UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM10-Q

(Mark One)

For the quarterly period ended June 30, 2018March 31, 2020

OR

For the transition period from                    to                    

Commission File Number:001-38550

Translate Bio, Inc.

(Exact Name of Registrant as Specified in its Charter)

Registrant’s telephone number, including area code: (617)945-7361

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☐☒    No  ☒☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of July 31, 2018,May 5, 2020, the registrant had 45,141,69062,908,826 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

i

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report onForm 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this Quarterly Reporton Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report onForm 10-Q include, among other things, statements about:

ii

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report onForm 10-Q, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

You should read this Quarterly Report onForm 10-Q and the documents that we reference herein and have filed or incorporated by reference hereto completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report onForm 10-Q are made as of the date hereof, and we do not assume any obligation to update any forward-looking statements except as required by applicable law.

iii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

TRANSLATE BIO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share and per share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TRANSLATE BIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except share and per share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TRANSLATE BIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)

(In thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TRANSLATE BIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(In thousands, except share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TRANSLATE BIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TRANSLATE BIO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Nature of the Business and Basis of Presentation

Translate Bio, Inc. (the “Company”) is a clinical-stage messenger RNA (“mRNA”) therapeutics company developing a new class of potentially transformative medicines to treat diseases caused by protein or gene dysfunction. Using its proprietary mRNA therapeutic platform (“MRT platform”), the Company creates mRNA that encodes functional proteins. The Company’s mRNA is designed to be delivered to the target cell where the cell’s own machinery recognizes it and translates it, restoring or augmenting protein function to treat or prevent disease. The Company is initiallyprimarily focused on restoringapplying its MRT platform to treat pulmonary diseases caused by insufficient protein production or where production of proteins can modify disease. The Company’s MRT platform may also be applied to produce various classes of treatments, such as therapeutic antibodies or vaccines in areas such as infectious disease and oncology, and it has an ongoing mRNA vaccine development program.

The outbreak of a novel strain of virus namedSARS-CoV-2 (severe acute respiratory syndrome 2), which causes coronavirus disease(“COVID-19���) has presented a substantial public health and economic challenge around the expressionworld and is affecting the Company’s employees, patients, communities and business operations, as well as the U.S. economy and financial markets. The full extent to which theCOVID-19 pandemic will directly or indirectly impact the Company’s business, results of intracellularoperations and transmembrane proteins, areasfinancial condition will depend on future developments that have eluded conventional protein therapeutics,are highly uncertain and cannot be accurately predicted. Potential impacts to the Company’s business include delays in planned and ongoing preclinical studies and clinical trials including enrollment of patients with genetic diseases where there is high unmet medical need.and disruptions in suppliers and manufacturing capabilities. The Company is a clinical-stage company. will continue to monitor the situation closely.

The Company is developing its lead MRT product candidate for the lung (“MRT5005”)MRT5005 for the treatment of cystic fibrosis (“CF”). The Company is developingconducting a Phase 1/2 clinical trial to evaluate the safety and tolerability of single and multiple-ascending doses of MRT5005. Percent predicted forced expiratory volume in one second (“ppFEV₁”), which is a well-defined and accepted endpoint measuring lung function, is also being measured atpre-defined timepoints throughout the trial. In April 2019, the Company completed dosing of all patients in the single-ascending dose (“SAD”) portion of the Phase 1/2 clinical trial and in July 2019, the Company reported interim data from the SAD portion of the clinical trial throughone-month follow up post dosing. MRT5005 was generally well-tolerated at low andmid-dose levels with no serious adverse events reported at any dose level. Marked increases in ppFEV₁ were observed after a single dose of MRT5005, primarily at themid-dose level. Based on the analysis of the interim results, the Company has amended the clinical trial protocol to include one additional SAD dose group and two additional dose groups in the ongoing multiple-ascending dose (“MAD”) portion of this trial. The Company began dosing patients in the MAD portion of the trial in early 2019. The Company had previously provided guidance that it anticipated reporting interim data of the additional SAD dose group and the MAD portion of the clinical trial in the third quarter of 2020. In April 2020, the Company announced that enrollment and dosing have been paused in the ongoing Phase 1/2 clinical trial in patients with CF as a consequence of the response to theCOVID-19 pandemic. As a result of the ongoing delay, the Company no longer anticipates reporting data in the third quarter of 2020 and plans to provide updated timing on the expected interim data readout at a later date.

