease in deferred revenue of $44.8 million due to revenue recognized under the 2019 Neurocrine Agreement and the 2023 Neurocrine Collaboration Agreement, offset by a decrease in accounts receivable of $78.6 million due to the collection of the upfront payment under the 2023 Novartis Agreement, and stock-based compensation expense of $14.8 million.

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Net cash provided by operating activities was $77.9 million during the year ended December 31, 2023. The cash provided by operating activities for the year ended December 31, 2023, was primarily driven by our net income for the year ended December 31, 2023, of $132.3 million, stock-based compensation expense of $11.2 million, and an increase in deferred revenue of $9.4 million, offset by an increase in accounts receivable of $80.2 million due to the recording of the upfront payment under the 2023 Novartis Agreement.

Net cash used in operating activities was $12.5 million during the year ended December 31, 2022. The cash used in operating activities for the year ended December 31, 2022 was primarily driven by operating expenses, net of stock-based compensation and depreciation, offset by an increase in deferred revenue partially driven by the upfront payment of $54.0 million from Novartis in connection with our entry into the 2022 Novartis Option and License Agreement during the year ended December 31, 2022.

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Cash Flows from Investing Activities

Net cash used in investing activities was $94.9 million during the year ended December 31, 2024. The cash used in investing activities for the year ended December 31, 2024 was primarily due to $465.7 million for purchases of marketable securities and $3.5 million for purchases of property and equipment, offset by $374.3 million from proceeds from maturities and sales of marketable securities.

Net cash used in investing activities was $141.6 million during the year ended December 31, 2023. The cash used in investing activities for the year ended December 31, 2023 was primarily due to $224.0 million for purchases of marketable securities and $3.3 million for purchases of property and equipment, offset by $85.6 million from proceeds from maturities and sales of marketable securities.

Net cash used in investing activities was $7.3 million during the year ended December 31, 2022. The cash used in investing activities for the year ended December 31, 2022 was primarily due to $54.8 million for purchases of marketable securities and $2.5 million for purchases of property and equipment, offset by $50.0 million from proceeds from maturities and sales of marketable securities.

Cash Flows from Financing Activities

Net cash provided by financing activities was $114.0 million during the year ended December 31, 2024 primarily due to the $93.5 million in net proceeds from a public offering of common stock and warrants and $19.3 million in connection with the sale of common stock to Novartis in January 2024.

Net cash provided by financing activities was $33.6 million during the year ended December 31, 2023 primarily due to the $31.1 million in proceeds from the sale of common stock in connection with the 2023 Neurocrine Collaboration Agreement along with proceeds from the exercise of stock options, and purchases by our employees of our common stock under our employee stock purchase plan.

Net cash provided by financing activities was $1.1 million during the year ended December 31, 2022 primarily due to the proceeds from the exercise of stock options, and purchases by our employees of our common stock under our employee stock purchase plan.

Funding Requirements

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Our expenses increased during the year ended December 31, 2024 as compared with the prior year as our development programs progressed and we increased headcount. We expect our expenses to continue to increase as we continue the research and development of, conduct clinical trials of, and seek marketing approval for our product candidates including our Phase 1 MAD clinical trial to evaluate VY7523 in 2025, and as we continue to enter into or conduct activities in connection with our collaboration agreements. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant expenses related to program sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators. Furthermore, we expect to incur increasing costs associated with operating as a public company, executing financial statement controls, satisfying regulatory and quality standards, fulfilling healthcare compliance requirements, and maintaining product, clinical trial and directors’ and officers’ liability insurance coverage. We also anticipate the cost of goods and services and the levels of compensation paid to employees will increase due to inflationary conditions existing in the general economy. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital or enter into business development transactions when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.

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As of December 31, 2024, we had cash, cash equivalents, and marketable securities of $332.4 million. Based upon our current operating plan, we expect that our existing cash, cash equivalents, and marketable securities at December 31, 2024, along with amounts expected to be received as reimbursement for development costs under our collaboration and license agreements with Neurocrine and Novartis and interest income, to be sufficient to meet our

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planned operating expenses and capital expenditure requirements into mid-2027. Our future capital requirements will depend on many factors, including:

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Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete. We may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our product revenues, if any, and any commercial milestone payments or royalty payments under our collaboration agreements, will be derived from sales of products that may not be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing and business development transactions to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

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Until such time, if ever, as we can generate product revenues sufficient to achieve consistent profitability, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic

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alliances, and option and license arrangements. We do not have any committed external source of funds other than the amounts we are entitled to receive from our collaboration partners and licensees for reimbursement of certain research and development expenses, potential option exercises, the achievement of specified regulatory and commercial milestones, and royalty payments under our collaboration, and option and license agreements, as applicable. To the extent that we raise additional capital through the sale of equity or equity-linked securities, including convertible debt, our stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights as holders of our common stock. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, obtaining additional capital, acquiring or divesting businesses, making capital expenditures or declaring dividends.

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If we raise additional funds through collaborations, strategic alliances, or option and license arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to 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 products or product candidates that we would otherwise prefer to develop and market ourselves.

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Contractual Obligations

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We enter into agreements in the normal course of business with clinical research organizations, contract manufacturing organizations, and institutions to license intellectual property. These contracts generally are cancelable at any time by us, upon 30 to 90 days prior written notice.

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Our agreements to license intellectual property include potential milestone payments that are dependent upon the development of products using the intellectual property licensed under the agreements and contingent upon the achievement of clinical trial or regulatory approval milestones. We may also be required to pay annual maintenance fees or minimum amounts payable ranging from low-four digits to low five-digits depending upon the terms of the applicable agreement. In certain instances, we are also obligated to pay our licensors royalties based on sales of products, if approved, using the intellectual property licensed under the applicable agreement.

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We also have non-cancelable operating lease commitments arising from our leases of office and laboratory space at our facilities in Cambridge and Lexington, Massachusetts. For more information, refer to Note 7 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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Off-Balance Sheet Arrangements

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We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable rules of the Securities and Exchange Commission, or the SEC.

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Smaller Reporting Company Status

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As of June 30, 2024, we ceased to qualify as a smaller reporting company, which requires us to comply with disclosure requirements that are applicable to other public companies that are not smaller reporting companies following the filing of our Annual Report on Form 10-K for the year ending December 31, 2024, and any portions of our definitive proxy statement relating to our 2025 Annual Meeting of Stockholders incorporated by reference therein.

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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. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this report, including those set forth under Item 1A. “Risk Factors” and under “Forward-Looking Statements” in this Annual Report on Form 10-K.

We are a biotechnology company whose mission is to leverage the power of human genetics to modify the course of and ultimately cure neurological diseases. Our pipeline includes programs for Alzheimer’s disease, or AD; amyotrophic lateral sclerosis, or ALS; Parkinson’s disease, and multiple other diseases of the central nervous system. Many of our programs are derived from our TRACER™ (Tropism Redirection of AAV by Cell Type-Specific Expression of RNA) adeno-associated virus, or AAV, capsid discovery platform, which we have used to generate novel capsids, or TRACER Capsids, and identify associated receptors to potentially enable high brain penetration with genetic medicines following intravenous dosing. Some of our programs are wholly-owned, and some are advancing with licensees and collaborators including Alexion, AstraZeneca Rare Disease, or Alexion; Novartis Pharma AG, or Novartis; Neurocrine Biosciences, Inc., or Neurocrine; and Sangamo Therapeutics, Inc., or Sangamo.

We focus on leveraging our expertise in capsid discovery and neuropharmacology to address the delivery hurdles that have constrained the genetic medicine and neurology disciplines, with the goal of either halting or slowing disease progression or reducing symptom severity, and therefore providing clinically meaningful impact to patients. We are advancing our own proprietary pipeline of drug candidates for neurological diseases, with a focus on AD. Our wholly-owned prioritized pipeline programs include an anti-tau antibody for AD; a superoxide dismutase 1, or SOD1, gene therapy for ALS; and a tau silencing gene therapy for AD. We identified a lead development candidate for our anti-tau antibody program in the first quarter of 2023 and expect to submit an investigational new drug, or IND, application to the U.S. Food and Drug Administration, or the FDA, for this program in the first half of 2024. We believe this trial could result in the potential to generate proof-of-concept data for slowing the spread of pathological tau via tau positron emission tomography imaging in 2026. We identified a lead development candidate for the SOD1 silencing gene therapy program in the fourth quarter of 2023, and we expect to submit the IND application for this program in mid-2025. We promoted our tau silencing gene therapy program to a prioritized program in the first quarter of 2024, based on preclinical data demonstrating robust reductions in tau messenger RNA, or mRNA, in a murine model, and we anticipate submission of an IND in 2026. Our proprietary pipeline also includes an early research initiative to develop a gene therapy for the treatment of AD. This program seeks to combine a vectorized anti-amyloid antibody with a TRACER Capsid.