The Company is leveraging its lung delivery platform and focusing its preclinical research efforts on identifying lead MRT product candidates for a next-generation CF program, as well as beyond CF in additional pulmonary diseases with unmet medical need, including primary ciliary dyskinesia, idiopathic pulmonary fibrosis and pulmonary arterial hypertension.

The Company has a collaboration with Sanofi Pasteur, Inc. (“Sanofi”), the vaccines global business unit of Sanofi S.A., to develop infectious disease vaccines using the Company’s mRNA technology for up to five infectious disease pathogens. Three of the target pathogens have been identified, of which one is influenza, the second is another viral pathogen and the third is a bacterial pathogen. On March 26, 2020, the Company and Sanofi amended this collaboration to include the development of mRNA vaccines againstSARS-CoV-2 as an additional infectious disease pathogen. MultipleCOVID-19 vaccine candidates are being evaluatedin vivo for immunogenicity and neutralizing antibody activity to support lead candidate forselection.

In September 2019, the Company announced its decision to discontinue the development of MRT5201, a liver (“MRT5201”)targeted treatment for the treatment of ornithine transcarbamylase (“OTC”) deficiency.

In December 2016,deficiency (see Notes 4 and 5). The Company’s decision to discontinue the Company acquired from Shire Human Genetic Therapies, Inc. (“Shire”), a subsidiarydevelopment of Shire plc, rights to the assets of Shire’s mRNA therapy platform (the “MRT Program”), including the cystic fibrosis transmembrane conductance regulator (“CFTR”) andMRT5201 for OTC deficiency mRNA therapy programs. In connection with this acquisition, Shire received shareswas based on data from preclinical studies completed in 2019, the results of which did not support the desired pharmacokinetic and safety profile for advancement of the Company’s common stock, with related anti-dilution rights, and is eligible for future milestone and earnout payments on products developed with the MRT technology (see Note 3).program.

The Company is subject to risks common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

The preparation of the accompanying condensed consolidated financial statements requires the Company to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis the Company evaluates its estimates, judgments and methodologies. The Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenues and expenses. The full extent to which theCOVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including revenue, expenses, reserves and allowances, manufacturing, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerningCOVID-19 and the actions taken in an effort to contain it or to potentially treat or vaccinate againstCOVID-19, as well as the economic impact on local, regional, national and international customers and markets. The Company has made estimates of the impact ofCOVID-19 within its financial statements and there may be changes to those estimates in future periods. Actual results may differ from these estimates.

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its two wholly owned subsidiaries, Translate Bio MA, Inc. and Translate Bio Securities Corporation, from their date of incorporation. All intercompany accounts and transactions have been eliminated in consolidation.

Reverse Stock Split

On June 15, 2018, The accompanying unaudited condensed consolidated balance sheet as of March 31, 2020, the unaudited condensed consolidated statements of operations and of comprehensive loss for the three months ended March 31, 2020 and 2019, the unaudited condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2020 and 2019 and the unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2020 and 2019 have been prepared by the Company effected aone-for-5.5555 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustmentpursuant to the existing conversion ratios for each seriesrules and regulations of the Company’s redeemable convertible preferred stock (see Note 7). Accordingly, all share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split and the associated adjustment of the preferred stock conversion ratios.

Initial Public Offering

On June 27, 2018, the Company’s registration statement on FormS-1 relating to its initial public offering of its common stock (“the IPO”) was declared effective by the Securities and Exchange Commission (“SEC”). In for interim financial statements. The accompanying balance sheet as of December 31, 2019 has been derived from the IPO, which closed on July 2, 2018,Company’s audited financial statements for the year ended December 31, 2019. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations. However, the Company issuedbelieves that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and sold 9,350,000 sharesthe notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form10-K that was filed with the SEC on March 12, 2020.