We are also working with our collaboration partners on multiple programs. In January 2019 and January 2023, we entered into collaboration and license agreements with Neurocrine. Under our agreements with Neurocrine, we are actively advancing two later preclinical stage programs: a glucocerebrosidase 1, or GBA1, gene therapy program for Parkinson’s disease and other GBA1-mediated diseases, and a frataxin gene therapy program for Friedreich’s ataxia, or the FA Program. Pursuant to such agreements, we are also working with Neurocrine on five early-stage programs for the research, development, manufacture and commercialization of gene therapies designed to address central nervous system diseases or conditions associated with rare genetic targets. We have also entered into agreements with licensees including Novartis, Alexion, and Sangamo, to license or to provide options to receive exclusive licenses to certain TRACER Capsids. As described further below, in December 2023, we entered into a license and collaboration agreement with Novartis to provide Novartis certain rights regarding the development of potential gene therapy product candidates for the treatment of spinal muscular atrophy and to collaborate with Novartis to develop gene therapy product candidates for the treatment of Huntington’s disease. The joint steering committee with Neurocrine has selected a development candidate for the FA Program, during the first quarter of 2024, and expects to advance into first-in-human

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clinical trials in 2025. We anticipate that our collaborative partners and licensees will submit at least one additional IND application for a partnered program and initiate clinical development for the associated program by the end of 2025.

Despite reporting $132.3 million in net income for the year ended December 31, 2023, we have a history of incurring significant losses. We reported a net loss of $46.4 million for the year ended December 31, 2022. We reported a net loss of $71.2 million for the year ended December 31, 2021. As of December 31, 2023, we had an accumulated deficit of $261.2 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase substantially in connection with our ongoing activities, as we:

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Financial Operations Overview

Revenue

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To date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales for the foreseeable future. For the year ended December 31, 2023, we recognized $80.8 million of collaboration revenue from the 2023 Neurocrine Collaboration Agreement, $80.0 million of collaboration revenue from the 2023 Novartis Collaboration Agreement, $79.0 million of collaboration revenue from our option and license agreement with Novartis entered into on March 4, 2022, or the 2022 Novartis Agreement, $9.8 million of collaboration revenue from the 2019 Neurocrine Collaboration Agreement, and $0.4 million of other collaboration revenue. For additional information about our revenue recognition policy, see the section titled “—Summary of significant accounting policies and basis of presentation.”

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For the foreseeable future, we expect substantially all of our revenue will be generated from the 2019 Neurocrine Collaboration Agreement, the 2023 Neurocrine Collaboration Agreement, the 2023 Novartis Collaboration Agreement, the 2022 Novartis Option and License Agreement, and our option and license agreement with Alexion entered into on October 1, 2021, or the Alexion Agreement, and any other strategic collaborations and out-licensing arrangements we may enter into in the future. If our development efforts are successful, we may also generate revenue from product sales.

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Expenses

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Research and Development Expenses

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Research and development expenses consist primarily of costs incurred for our research activities, including our program discovery efforts, and the development of our proprietary antibody program and gene therapy and vectorized antibody platforms and programs which include:

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Research and development costs are expensed as incurred. Costs for certain activities, such as manufacturing, preclinical studies, and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators.

Research and development activities are central to our business model. We are in the early stages of development of our product candidates. During the year ended December 31, 2023, our research and development expenses have increased as compared to the amounts recorded in the same period in the prior year. As our development programs progress and as we identify product candidates and initiate preclinical studies and clinical trials, including as we initiate our planned Phase 1 clinical trial to evaluate VY-TAU01 in 2024, we expect research and development costs

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to continue to increase. However, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of our product candidates.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses. Our expenses will increase if:

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General and Administrative Expenses

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

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During the year ended December 31, 2023, our general and administrative expenses have increased as compared to the amount recorded in the same period in prior year. As our development programs progress and we identify product candidates and initiate preclinical studies and clinical trials, including as we initiate our planned Phase 1 clinical trial to evaluate VY-TAU01 in 2024, we continue to expect general and administrative expenses to increase to support these additional research and development activities.

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Other Income, Net

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Other income, net consists primarily of interest income on our marketable securities.

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Critical Accounting Policies and Estimates

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Our management’s discussion and analysis of our consolidated financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates, if any, will be reflected in the financial statements prospectively from the date of change in estimates.

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While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe that certain aspects of our accounting policy on revenue recognition require the most significant judgments and estimates in the preparation of our financial statements.

Revenue Recognition – ASC 606

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We recognize revenue in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 606 Revenue from Contracts with Customers, or ASC 606.

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We enter into license, option, and collaboration agreements which are within the scope of ASC 606, under which we license or provide options to license certain of our product candidates and, in certain cases, perform research and development. The terms of these arrangements typically include payment of one or more of the following: non-refundable, upfront fees; reimbursement of research and development costs; development, regulatory and commercial milestone payments; option exercise fees; and royalties on net sales of licensed products.

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We estimate the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include fixed consideration and/or variable consideration. At the inception of each arrangement that includes variable consideration, we evaluate the amount of potential payment and the likelihood that the payments will be received. We utilize either the most likely amount method or expected amount method to estimate the amount expected to be received based on which method best predicts the amount expected to be received. The amount of variable consideration which is included in the transaction price may be constrained, and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

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Our contracts often include development and regulatory milestone payments which are assessed under the most likely amount method and constrained if it is probable that a significant revenue reversal would occur. Milestone payments that are not within our control or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each reporting period, we re-evaluate the probability of achievement of such development milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Given the nature of the milestone payments in our contracts with customers, most of the variable consideration is subject to a constraint that does not involve significant judgement.

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We allocate the transaction price based on the estimated stand-alone selling price of each of the performance obligations. We must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. We utilize key assumptions to determine the stand-alone selling price for performance obligations, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs. Additionally, in determining the standalone selling price for material rights, we utilize comparable transactions, industry standards for product development and clinical trial success probabilities and estimates of option exercise likelihood. We do not believe that reasonable changes in the assumptions used to determine stand-alone selling price for our performance obligations would materially impact the amount of revenue we recognize.

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The consideration allocated to each performance obligation is recognized as revenue when control is transferred for the related goods or services. For performance obligations which consist of licenses and other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

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A significant portion of revenue recognized from the 2019 Neurocrine Collaboration Agreement and the 2023 Neurocrine Collaboration Agreement is related to performance obligations pursuant to which revenue is recognized using a proportional performance model. Revenue is recognized using input-based measurements, which involves the measurement of progress toward each performance obligation based on the actual costs incurred compared to total projected costs. We use judgement in estimating the expected remaining costs to complete the research and development services for each performance obligation based on discussions with the joint steering committee for the program and discussions with our collaboration partners. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure and related revenue recognition. Changes in our estimates of the expected remaining costs to complete the research and development services for our performance obligations, such as the significant change that occurred in the fourth quarter of 2021 as a result of decisions made by the JSC for the 2019 Neurocrine Collaboration Agreement, can result in significant changes to the amount of revenue we recognize each period.

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Results of Operations

Comparison of the years ended December 31, 2023 and 2022:

The following table summarizes our results of operations for the years ended December 31, 2023 and 2022, respectively, together with the changes in those items in dollars:

Collaboration Revenue

Collaboration revenue was $250.0 million and $40.9 million for the years ended December 31, 2023 and 2022, respectively. The increase in collaboration revenue was the result of $79.0 million in revenue recognized during the year ended December 31, 2023, in connection with Novartis’ decision to exercise two of its license options under the 2022 Novartis Option and License Agreement, or Novartis License Options, along with the expiration of a third Novartis License Option. In addition, during the year ended December 31, 2023, we recognized $80.0 million of revenue associated with the 2023 Novartis Collaboration Agreement, $80.8 million of revenue associated with the 2023 Neurocrine Collaboration Agreement, $9.8 million of revenue associated with the 2019 Neurocrine Collaboration Agreement, and $0.4 million of other collaboration revenue. During the year ended December 31, 2022, collaboration revenue was primarily related to Pfizer’s decision, as Alexion’s predecessor-in-interest under the Alexion Agreement, to exercise the first material right for a license option under the Alexion Agreement, or the Pfizer License Option, along with the expiration of the second material right associated with the Pfizer License Option, which resulted in revenue recognized of $40.0 million.

Research and Development Expense

Research and development expense increased by $31.4 million from $60.8 million for the year ended December 31, 2022 to $92.2 million for the year ended December 31, 2023. The following table summarizes our research and development expenses for the years ended December 31, 2023 and 2022:

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The increase in research and development expense for the year ended December 31, 2023 was primarily attributable to the following:

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General and Administrative Expense

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General and administrative expense increased by $4.8 million from $31.0 million for the year ended December 31, 2022 to $35.8 million for the year ended December 31, 2023. The increase in general and administrative expense was primarily attributable to increased compensation costs and stock-based compensation associated with higher headcount in general and administrative functions as compared to the same period in the prior year, as well as the recognition of $1.9 million of business development costs related to the 2023 Novartis Collaboration Agreement as general and administrative expenses during the year ended December 31, 2023.

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Other Income, Net

Other income, net of approximately $11.7 million was recognized during the year ended December 31, 2023, as compared to $4.4 million during the year ended December 31, 2022. Other income, net during the year ended December 31, 2023 was primarily related to interest income due to increased interest rates on increased balances of marketable securities, while other income, net during the year ended December 31, 2022 was primarily related to an employee retention tax credit under the Coronavirus Aid, Relief, and Economic Security Act and interest income on marketable securities balances.

Liquidity and Capital Resources

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Sources of Liquidity

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We have funded our operations primarily through private placements of redeemable convertible preferred stock, public offerings and private placements of our common stock, strategic collaborations and option and license arrangements, including our 2019 Neurocrine Agreement, 2023 Neurocrine Collaboration Agreement, 2022 Novartis Agreement, 2023 Novartis Collaboration Agreement, Alexion Agreement, and with our prior collaboration agreements.

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As of December 31, 2023, we had cash, cash equivalents, and marketable securities of $230.9 million. Based upon our current operating plan, we expect that our existing cash, cash equivalents, and marketable securities at December 31, 2023, together with the $80.0 million upfront payment received in January 2024 in connection with the 2023 Novartis Collaboration Agreement, the $20.0 million in proceeds from Novartis’ stock purchase, the $93.5 million in net proceeds received from a public offering in January 2024 (refer to Note 15 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K), along with amounts expected to be received as reimbursement for development costs under our collaboration and license agreements with Neurocrine and Novartis, certain near term milestones, and interest income, to be sufficient to meet our planned operating expenses and capital expenditure requirements into 2027.

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Cash Flows

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The following table provides information regarding our cash flows for the years ended December 31, 2023, 2022, and 2021:

Cash Flows from Operating Activities

Net cash provided by operating activities was $77.9 million during the year ended December 31, 2023 as compared to $12.5 million of net cash used in operating activities for the year ended December 31, 2022. The increase was primarily due to our net income for the year ended December 31, 2023 of $132.3 million as compared to our net loss for the year ended December 31, 2022 of $46.4 million. This is offset by an increase in accounts receivable of $80.2 million during the year ended December 31, 2023 primarily attributable to the upfront payment due in connection with the 2023 Novartis Collaboration Agreement, as compared to no accounts receivable activity during the year ended December 31, 2022.

Net cash used in operating activities was $12.5 million during the year ended December 31, 2022. The cash used in operating activities for the year ended December 31, 2022 was primarily driven by operating expenses, net of stock-based compensation and depreciation, offset by an increase in deferred revenue partially driven by the upfront payment of $54.0 million from Novartis in connection with our entry into the 2022 Novartis Agreement during the year ended December 31, 2022.

Net cash used in operating activities was $53.5 million during the year ended December 31, 2021. The cash used in operating activities for the year ended December 31, 2021 was primarily driven by operating expenses, net of stock-based compensation and depreciation. We also received an upfront payment of $30.0 million from Pfizer as the predecessor-in-interest to Alexion, in connection with our entry into the Alexion Agreement.

Cash Flows from Investing Activities

Net cash used in investing activities was $141.6 million during the year ended December 31, 2023. The cash used in investing activities for the year ended December 31, 2023 was primarily due to $224.0 million for purchases of marketable securities and $3.3 million for purchases of property and equipment, offset by $85.6 million from proceeds from maturities and sales of marketable securities.

Net cash used in investing activities was $7.3 million during the year ended December 31, 2022. The cash used in investing activities for the year ended December 31, 2022 was primarily due to $54.8 million for purchases of marketable securities and $2.5 million for purchases of property and equipment, offset by $50.0 million from proceeds from maturities and sales of marketable securities.

Net cash provided by investing activities was $65.9 million during the year ended December 31, 2021. The cash provided by investing activities for the year ended December 31, 2021 was primarily due to $70.0 million from maturities of marketable securities and $12.6 million from proceeds of sales of marketable securities partially offset by $15.1 million for purchases of marketable securities and $1.6 million for purchases of property and equipment.

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Cash Flows from Financing Activities

Net cash provided by financing activities was $33.6 million during the year ended December 31, 2023 primarily due to the $31.1 million in proceeds from the issuance of common stock in connection with the 2023 Neurocrine Collaboration Agreement along with proceeds from the exercise of stock options, and purchases by our employees of our common stock under our employee stock purchase plan.

Net cash provided by financing activities was $1.1 million during the year ended December 31, 2022 primarily due to the proceeds from the exercise of stock options, and purchases by our employees of our common stock under our employee stock purchase plan.

Net cash provided by financing activities was $0.6 million during the year ended December 31, 2021 primarily due to the proceeds from the exercise of stock options, and purchases by our employees of our common stock under our employee stock purchase plan.

Funding Requirements

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Our expenses increased during the year ended December 31, 2023 as compared with the prior year as our development programs progressed and we increased headcount. We expect our expenses to continue to increase as we continue the research and development of, conduct clinical trials of, and seek marketing approval for our product candidates including as we initiate our planned Phase 1 clinical trial to evaluate VY-TAU01 in 2024, and as we continue to enter into or conduct activities in connection with our collaboration agreements. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant expenses related to program sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators. Furthermore, we expect to incur increasing costs associated with operating as a public company, executing financial statement controls, satisfying regulatory and quality standards, fulfilling healthcare compliance requirements, and maintaining product, clinical trial and directors’ and officers’ liability insurance coverage. We also anticipate the cost of goods and services and the levels of compensation paid to employee will increase due to inflationary conditions existing in the general economy. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital or enter into business development transactions when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.

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As of December 31, 2023, we had cash, cash equivalents, and marketable securities of $230.9 million. Based upon our current operating plan, we expect that our existing cash, cash equivalents, and marketable securities at December 31, 2023, together with the $80.0 million upfront payment received in January 2024 in connection with the 2023 Novartis Collaboration Agreement, the $20.0 million in proceeds from Novartis’ stock purchase, the $93.5 million in net proceeds received from a public offering executed in January 2024, along with amounts expected to be received as reimbursement for development costs under our collaboration and license agreements with Neurocrine and Novartis, certain near term milestones, and interest income, to be sufficient to meet our planned operating expenses and capital expenditure requirements into 2027. Our future capital requirements will depend on many factors, including:

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Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete. We may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our product revenues, if any, and any commercial milestone payments or royalty payments under our collaboration agreements, will be derived from sales of products that may not be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing and business development transactions to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

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Until such time, if ever, as we can generate product revenues sufficient to achieve consistent profitability, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and option and license arrangements. We do not have any committed external source of funds other than the amounts we are entitled to receive from our collaboration partners and licensors for reimbursement of certain research and development expenses, potential option exercises, the achievement of specified regulatory and commercial milestones, and royalty payments under our collaboration, and option and license agreements, as applicable. To the extent that we raise additional capital through the sale of equity or equity-linked securities, including convertible debt, our stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights as holders of our common stock. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, obtaining additional capital, acquiring or divesting businesses, making capital expenditures or declaring dividends.

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If we raise additional funds through collaborations, strategic alliances, or option and license arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to 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

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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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Contractual Obligations

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We enter into agreements in the normal course of business with clinical research organizations, contract manufacturing organizations, and institutions to license intellectual property. These contracts generally are cancelable at any time by us, upon 30 to 90 days prior written notice.

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Our agreements to license intellectual property include potential milestone payments that are dependent upon the development of products using the intellectual property licensed under the agreements and contingent upon the achievement of clinical trial or regulatory approval milestones. We may also be required to pay annual maintenance fees or minimum amounts payable ranging from low-four digits to low five-digits depending upon the terms of the applicable agreement. In certain instances, we are also obligated to pay our licensors royalties based on sales of products, if approved, using the intellectual property licensed under the applicable agreement.

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We also have non-cancelable operating lease commitments arising from our leases of office and laboratory space at our facilities in Cambridge and Lexington, Massachusetts. For more information, refer to Note 7 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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Off-Balance Sheet Arrangements

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We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable rules of the Securities and Exchange Commission, or the SEC.

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Smaller Reporting Company Status

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As of June 30, 2023, we have requalified as a “smaller reporting company,” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended. We would cease to qualify as a smaller reporting company if we have (a) a non-affiliate public float in excess of $250 million and annual revenues in excess of $100 million during our last fiscal year, or (b) a non-affiliate public float in excess of $700 million, in each case determined on an annual basis as of the last business day of our second quarter. As a smaller reporting company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not smaller reporting companies. These exemptions include:

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We expect to continue to take advantage of some or all of the available exemptions until we cease to be a smaller reporting company. We may cease to qualify as a smaller reporting company as early as June 30, 2024, which would require us to comply with disclosure requirements that are applicable to other public companies that are not smaller reporting companies following the filing of our Annual Report on Form 10-K for the year ending December 31, 2024, and any portions of our definitive proxy statement relating to our 2025 Annual Meeting of Stockholders incorporated by reference therein.

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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. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this report, including those set forth under Item 1A. “Risk Factors” and under “Forward-Looking Statements” in this Annual Report on Form 10-K.