The accompanying unaudited interim condensed consolidated financial presentation has been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflects all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2020, the results of its operations for the three months ended March 31, 2020 and 2019, and its cash flows for the three months ended March 31, 2020 and 2019. The financial data and other information disclosed in these notes related to the three months ended March 31, 2020 and 2019 are also unaudited. The results for the three months ended March 31, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020, any other interim periods, or any future year or period.

Sales of Common Stock

In July 2019, the Company filed a universal shelf registration statement on FormS-3 with the SEC (the “2019 Shelf”) to register for sale from time to time up to $250.0 million of common stock, at a publicpreferred stock, debt securities, warrants and/or units in one or more offerings, which became effective on July 19, 2019 (FileNo. 333-232543).

In July 2019, the Company entered into an Open Market Sale Agreement^SM (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) under which the Company may issue and sell shares of its common stock, from time to time, having an aggregate offering price of $13.00 per share. On July 24, 2018,up to $50.0 million. The offer and sales of shares under the Sales Agreement were also registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the 2019 Shelf. Between April 1, 2020 and May 5, 2020, the Company settled transactions that occurred pursuant to the Sales Agreement, whereby the Company issued and sold an additional 364,371aggregate of 2,863,163 shares of its common stock between March 30, 2020 and May 1, 2020, resulting in gross proceeds of $37.9 million, before deducting commissions of $1.1 million and other offering expenses of $0.2 million (see Note 14). Sales of common stock through Jefferies may be made by any method that is deemed an “at the market” offering as defined in Rule 415 promulgated under the Securities Act. Jefferies has agreed to use its commercially reasonable efforts consistent with its normal trading and sales practices to sell the common stock based upon the Company’s instructions. The Company is not obligated to make any sales of its common stock under the Sales Agreement.

On March 13, 2020, the Company filed a universal shelf registration statement on FormS-3 with the SEC (the “2020 Shelf”) to register for sale from time to time up to $350.0 million of common stock, preferred stock, debt securities, warrants and/or units in one of more offerings (FileNo. 333-237159). This registration statement was declared effective on May 4, 2020. Upon the effectiveness of the 2020 Shelf, the Company deregistered the 2019 Shelf and no more sales may be made pursuant to the 2019 Shelf.

On March 13, 2020, the Company entered into Amendment No. 1 to the Open Market Sale Agreement^SM with Jefferies, which increased the aggregate dollar amount of shares of common stock at a price of $13.00 per sharethat the Company may issue and sell pursuant to the exerciseSales Agreement from $50.0 million to $100.0 million, which became effective when the 2020 Shelf was declared effective. As of the underwriters’ over-allotment option in the IPO. The aggregate net proceeds toMay 1, 2020, the Company fromhad issued and sold $37.9 million under the IPO, inclusiveSales Agreement. In the future, $62.1 million of the proceeds from the over-allotment exercise, were approximately $113.4 million after deducting underwriting discounts and commissions of $8.8 million and estimated offering expenses of approximately $4.1 million. Upon closing of the IPO, all 142,288,292 shares of the Company’s redeemable convertible preferred stock then outstanding converted into an aggregate of 25,612,109 shares of common stock. As of July 31, 2018, there were 45,141,690 shares of common stock outstanding.remain available to be sold pursuant to the Sales Agreement, which sales, if any, would be made under the 2020 Shelf. Any shares sold subsequent to the effectiveness of the 2020 Shelf would be pursuant to the 2020 Shelf.