We are a biotechnology company dedicated to breaking through barriers in gene therapy and neurology. We believe the potential of both disciplines has been constrained by delivery challenges; we are leveraging expertise in capsid discovery and neuropharmacology to address these constraints. Our gene therapy platforms enable us to engineer, optimize, manufacture and deliver adeno-associated virus, or AAV, based gene therapies that we believe have the potential to safely provide durable efficacy. Our team of experts in the field of AAV gene therapy and neuroscience first identifies and selects diseases in which we believe an AAV gene therapy or other biological therapy will answer a high unmet medical need, be supported by target validation, offer an efficient path to human proof of biology, present robust preclinical pharmacology, and offer strong commercial potential. We then engineer and optimize an AAV vector or other biological therapy for activity in, efficacy in, or delivery to, the targeted tissue or cells.

We are identifying proprietary AAV capsids, the outer viral protein shells that enclose genetic material that makes up the vector payload. Our team has developed a proprietary AAV capsid discovery platform called TRACERTM (Tropism Redirection of AAV by Cell Type-Specific Expression of RNA) that employs directed evolution to facilitate the selection of AAV capsids with enhanced tissue delivery characteristics, such as more effective delivery across the blood brain barrier, or BBB. The TRACER discovery platform is a broadly applicable, functional RNA-based AAV capsid discovery platform that allows for rapid in vivo evolution of AAV capsids with cell-specific transduction properties in multiple species, including non-human primates. We believe that capsids we discover through our TRACER discovery platform, which we refer to as TRACER capsids, have the potential to significantly enhance the efficacy and safety of our single dose gene therapies, which we expect to be delivered with targeted surgical delivery or systemic infusions, as compared with conventional capsids.

In addition to leveraging TRACER capsids in potential licensing arrangements, we are advancing our own proprietary pipeline of drug candidates for neurological diseases. Our wholly-owned prioritized pipeline programs include: superoxide dismutase 1, or SOD1, gene therapy for amyotrophic lateral sclerosis, or ALS, and an anti-tau antibody for Alzheimer’s disease. We have identified a lead development candidate for our anti-tau antibody program and we expect to identify a lead development candidate for our SOD1 program during the first half of 2023. We expect to file INDs for both programs in 2024. In addition to these two wholly-owned programs, we are actively advancing two programs in collaboration with Neurocrine Biosciences, Inc., or Neurocrine: a glucocerebrosidase 1, or GBA1, gene therapy program for Parkinson’s disease and other GBA1-mediated diseases, and a FXN gene therapy program for Friedreich’s ataxia. We also maintain a robust early research pipeline of wholly-owned and collaborative gene therapy programs for neurological diseases.

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We have a history of incurring significant losses. We reported a net loss of $46.4 million for the year ended December 31, 2022. As of December 31, 2022, we had an accumulated deficit of $393.5 million. We reported a net loss of $71.2 million for the year ended December 31, 2021. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase substantially in connection with our ongoing activities, as we:

We refer to our collaboration agreement with Neurocrine dated as of January 28, 2019 as the 2019 Neurocrine Collaboration Agreement. We refer to our option and license agreement with Pfizer Inc., or Pfizer, as the Pfizer Agreement, and to our option and license agreement with Novartis Pharma AG, or Novartis, as the Novartis Agreement.

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Financial Operations Overview

Revenue

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To date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales for the foreseeable future. For the year ended December 31, 2022, we recognized $40.9 million of collaboration revenue from the Pfizer Agreement and the 2019 Neurocrine Collaboration Agreement. For additional information about our revenue recognition policy, see the section titled “—Critical Accounting Policies and Estimates—Revenue.”

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For the foreseeable future, we expect substantially all of our revenue will be generated from the 2019 Neurocrine Collaboration Agreement and the 2023 Neurocrine Collaboration Agreement, the Pfizer Agreement, the Novartis Agreement, and any other strategic collaborations and out-licensing arrangements we may enter into in the future. If our development efforts are successful, we may also generate revenue from product sales.

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Expenses

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Research and Development Expenses

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Research and development expenses consist primarily of costs incurred for our research activities, including our program discovery efforts, and the development of our programs, gene therapy platform, proprietary antibodies, and vectorized antibody platform which include:

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Research and development costs are expensed as incurred. Costs for certain activities, such as manufacturing, preclinical studies, and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators.

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Research and development activities are central to our business model. We are in the early stages of development of our product candidates. On August 6, 2021, our board of directors approved a strategic restructuring plan to eliminate a portion of our workforce as part of an initiative to reduce expenses and enhance operations. Our research and development costs have decreased relative to pre-2021 levels as a result of this strategic restructuring, and also due to the reevaluation of our product candidate pipeline, our strategic shift to invest in TRACER capsid development efforts, and our initiation of other cost-saving initiatives. As our development programs progress and as we identify product candidates and initiate preclinical studies and clinical trials, we expect research and development costs to increase. However, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of our product candidates.

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Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses. Our expenses will increase if:

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General and Administrative Expenses

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

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Our general and administrative expenses have decreased relative to pre-2021 levels as a result of our strategic restructuring. As a result of the strategic restructuring, there are decreases including a reduction in personnel costs and fees paid to outside consultants, as well as other cost-saving initiatives including a reduction in facility-related expenditures. As our development programs progress and we identify product candidates and initiate preclinical studies and clinical trials, we expect general and administrative expenses to increase to support these additional research and development activities.

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Other Income, Net

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Other income, net consists primarily of an employee retention tax credit under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, and interest income on our marketable securities.

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Critical Accounting Policies and Estimates

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Our management’s discussion and analysis of our consolidated financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates, if any, will be reflected in the financial statements prospectively from the date of change in estimates.

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While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies used in the preparation of our financial statements require the most significant judgments and estimates.

Revenue Recognition – ASC 606

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We recognize revenue in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 606 Revenue from Contracts with Customers, or ASC 606.

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We enter into license, option, and collaboration agreements which are within the scope of ASC 606, under which we license or provide options to license certain of our product candidates and, in certain cases, perform research and development. The terms of these arrangements typically include payment of one or more of the following: non-

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refundable, upfront fees; reimbursement of research and development costs; development, regulatory and commercial milestone payments; option exercise fees; and royalties on net sales of licensed products.

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We estimate the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include fixed consideration or variable consideration. At the inception of each arrangement that includes variable consideration, we evaluate the amount of potential payment and the likelihood that the payments will be received. We utilize either the most likely amount method or expected amount method to estimate the amount expected to be received based on which method best predicts the amount expected to be received. The amount of variable consideration which is included in the transaction price may be constrained, and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

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Our contracts often include development and regulatory milestone payments which are assessed under the most likely amount method and constrained if it is probable that a significant revenue reversal would occur. Milestone payments that are not within our control or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each reporting period, we re-evaluate the probability of achievement of such development milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues in the period of adjustment. To date, we have not recognized any consideration related to the achievement of development, regulatory, or commercial milestone revenue resulting from any of our collaboration arrangements.

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For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (a) when the related sales occur, or (b) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any consideration related to sales-based royalty revenue resulting from any of our collaboration arrangements.

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We allocate the transaction price based on the estimated stand-alone selling price of each of the performance obligations. We must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. We utilize key assumptions to determine the stand-alone selling price for performance obligations, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs. Additionally, in determining the standalone selling price for material rights, we utilize comparable transactions, industry standards for product development and clinical trial success probabilities and estimates of option exercise likelihood. Variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated are consistent with the amounts we would expect to receive for the satisfaction of each performance obligation.

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The consideration allocated to each performance obligation is recognized as revenue when control is transferred for the related goods or services. For performance obligations which consist of licenses and other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

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Upfront payments and fees are recorded as contract liabilities within deferred revenue upon receipt or when due until we perform our obligations under these arrangements. Amounts are recorded as accounts receivable when our rights to consideration are unconditional. A significant portion of revenue recognized from the 2019 Neurocrine Collaboration Agreement is related to performance obligations pursuant to which revenue is recognized using a proportional performance model. Revenue is recognized using input-based measurements, which involves the measurement of progress toward each performance obligation based on the actual costs incurred compared to total projected costs. We estimate the expected remaining costs to complete the research and development services for each performance obligation. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure and related

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revenue recognition. Changes in our estimates of the expected remaining costs to complete the research and development services for our performance obligations, such as the significant change that occurred in the fourth quarter of 2021 as a result of decisions made by the JSC for the 2019 Neurocrine Collaboration Agreement, can result in significant changes to the amount of revenue we recognize each period.

Results of Operations

Comparison of the years ended December 31, 2022 and 2021:

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

Collaboration Revenue

Collaboration revenue was $40.9 million for the year ended December 31, 2022, and $37.4 million for the year ended December 31, 2021. The increase in collaboration revenue was largely a result of revenue recognized in connection with Pfizer’s decision to exercise the first material right for the option to receive an exclusive license, or the Pfizer License Option, along with the expiration of the second material right associated with the Pfizer License Option. This resulted in total revenue recognized of $40.0 million from Pfizer during the year ended December 31, 2022. The increase in collaboration revenue is partially offset by decreased revenue recognized under the 2019 Neurocrine Collaboration Agreement during the year ended December 31, 2022. During the fourth quarter of 2021, we recorded significant revenue associated with a change in estimate of the expected remaining costs to complete the research and development services for our performance obligations under the 2019 Neurocrine Collaboration Agreement, resulting in a significant decrease in revenue to be recorded in future periods. During the year ended December 31, 2021, collaboration revenue was entirely related to research services and cost reimbursement from the 2019 Neurocrine Collaboration Agreement. Our collaboration revenues were not materially impacted by the COVID-19 pandemic during the year ended December 31, 2022.