Sanofi Pasteur Collaboration and Licensing Agreement

On June 8,In 2018, the Company entered into a collaboration and license agreement with Sanofi Pasteur Inc. (“Sanofi”), the vaccines global business unit of(the “Original Sanofi S.A.,Agreement”) to develop mRNA vaccines for up to five undisclosed infectious disease pathogens (the “Sanofi Agreement”“Licensed Fields”). The Sanofi Agreement became effective on July 9, 2018, following notice of early termination of the waiting period under the Hart-Scott-Rodino Antitrust Act of 1976. Under the Sanofi Agreement,On March 26, 2020, the Company and Sanofi willamended the Original Sanofi Agreement (the “Sanofi Amendment”) to include vaccines againstSARS-CoV-2 as an additional Licensed Field, increasing the number of infectious disease pathogens to up to six. The Original Sanofi Agreement, as amended by the Sanofi Amendment, is referred to as the “Amended Sanofi Agreement.”

Pursuant to the Sanofi Amendment, the Company and Sanofi agreed that no upfront fee is payable by Sanofi to the Company with respect to the addition ofSARS-CoV-2 as a Licensed Field. The Company and Sanofi also agreed that certain provisions of the Original Sanofi Agreement, including provisions related to milestone payments, royalties and royalty reductions, shall not apply to vaccine products for the prevention, treatment or cure ofSARS-CoV-2 that are purchased by a governmental authority whileSARS-CoV-2 is a declared pandemic. The Company and Sanofi agreed to negotiate in good faith the royalty terms applicable to such products, which terms shall reflect the economic conditions applicable to commercializing such products and shall not exceed the royalty terms for the existing Licensed Fields. The Company and Sanofi have also agreed to jointly conduct researchearly stage formulation and developmentpreclinical activities to advance mRNA vaccines and mRNA vaccine platform development duringon a three-year research term, which may be extended by mutual agreement.

Although the Company has been successful in raising capital in the past, there is no assurance that it will be successful in obtaining such additional financing on terms acceptable to the Company, if at all. The Company expects that its expenses will increase in connection with its ongoing business activities. As a result, the Company will need substantial additional funding to support its continuing operations and pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through the sale of equity, debt financings or other capital sources, including collaborations with other companies or other strategic transactions. The Company may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If the Company is unable to obtain funding, the Company will be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. Although management continues

Based on its recurring losses and cash outflows from operations since inception, expectation of continuing operating losses and cash outflows from operations for the foreseeable future and the need to pursue these plans,raise additional capital to finance its future operations, the Company concluded that there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptablesubstantial doubt about its ability to the Company to fund continuing operations, if at all.continue as a going concern.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of the Company’s consolidated financial statementssignificant accounting policies and estimates used in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the datepreparation of the consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Significant estimates and assumptions reflectedare described in these consolidated financial statements include, but are not limited to, the accrual for research and development expenses, the valuation of common stock and stock-based awards, the valuation of assets acquired and liabilities assumed in business combinations, and the impairment of identifiable intangible assets and goodwill. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated balance sheet as of June 30, 2018, the unaudited condensed consolidated statements of operations and of comprehensive loss for the three and six months ended June 30, 2018 and 2017 and of cash flows for the six months ended June 30, 2018 and 2017 have been prepared by the Company, pursuant to the rules and regulations of the SEC for the interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of and the notes thereto for the year ended December 31, 20172019, and the notes thereto, which are included in the Company’s prospectus that forms a part of the Company’s Registration StatementAnnual Report on FormS-110-K. (FileNo. 333-225368). The prospectus was filed with the SEC pursuant to Rule 424(b)(4) on June 28, 2018.

result in a2017-11step-up in the tax basis of goodwill. The standard is required to be adoptedeffective for annual periods beginning after December 15, 2018, including2020 and interim periods within, those fiscal years.with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. The Company is currently evaluating the impact thatdoes not expect the adoption of ASU2017-11 willthis new standard to have on its consolidated financial statements.

In June 2018, the FASB issued ASUNo. 2018-07,Compensation-Stock Compensation (Topic 718) (“ASU2018-07”), which aligns the accounting for share-based payment awards issued to employees andnon-employees. Under the new guidance, the existing employee guidance will apply tonon-employee share-based transactions. The new guidance is effective for the Company on January 1, 2019. The Company is currently evaluating the potentiala material impact that this adoption of ASU 2018-07 will have on its consolidated financial statements.