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Research and Development Expense

Research and development expense decreased by $13.0 million from $73.8 million for the year ended December 31, 2021 to $60.8 million for the year ended December 31, 2022. The following table summarizes our research and development expenses for the years ended December 31, 2022 and 2021:

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The decrease in research and development expense for the year ended December 31, 2022 was primarily attributable to the following:

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General and Administrative Expense

General and administrative expense decreased by $6.3 million from $37.2 million for the year ended December 31, 2021 to $31.0 million for the year ended December 31, 2022. The decrease in general and administrative expense was primarily attributable to the following:

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Other Income, Net

Other income, net of approximately $4.4 million was recognized during the year ended December 31, 2022, as compared to $2.4 million during the year ended 2021. Other income, net during the year ended December 31, 2022 primarily related to an employee retention tax credit under the CARES Act and interest income on marketable securities

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balances, while other income, net during the year ended December 31, 2021 primarily related to interest income on marketable securities balances.

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Liquidity and Capital Resources

Sources of Liquidity

We have funded our operations primarily through private placements of redeemable convertible preferred stock, public offerings of our common stock, strategic collaborations and option and license arrangements, including our 2019 Neurocrine Agreement and 2023 Neurocrine Collaboration Agreement, our ongoing option and license arrangements with Pfizer and Novartis under the Pfizer Agreement and the Novartis Agreement, respectively, and with our prior collaboration agreements.

As of December 31, 2022, we had cash, cash equivalents, and marketable securities of $118.8 million. Based upon our current operating plan, we expect that our existing cash, cash equivalents, and marketable securities at December 31, 2022, together with the upfront payment received in February 2023 in connection with the 2023 Neurocrine Collaboration Agreement, along with amounts expected to be received as reimbursement for development costs under our 2019 Neurocrine Agreement and 2023 Neurocrine Collaboration Agreement, will enable us to meet our planned operating expenses and capital expenditure requirements into 2025.

Cash Flows

The following table provides information regarding our cash flows for the years ended December 31, 2022, 2021, and 2020.

Cash Flows from Operating Activities

Net cash used in operating activities was $12.5 million during the year ended December 31, 2022. The cash used in operating activities for the year ended December 31, 2022 was primarily driven by operating expenses, net of stock-based compensation and depreciation, offset by an increase in deferred revenue partially driven by the upfront payment of $54.0 million from Novartis during the year ended December 31, 2022.

Net cash used in operating activities was $53.5 million during the year ended December 31, 2021. The cash used in operating activities for the year ended December 31, 2021 was primarily driven by operating expenses, net of stock-based compensation and depreciation. We also received an upfront payment of $30.0 million pursuant to the Pfizer Agreement.

Net cash used in operating activities was $96.7 million during the year ended December 31, 2020. The cash used in operating activities for the year ended December 31, 2020 was primarily driven by the one-time recognition of $105.2 million deferred revenue related to the termination of the AbbVie Tau Collaboration and the AbbVie Alpha-Synuclein Collaboration, offset by $36.7 million of net income, and changes in working capital.

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Cash Flows from Investing Activities

Net cash used in investing activities was $7.3 million during the year ended December 31, 2022. The cash used in investing activities for the year ended December 31, 2022 was primarily due to $54.8 million for purchases of marketable securities and $2.5 million for purchases of property and equipment, offset by $50.0 million from proceeds from maturities and sales of marketable securities.

Net cash provided by investing activities was $65.9 million during the year ended December 31, 2021. The cash provided by investing activities for the year ended December 31, 2021 was primarily due to $70.0 million from maturities of marketable securities and $12.6 million from proceeds of sales of marketable securities partially offset by $15.1 million for purchases of marketable securities and $1.6 million for purchases of property and equipment.

Net cash provided by investing activities was $113.0 million during the year ended December 31, 2020. The cash provided by investing activities for the year ended December 31, 2020 was primarily due to proceeds from maturities of marketable securities of $195.5 million, offset by purchases of marketable securities of $70.4 million and purchases of property and equipment of $12.1 million.

Cash Flows from Financing Activities

Net cash provided by financing activities was $1.1 million during the year ended December 31, 2022 primarily due to the proceeds from the exercise of stock options, and purchases by our employees of our common stock under our employee stock purchase plan.

Net cash provided by financing activities was $0.6 million during the year ended December 31, 2021 primarily due to the proceeds from the exercise of stock options, and purchases by our employees of our common stock under our employee stock purchase plan.

Net cash provided by financing activities was $3.2 million during the year ended December 31, 2020 primarily due to the proceeds from the exercise of stock options, and purchases by our employees of our common stock under our employee stock purchase plan.

Funding Requirements

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Our expenses decreased during the year ended December 31, 2022 as compared with the prior year as a result of our strategic restructuring, the reevaluation of our product candidate pipeline, our strategic shift to invest in TRACER capsid development efforts, and our initiation of other cost-saving initiatives. We expect our expenses to increase in the longer term, however, as we continue the research and development of, conduct clinical trials of, and seek marketing approval for, our product candidates and as we continue to enter into or conduct activities in connection with our collaboration agreements. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant expenses related to program sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators. Furthermore, we expect to incur increasing costs associated with operating as a public company, executing financial statement controls, satisfying regulatory and quality standards, fulfilling healthcare compliance requirements, and maintaining product, clinical trial and directors’ and officers’ liability insurance coverage. We also anticipate the cost of goods and services and the levels of compensation paid to employee will increase due to inflationary conditions existing in the general economy. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital or enter into business development transactions when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.

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Based upon our current operating plan, we expect that our existing cash, cash equivalents, and marketable securities at December 31, 2022, together with the upfront payment received in February 2023 in connection with the 2023 Neurocrine Collaboration Agreement, along with amounts expected to be received as reimbursement for development costs under our 2019 Neurocrine Agreement and 2023 Neurocrine Collaboration Agreement, will enable us

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to meet our planned operating expenses and capital expenditure requirements into 2025. Our future capital requirements will depend on many factors, including:

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Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete. We may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our product revenues, if any, and any commercial milestone payments or royalty payments under our collaboration agreements, will be derived from sales of products that may not be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing and business development transactions to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

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Until such time, if ever, as we can generate product revenues sufficient to achieve consistent profitability, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and option and license arrangements. We do not have any committed external source of funds other than the

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amounts we are entitled to receive from our collaboration partners and licensors for reimbursement of certain research and development expenses, potential option exercises, the achievement of specified regulatory and commercial milestones, and royalty payments under our collaboration, and option and license agreements, as applicable. To the extent that we raise additional capital through the sale of equity or equity-linked securities, including convertible debt, our stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights as holders of our common stock. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, obtaining additional capital, acquiring or divesting businesses, making capital expenditures or declaring dividends.

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If we raise additional funds through collaborations, strategic alliances, or option and license arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to 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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Contractual Obligations

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We enter into agreements in the normal course of business with clinical research organizations, contract manufacturing organizations, and institutions to license intellectual property. These contracts generally are cancelable at any time by us, upon 30 to 90 days prior written notice.

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Our agreements to license intellectual property include potential milestone payments that are dependent upon the development of products using the intellectual property licensed under the agreements and contingent upon the achievement of clinical trial or regulatory approval milestones. We may also be required to pay annual maintenance fees or minimum amounts payable ranging from low-four digits to low five-digits depending upon the terms of the applicable agreement. In certain instances, we are also obligated to pay our licensors royalties based on sales of products, if approved, using the intellectual property licensed under the applicable agreement.

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We also have non-cancelable operating lease commitments arising from our leases of office and laboratory space at our facilities in Cambridge and Lexington, Massachusetts. For more information, refer to Note 7 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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Off-Balance Sheet Arrangements

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We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable rules of the Securities and Exchange Commission, or the SEC.

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Smaller Reporting Company Status

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As of June 30, 2022, we have requalified as a “smaller reporting company,” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended. We would cease to qualify as a smaller reporting company if we have (a) a non-affiliate public float in excess of $250 million and annual revenues in excess of $100 million during our last fiscal year, or (b) a non-affiliate public float in excess of $700 million, in each case determined on an annual basis as of the last business day of our second quarter. As a smaller reporting company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not smaller reporting companies. These exemptions include:

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We expect to take advantage of some or all of the available exemptions until we cease to be a smaller reporting company. We may cease to qualify as a smaller reporting company as early as June 30, 2023, which would require us to comply with disclosure requirements that are applicable to other public companies that are not smaller reporting companies following the filing of our Annual Report on Form 10-K for the year ending December 31, 2023, and any portions of our definitive proxy statement relating to our 2024 Annual Meeting of Stockholders incorporated by reference therein.

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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. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this report, including those set forth under Item 1A. “Risk Factors” and under “Forward-Looking Statements” in this Annual Report on Form 10-K.

We are a gene therapy company focused on developing life-changing treatments and next-generation platform technologies. We focus on diseases where we believe a single dose adeno-associated virus, or AAV, gene therapy approach that either increases or decreases the production of a specific protein can either halt or slow disease progression or reduce symptom severity, therefore providing clinically meaningful impact to patients. Our gene therapy platforms enable us to engineer, optimize, manufacture and deliver AAV-based gene therapies that we believe have the potential to safely provide durable efficacy. Our team of experts in the field of AAV gene therapy first identifies and selects diseases that are well-suited for treatment using AAV gene therapy. We then engineer and optimize AAV vectors for delivery of the virus payload to the targeted tissue or cells.

We are identifying proprietary AAV capsids, the outer viral protein shells that enclose genetic material of a virus payload. Our team has developed a proprietary AAV capsid discovery platform called TRACERTM (Tropism Redirection of AAV by Cell Type-Specific Expression of RNA) to facilitate the selection of AAV capsids with blood

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brain barrier, or BBB, crossing and cell-specific transduction properties for particular therapeutic applications. The TRACER discovery platformis a broadly-applicable, functional RNA-based AAV capsid discovery platform that allows for rapid in vivo evolution of AAV capsids with cell-specific transduction properties in multiple species, including non-human primates. We believe our single dose gene therapies have the potential to be delivered directly, with targeted or systemic surgical delivery or infusions in conjunction with capsids we discover through our TRACER platform, which we refer to as TRACER capsids.

We are also applying the TRACER discovery platform towards further capsid variant libraries and selection for tropism and transduction in additional cell and tissue types. We are actively engaged in discussions with multiple parties to make TRACER capsids available to third parties for use in their drug development programs through potential licensing and other arrangements.

Our quality and manufacturing processes employ an established system capable of enabling production of high quality AAV vectors at scale sufficient for clinical trials. In addition to our TRACER discovery platform, we have developed a vectorized antibody platform which we believe will overcome many of the challenges of passive immunization.

Our business strategy focuses on discovering, developing, manufacturing and commercializing our gene therapy programs. As part of this strategy, we have developed core competencies specific to AAV gene therapy development and manufacturing. This business strategy also includes business development activities that may include in-licensing activities or partnering certain programs in specific geographies with collaborators, as we have demonstrated through our ongoing collaboration with Neurocrine, or out-licensing activities including license agreements related to our TRACER capsids such as our October 2021 licensing agreement with Pfizer Inc., which we refer to as Pfizer, and our March 2022 licensing agreement with Novartis Pharma, AG, which we refer to as Novartis. We believe there is an ongoing opportunity for out-licensing transactions related to the TRACER capsids. To maximize the potential of TRACER capsids for both our own programs and out-licensing transactions, we have retained to date, and expect to retain in the future, all rights associated with such TRACER capsids other than the rights specific to their use in combination with a particular licensee’s transgenes. Since our inception, our operations have focused on organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio, determining which neurological, cardiac, and other diseases to pursue, advancing our product candidates including delivery and manufacturing, and conducting preclinical studies and early-phase clinical trials. We do not have any product candidates approved for sale and have not generated any revenue from product sales.

We have funded our operations primarily through private placements of redeemable convertible preferred stock, public offerings of our common stock, and our strategic collaborations, including our prior collaboration with Sanofi Genzyme Corporation, or the Sanofi Genzyme Collaboration, which commenced in February 2015 and was terminated in June 2019, our prior collaboration with AbbVie Biotechnology Ltd. focusing on tau-related disease, or the AbbVie Tau Collaboration, which commenced in February 2018 and was terminated in August 2020, our prior collaboration with AbbVie Ireland Unlimited Company focusing on pathological species of alpha-synuclein, or the AbbVie Alpha-Synuclein Collaboration, which commenced in February 2019 and was terminated in August 2020, our ongoing collaboration with Neurocrine, which commenced in March 2019, our licensing agreement with Pfizer, which commenced in October 2021, and our licensing agreement with Novartis, which commenced in March 2022. We refer to our collaboration agreement with Neurocrine as the Neurocrine Collaboration Agreement. We refer to our licensing agreement with Pfizer as the Pfizer License Agreement. We refer to our licensing agreement with Novartis as the Novartis License Agreement.

In August 2021, we initiated a strategic initiative and reevaluated our existing product candidate portfolio. As a result of this reevaluation, we intend to invest additional resources in our TRACER discovery platform, to expand discovery of TRACER capsids with broad tissue tropism in central nervous system, or CNS, cardiac and other tissues. We also plan to advance innovative gene therapy programs that leverage these TRACER capsids as well as our vectorized antibody technology.

Additionally, to take advantage of our TRACER capsid development efforts, we decided in 2021 to discontinue our VY-HTT01 program for the treatment of Huntington’s disease and to initiate a second-generation program for the

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treatment of Huntington’s disease leveraging a proprietary AAV capsid that may enable intravenous administration and achieve broad distribution to affected tissue. We have also initiated gene therapy programs using our TRACER capsids in treatment programs for monogenic amyotrophic lateral sclerosis, or ALS; spinal muscular atrophy, or SMA; and various diseases linked to GBA1 mutations, including Parkinson’s disease, Lewy body dementia and Gaucher’s disease. We continue to advance our vectorized antibody platform capability with programs for tauopathies and indications in neuro-oncology. We continue to partner with Neurocrine on programs for diseases including Friedreich’s ataxia. All of our current product candidates are in the early stages of development. We continue to evaluate additional diseases that could be treated using AAV gene therapy and are also actively exploring additional potential treatment methods that can utilize our proprietary TRACER capsids.

We have a history of incurring significant losses. We reported a net loss of $71.2 million for the year ended December 31, 2021. As of December 31, 2021, we had an accumulated deficit of $347.1 million. We reported a net income of $36.7 million for the year ended December 31, 2020 primarily due to revenue recognition in connection with the terminations of our prior collaborations with AbbVie. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:

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Financial Operations Overview

Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales for the foreseeable future. For the year ended December 31, 2021, we recognized $37.4 million of collaboration revenue from the Neurocrine Collaboration. For additional information about our revenue recognition policy related to the collaborations, see the section titled “—Critical Accounting Policies and Estimates—Revenue.”

For the foreseeable future, we expect substantially all of our revenue will be generated from the Neurocrine Collaboration Agreement, the Pfizer License Agreement, the Novartis License Agreement, and any other strategic collaborations and out-licensing arrangements we may enter into in the future. If our development efforts are successful, we may also generate revenue from product sales.

Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our program discovery efforts, and the development of our programs and gene therapy platform, which include:

Research and development costs are expensed as incurred. Costs for certain activities, such as manufacturing, preclinical studies, and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators.

At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of our product candidates. We are also unable to predict when, if ever,

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material net cash inflows will commence from sales of our product candidates. This is due to the numerous risks and uncertainties associated with developing such product candidates, including the uncertainty of:

A change in the outcome of any of these variables with respect to the development of any of our product candidates would 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 are in the early stages of development of our product candidates. Our research and development costs have decreased relative to pre-2021 levels as a result of our strategic restructuring, the reevaluation of our product candidate pipeline, and our strategic shift to invest in TRACER capsid development efforts, including our decision on whether to proceed with the VY-AADC Program for Parkinson’s disease with a collaborative partner and our decision to terminate our VY-HTT01 program for Huntington’s disease and to advance a second generation Huntington’s disease program, and our initiation of other cost-saving initiatives. As our development programs progress and as we identify product candidates and initiate preclinical studies and clinical trials, we expect research and development costs to increase.

General and Administrative Expenses

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

Our general and administrative expenses have increased relative to pre-2021 levels as a result of our strategic restructuring costs. As a result of the strategic restructuring, there are decreases including a reduction in personnel costs and fees paid to outside consultants, as well as other cost-saving initiatives including a reduction in facility-related expenditures. As our development programs progress and we identify product candidates and initiate preclinical studies and clinical trials, we expect general and administrative expenses to increase to support these additional research and development activities.

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Other Income (Expense)

Interest and other income (expense) consists primarily of interest income on our marketable securities and the gain or loss on the equity securities investment in ClearPoint Neuro, Inc. (formerly known as MRI Interventions, Inc.), or CLPT. All equity securities in CLPT held by us were sold or otherwise disposed of during the year ended December 31, 2021.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our consolidated financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates, if any, will be reflected in the financial statements prospectively from the date of change in estimates.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies used in the preparation of our financial statements require the most significant judgments and estimates.

Revenue Recognition – ASC 606

We recognize revenue in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 606 Revenue from Contracts with Customers, or ASC 606.

We enter into collaboration agreements which are within the scope of ASC 606, under which we license rights to certain of our product candidates and perform research and development services. The terms of these arrangements typically include payment of one or more of the following: non-refundable, upfront fees; reimbursement of research and development costs; development, regulatory and commercial milestone payments; option exercise fees; and royalties on net sales of licensed products.

Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, we perform the following five steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) we satisfy each performance obligation. We only apply the five-step model to contracts when it is probable that we will collect consideration we are entitled to in exchange for the goods or services we transfer to the customer.