3. Acquisitions, GoodwillCollaboration Agreement

Sanofi Collaboration and License Agreement

In 2018, the Company entered into the Original Sanofi Agreement to develop mRNA vaccines and an mRNA vaccine platform for up to five infectious disease pathogens. In March 2020, the Company entered into the Sanofi Amendment to include vaccines againstSARS-CoV-2 as an additional Licensed Field, increasing the number of infectious disease pathogens to up to six.

Pursuant to the Amended Sanofi Agreement, the Company and Sanofi have agreed to collaborate to perform certain research and development activities to advance mRNA vaccines and mRNA vaccine platform development during a three-year research term, which may be extended by mutual agreement. Other than the Licensed Field ofSARS-CoV-2, the Company is obligated to manufacture and supply certainnon-clinical and clinical product until the Company transfers such manufacturing capabilities to Sanofi, which the Company originally estimated to take up to eight years to complete. The collaboration activities will be subject to a collaboration plan to be updated annually. During March 2020, the joint steering committee revised the collaboration timeline and the Company now estimates the completion of the transfer of manufacturing capabilities to be six years, or 2024.

Pursuant to the Amended Sanofi Agreement, the Company and Sanofi have agreed to a governance structure, including committees and working groups, to manage the activities under the collaboration. If the Company and Sanofi do not mutually agree on certain decisions, Sanofi would be able to break a deadlock without the Company’s consent. The collaboration includes an estimated budget. Sanofi is responsible for paying reimbursable development costs, including the Company’s employee costs,out-of-pocket costs paid to third parties and manufacturing costs, up to a specified amount for the Licensed Field other thanSARS-CoV-2, for which each party pays its own employee costs and share equally in the collective out of pocket costs.

Under the terms of the Amended Sanofi Agreement, the Company has granted to Sanofi exclusive, worldwide licenses under applicable patents, patent applications,know-how and materials, including those arising under the collaboration, to develop, commercialize and manufacture mRNA vaccines to prevent, treat or cure diseases, disorders or conditions in humans caused by any of four of the Licensed Fields. In addition, pursuant to the terms of the Amended Sanofi Agreement and subject to certain limitations, Sanofi has options to add up to two additional infectious disease pathogens within the granted licenses to the Licensed Fields by exercising either option or both options during a specified option term and paying the Company a $5.0 million fee per added pathogen, subject to certain limitations on the pathogens. If, prior to the exercise of the options by Sanofi, the Company receives a bona fide third-party offer to acquire rights to the field to which an option relates, the Company must notify Sanofi of such offer, and if Sanofi does not exercise its option as to the applicable field, such field will no longer be subject to the option.

The Company and Sanofi retain the rights to perform their respective obligations and exercise their respective rights under the Amended Sanofi Agreement other than for the Licensed Field ofSARS-CoV-2, for which such rights are limited to discovery and preclinical research and other rights shall be by mutual agreement, and Sanofi may grant sublicenses to affiliates or third parties. Sanofi has also granted the Companynon-exclusive, sublicensable licenses under patent rights claiming certain improvements that Sanofi may make to the technology the Company has licensed to it or claiming certain technology arising from the collaboration and owned by Sanofi. The Company may exercise such licenses to develop, manufacture and commercialize products, other than products that use a vaccine to prevent, treat or cure a disease, disorder or condition in humans caused by an infectious disease pathogen. Sanofi may terminate these licenses to the Company if the Company materially breaches the terms of the license and the breach remains uncured for a specified period, which may be extended in certain circumstances.