The promised goods or services in our arrangements typically consist of license rights to our intellectual property and in certain instances, research and development services. We provide options to additional items in the contracts, which are accounted for as separate contracts when the customer elects to exercise such options, unless the option provides a material right to the customer. We evaluate the customer options for material rights, or options to acquire additional goods or services for free or at a discount. If the customer options are determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement. Performance obligations are promised goods or services in a contract to transfer a distinct good or service to the customer and are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised goods or services are distinct, we consider factors such as the stage of

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development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on their own or whether the required expertise is readily available and whether the goods or services are integral or dependent to other goods or services in the contract.

We estimate the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include fixed consideration or variable consideration. At the inception of each arrangement that includes variable consideration, we evaluate the amount of potential payment and the likelihood that the payments will be received. We utilize either the most likely amount method or expected amount method to estimate the amount expected to be received based on which method best predicts the amount expected to be received. The amount of variable consideration which is included in the transaction price may be constrained, and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

Our contracts often include development and regulatory milestone payments which are assessed under the most likely amount method and constrained if it is probable that a significant revenue reversal would occur. Milestone payments that are not within our control or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each reporting period, we re-evaluate the probability of achievement of such development milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues in the period of adjustment. To date, we have not recognized any consideration related to the achievement of development, regulatory, or commercial milestone revenue resulting from any of our collaboration arrangements.

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any consideration related to sales-based royalty revenue resulting from any of our collaboration arrangements.

We allocate the transaction price based on the estimated stand-alone selling price of each of the performance obligations. We must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. We utilize key assumptions to determine the stand-alone selling price for performance obligations, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs. Additionally, in determining the standalone selling price for material rights, we utilize comparable transactions, industry standards for product development and clinical trial success probabilities and estimates of option exercise likelihood. Variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated are consistent with the amounts we would expect to receive for the satisfaction of each performance obligation.

The consideration allocated to each performance obligation is recognized as revenue when control is transferred for the related goods or services. For performance obligations which consist of licenses and other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Upfront payments and fees are recorded as contract liabilities within deferred revenue upon receipt or when due until we perform our obligations under these arrangements. Amounts are recorded as accounts receivable when our rights to consideration are unconditional. A significant portion of revenue recognized from the Neurocrine Collaboration is related to performance obligations pursuant to which revenue is recognized using a proportional performance model. Revenue is recognized using input-based measurements, which involves the measurement of progress toward each performance obligation based on the actual costs incurred compared to total projected costs. We estimate the expected remaining costs to complete the research and development services for each performance obligation. We evaluate the

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measure of progress each reporting period and, if necessary, adjust the measure and related revenue recognition.Changes in our estimates of the expected remaining costs to complete the research and development services for our performance obligations, such as the change that occurred in the fourth quarter of 2021 as a result of decisions made by the Joint Steering Committee for the Neurocrine Collaboration, can result in significant changes to the amount of revenue we recognize each period.

Results of Operations

Comparison of the years ended December 31, 2021 and 2020:

The following table summarizes our results of operations for the years ended December 31, 2021 and 2020, respectively, together with the changes in those items in dollars:

Collaboration Revenue

Collaboration revenue was $37.4 million for the year ended December 31, 2021, and $171.1 million for the year ended December 31, 2020. The $133.7 million decrease in collaboration revenue was largely due to our reduced research and development services related to the Neurocrine Collaboration as a result of Neurocrine’s termination of the Neurocrine Collaboration Agreement with respect to the VY-AADC Program. Additionally, in the year ended December 31, 2020, we recognized revenue on the AbbVie Tau Collaboration and AbbVie Alpha-Synuclein Collaboration, both of which were terminated in August 2020. During the year ended December 31, 2021 collaboration revenue was entirely comprised of $37.4 million related to research services and cost reimbursement from the Neurocrine Collaboration. During the year ended December 31, 2020 we recognized $50.8 million related to research services from the AbbVie Tau Collaboration. This amount included $4.5 million related to research services provided prior to the termination date and $46.3 million of deferred revenue remaining under the agreement at the termination date as all of our obligations were complete as of September 30, 2020. We also recognized $63.7 million related to research services from the AbbVie Alpha-Synuclein Collaboration in the year ended December 31. 2020. This amount included $4.8 million related to research services provided prior to the termination date and $58.9 million of deferred revenue remaining under the agreement at the termination date as all of our obligations were complete as of September 30, 2020. Additionally, we recognized $56.7 million of revenue related to the Neurocrine Collaboration for collaboration-related services provided and expenses reimbursed in the year ended December 31, 2020. As a result of changes in our estimates of research and development services in the fourth quarter of 2021, we expect to record less revenue associated with research and development services for the Neurocrine Collaboration. We expect a significant portion of revenue recognized in future periods to be attributable to the Pfizer License Agreement and the Novartis License Agreement.

Our collaboration revenues were not materially impacted by the COVID-19 pandemic during the year ended December 31, 2021. In subsequent periods, the COVID-19 pandemic could affect our collaboration revenues and our operations.

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Research and Development Expense

Research and development expense decreased by $35.0 million from $108.8 million for the year ended December 31, 2020 to $73.8 million for the year ended December 31, 2021. The following table summarizes our research and development expenses for the years ended December 31, 2021 and 2020:

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The decrease in research and development expense for the year ended December 31, 2021 was primarily attributable to the following:

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General and Administrative Expense

General and administrative expense increased by $2.2 million from $35.0 million for the year ended December 31, 2020 to $37.2 million for the year ended December 31, 2021. The change in general and administrative expense was primarily attributable to the following:

Other Income, Net

Interest and other income of approximately $2.4 million and $9.4 million was recognized in the years ended December 31, 2021 and 2020, respectively, related to interest income on marketable securities balances in addition to gains and losses on our common stock investment in and warrants to purchase shares of common stock of CLPT.

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Comparison of year ended December 31, 2020 and 2019:

The following table summarizes our results of operations for the year ended December 31, 2020 and 2019, respectively, together with the changes in those items in dollars:

Collaboration Revenue

Collaboration revenue was $171.1 million for the year ended December 31, 2020, and $104.4 million for the year ended December 31, 2019. The $66.7 million increase in collaboration revenue in 2020 was primarily a result of the termination of the AbbVie Tau Collaboration and the AbbVie Alpha-Synuclein Collaboration in August 2020. We recognized $50.8 million related to research services from the AbbVie Tau Collaboration in the year ended December 31, 2020. This amount included $4.5 million related to research services provided prior to the termination date and $46.3 million of deferred revenue remaining under the agreement at the termination date as all of our obligations were complete as of September 30, 2020. We also recognized $63.7 million related to research services from the AbbVie Alpha-Synuclein Collaboration in the year ended December 31. 2020. This amount included $4.8 million related to research services provided prior to the termination date and $58.9 million of deferred revenue remaining under the agreement at the termination date as all of our obligations were complete as of September 30, 2020. Additionally, we recognized $56.7 million of revenue related to the Neurocrine Collaboration for collaboration-related services provided and expenses reimbursed in the year ended December 31, 2020. We expect the termination of the collaboration related to VY-AADC Program will result in a decrease in revenue related to services provided and expenses reimbursed from the Neurocrine Collaboration.

Our collaboration revenues were not materially impacted by the COVID-19 pandemic during the year ended December 31, 2020. In subsequent periods, the COVID-19 pandemic could affect our collaboration revenues and our operations.

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Research and Development Expense

Research and development expense decreased by $10.9 million from $119.7 million for the year ended December 31, 2019 to $108.8 million for the year ended December 31, 2020. The following table summarizes our research and development expenses, for the year ended December 31, 2020 and 2019, respectively:

The change in research and development expense was primarily attributable to research and development, and included the following:

General and Administrative Expense

General and administrative expense decreased by $1.3 million from $36.3 million for the year ended December 31, 2019 to $35.0 million for the year ended December 31, 2020. The change in general and administrative expense was primarily attributable to the following:

Other Income, Net

Interest and other income of approximately $9.4 million and $8.1 million was recognized in the years ended December 31, 2020 and 2019, primarily driven by $7.7 million and $1.6 million in the years ended December 31, 2020 and 2019, respectively, related to gains on our common stock investment in and warrants to purchase shares of common stock of CLPT, and interest income on marketable securities balances.

Strategic Restructuring

On August 6, 2021, the board of directors approved a strategic restructuring plan to eliminate a portion of its workforce as part of an initiative to reduce expenses and enhance operations. The strategic restructuring plan was approved in connection with its portfolio reevaluation efforts and its strategic shift to invest additional resources in the Company’s TRACER capsid development efforts.

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During the year ended December 31, 2021, we incurred restructuring costs of approximately $2.6 million, which consists of severance-related costs. These costs are reported within our research and development expenses, general and administrative expenses, and accrued expenses. Approximately $1.5 million of these restructuring costs were paid as of December 31, 2021

COVID-19

The COVID-19 pandemic continues to evolve rapidly. We have and will continue to be guided by applicable guidelines and safety measures, including stay-at-home policies for certain non-essential employees, consultants, contractors, and staff. Certain of our clinical trial sites, collaboration partners, suppliers and consultants have experienced facility closures or been subject to quarantines, travel restrictions and other governmental restrictions and have appropriately diverted attention and resources to respond to the impacts of COVID-19 on their own operations and personnel. Some have even become involved in research and development efforts related to COVID-19.

The current workplace safety measures that we have enacted in response to COVID-19 have required a reduction in on-site activity at our facilities in Massachusetts, including in our laboratories in which preclinical experiments are conducted. As a result, we have had to prioritize our preclinical experiments and terminate or delay some non-critical experiments in order to maintain critical experiments for our preclinical programs.

We will continue to monitor the issues raised by the global spread of COVID-19 and have put in place and will continue to put in place measures as appropriate and necessary for, or that we believe to be in the best interest of, our business, employees, collaborators, stockholders, and the community.

Liquidity and Capital Resources

Sources of Liquidity

We have funded our operations primarily through private placements of redeemable convertible preferred stock, public offerings of our common stock, our strategic collaborations, including our prior Sanofi Genzyme Collaboration, AbbVie Tau Collaboration, and AbbVie Alpha-Synuclein Collaboration, our ongoing Neurocrine Collaboration, the Pfizer License Agreement, and the Novartis License Agreement.

In February 2021, Neurocrine notified us it had elected to terminate the Neurocrine Collaboration with respect to VY-AADC and its participation in the VY-AADC Program, effective August 2, 2021. The Neurocrine Collaboration Agreement remains in full force and effect for each other program thereunder. As a result of the termination, Neurocrine is no longer obligated to reimburse us for research and development activities related to the VY-AADC Program, other than incidental expenses incurred by us in conducting wind-down activities.

As of December 31, 2021, we had cash, cash equivalents, and marketable securities of $132.5 million. Based upon our current operating plans, we expect that our existing cash, cash equivalents, marketable securities, and the $54 million up-front payment associated with the Novartis License Agreement executed in March 2022 will enable us to meet our planned operating expenses and capital expenditure requirements into 2024.

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Cash Flows

The following table provides information regarding our cash flows for the years ended December 31, 2021, 2020, and 2019.

Cash Flows from Operating Activities

Net cash used in operating activities was $54.4 million during the year ended December 31, 2021. The cash used in operating activities for the year ended December 31, 2021 was primarily driven by operating expenses, net of stock-based compensation and depreciation. We also received an upfront payment of $30.0 million pursuant to the Pfizer License Agreement.

Net cash used in operating activities was $96.7 million during the year ended December 31, 2020. The cash used in operating activities for the year ended December 31, 2020 was primarily driven by the one-time recognition of $105.2 million deferred revenue related to the termination of the AbbVie Tau Collaboration and the AbbVie Alpha-Synuclein Collaboration, offset by $36.7 million of net income, and changes in working capital.

Net cash provided by operating activities was $48.7 million during the year ended December 31, 2019 and was primarily due to an increase in cash received of $157.0 million from the upfront payments related to the AbbVie Alpha-Synuclein Collaboration and the Neurocrine Collaboration, offset by an increase of $57.4 million in operating expenses, net of stock-based compensation and depreciation, as we increased our research and development activities and infrastructure to support our program initiatives.

Cash Flows from Investing Activities

Net cash provided by investing activities was $66.7 million during the year ended December 31, 2021. The cash provided by investing activities for the year ended December 31, 2021 was primarily due to $70.0 million from maturities of marketable securities and $12.6 million from proceeds of sales of marketable securities partially offset by $15.1 million for purchases of marketable securities and $0.8 million for purchases of property and equipment.

Net cash provided by investing activities was $113.0 million during the year ended December 31, 2020. The cash provided by investing activities for the year ended December 31, 2020 was primarily due to proceeds from maturities of marketable securities of $195.5 million, offset by purchases of marketable securities of $70.4 million and purchases of property and equipment of $12.3 million.

Net cash used in investing activities was $90.5 million during the year ended December 31, 2019. The cash used in investing activities for the year ended December 31, 2019 was primarily due to purchases of marketable securities of $494.2 million and purchases of property and equipment of $5.1 million, partially offset by proceeds from maturities of marketable securities of $411.3 million.

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Cash Flows from Financing Activities

Net cash provided by financing activities was $0.6 million during the year ended December 31, 2021 primarily due to the proceeds from the exercise of stock options, and purchases by our employees of our common stock under our employee stock purchase plan.

Net cash provided by financing activities was $3.2 million during the year ended December 31, 2020 primarily due to the proceeds from the exercise of stock options, and purchases by our employees of our common stock under our employee stock purchase plan.

Net cash provided by financing activities was $81.0 million during the year ended December 31, 2019 primarily related to the issuance of 4,179,728 shares of our common stock to Neurocrine pursuant to a stock purchase agreement in connection with the Neurocrine Collaboration as well as proceeds from exercises of stock options.

Funding Requirements

We expect our expenses to decrease from current levels in the near term as a result of our strategic restructuring, the reevaluation of our product candidate pipeline, and our strategic shift to invest in TRACER capsid development efforts, including reducing our clinical trial support activities pending our decision to proceed with the VY-AADC Program for Parkinson’s disease with a collaborative partner, ceasing our clinical study activities as we transition our Huntington’s disease program from a clinical-stage program to a pre-clinical second generation Huntington’s disease program, and our initiation of other cost-saving initiatives. We expect our expenses to increase in the future, however, as we continue the research and development of, continue or initiate clinical trials of, and seek marketing approval for, our product candidates and as we continue to enter into or expand efforts on our collaboration agreements. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant expenses related to program sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators. Furthermore, we expect to incur increasing costs associated with operating as a public company, meeting financial controls, satisfying regulatory and quality standards, fulfilling healthcare compliance requirements, and maintaining product, clinical trial and directors’ and officers’ liability insurance coverage. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital or enter into business development transactions when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.

Based upon our current operating plan, we expect that our existing cash, cash equivalents, and marketable securities, including the $54 million payment from Novartis, will be sufficient to meet our planned operating expenses and capital expenditure requirements into 2024. Our future capital requirements will depend on many factors, including:

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Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete. We may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our product revenues, if any, and any commercial milestone payments or royalty payments under our collaboration agreements, will be derived from sales of products that may not be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing and business development transactions to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

Until such time, if ever, as we can generate product revenues sufficient to achieve profitability, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds other than the amounts we are entitled to receive from our collaboration partners or licensors for reimbursement of research and development expenses, potential option exercises, the achievement of specified regulatory and commercial milestones, and royalty payments under our collaboration or licensing agreements. To the extent that we raise additional capital through the sale of equity or equity-linked securities, including convertible debt, our stockholders’ ownership interests will be diluted. The amount of stockholder dilution will be affected by the size of each securities offering and the offering price for the securities sold. The offering price will likely reflect the prevailing market price for our securities, with dilution increasing as the prevailing market price for our securities decreases. The terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights as holders of our common stock. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, obtaining additional capital, acquiring or divesting businesses, making capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to 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

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development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations

We enter into agreements in the normal course of business with clinical research organizations, contract manufacturing organizations, and institutions to license intellectual property. These contracts generally are cancelable at any time by us, upon 30 to 90 days prior written notice.

Our agreements to license intellectual property include potential milestone payments that are dependent upon the development of products using the intellectual property licensed under the agreements and contingent upon the achievement of clinical trial or regulatory approval milestones. We may also be required to pay annual maintenance fees or minimum amounts payable ranging from low-four digits to low five-digits depending upon the terms of the applicable agreement.

We also have non-cancelable operating lease commitments arising from our leases of office and laboratory space at our facilities in Cambridge and Lexington, Massachusetts. We expect lease payments under these commitments to total $8.7 million in 2022 and increase annually; in 2026, we expect total lease payments of approximately $9.3 million. We expect to receive sublease payments of $9.1 million from our sublessee for a portion of our facilities in Cambridge over the term of the sublease.

As described elsewhere in this Annual Report on Form 10-K including in “Part I, Item 1—Business,” we are also currently party to a collaboration agreement with Neurocrine, a license agreement with Pfizer, and a license agreement with Novartis.

Off-Balance Sheet Arrangements

We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable rules of the Securities and Exchange Commission, or the SEC.

Smaller Reporting Company Status

As of June 30, 2021, we have requalified as a “smaller reporting company,” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended. We would cease to qualify as a smaller reporting company if we have (i) a non-affiliate public float in excess of $250 million and annual revenues in excess of $100 million during our last fiscal year, or (ii) a non-affiliate public float in excess of $700 million, in each case determined on an annual basis as of the last business day of our second quarter. As a smaller reporting company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not smaller reporting companies. These exemptions include:

We expect to take advantage of some or all of the available exemptions as long as we continue to qualify as a smaller reporting company. We may cease to qualify as a smaller reporting company as early as June 30, 2022, which would require us to comply with disclosure requirements that are applicable to other public companies that are not smaller reporting companies following the filing of our Annual Report on Form 10-K for the year ending December 31, 2022, and any portions of our definitive proxy statement relating to our 2023 Annual Meeting of Stockholders incorporated by reference therein.

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