Sanofi has sole responsibility for all commercialization activities for mRNA vaccines in the Licensed Fields, other thanSARS-CoV-2, and is obligated to bear all costs in connection with any such commercialization. The Company and Sanofi intend to enter into a supply agreement pursuant to which the Company would be responsible for manufacturing certainnon-clinical and clinical mRNA vaccines and materials containing mRNA until the Company transfers such manufacturing capabilities to Sanofi. The Company is entitled to receive payments for manufacturing mRNA vaccines under the supply agreement.

The Amended Sanofi Agreement provides that the Company is eligible to receive aggregate potential payments of up to $805.0 million from Sanofi, which includes the $45.0 million upfront payment the Company received in 2018, potential milestone payments and potential option exercise payments. Sanofi will also pay the Company $5.0 million with respect to each additional Licensed Field for which it exercises an option. Sanofi did not pay an upfront fee to the Company with respect to the addition ofSARS-CoV-2 as a Licensed Field. Sanofi has also agreed to pay the Company milestone payments upon the achievement of specified development,

regulatory and commercialization milestones. In particular, the Company is entitled to receive development and regulatory milestone payments of up to $63.0 million per Licensed Field and sales milestone payments of up to $85.0 million per Licensed Field. In addition, the Company is entitled to receive a $10.0 million milestone payment from Sanofi following completion of the technology and process transfer.

Notwithstanding the foregoing, milestone payments provisions of the Original Sanofi Agreement shall not apply to vaccine products for the prevention, treatment or cure ofSARS-CoV-2 that are purchased by a governmental authority whileSARS-CoV-2 is a declared pandemic.

Pursuant to the Amended Sanofi Agreement, Sanofi has agreed to pay the Company a tiered royalty on worldwide net sales of all mRNA vaccines within each Licensed Field ranging from a high single-digit percentage to a low teens percentage, depending on quarterly net sales by Sanofi, its affiliates and its sublicensees. The Company and Sanofi agreed to negotiate in good faith the royalty terms applicable to such products. The royalty paid to the Company can be reduced with respect to a product once the relevant licensed patent rights expire or if additional licensed technology is required, but the royalty payments may not fall below the Company’s royalty obligations to third parties plus a royalty of a low single-digit percentage. Royalty payments are payable on aproduct-by-product andcountry-by-country basis beginning on the launch of the product in the country until the later of the expiration of the last valid claim covering such product or 10 years after the launch of such product in such country. If the Company commercializes any product covered by such a Sanofi patent right, the Company would pay Sanofi a royalty of a low single-digit percentage. Notwithstanding the foregoing, pursuant to the Amended Sanofi Agreement, royalty payments shall not apply to vaccine products for the prevention, treatment or cure ofSARS-CoV-2 that are purchased by a governmental authority whileSARS-CoV-2 is a declared pandemic, and instead the parties will negotiate in good faith royalty terms to apply to such vaccine products, which royalty terms shall reflect the economic conditions applicable to commercializing such vaccine products, and in no event will be higher than those set out in the Original Sanofi Agreement.

Under the Sanofi Amendment, the Company and Sanofi agreed to negotiate in good faith an additional amendment related to activities directed to clinical development or commercialization of a product related toSARS-CoV-2, which could include the applicable royalty terms.

The Amended Sanofi Agreement provides that it will remain in effect until terminated in accordance with its terms. Either the Company or Sanofi may terminate the Amended Sanofi Agreement in its entirety if the other party is subject to certain insolvency proceedings. Either party may terminate the Amended Sanofi Agreement in its entirety or with respect to a particular Licensed Field, country or product if the other party materially breaches the Amended Sanofi Agreement and the breach remains uncured for a specified period, which may be extended in certain circumstances. Sanofi may also terminate the Amended Sanofi Agreement in its entirety or with respect to a particular Licensed Field, country or product for safety reasons or for convenience, in each case after a specified notice period. After termination of the Amended Sanofi Agreement, Sanofi may continue to manufacture and commercialize the terminated products for a specified period of time, subject to Sanofi’s payment obligations.

Moreover, in the event that the Company and Sanofi are unable to mutually agree on terms relating to the conduct of clinical development and commercialization of a product related toSARS-CoV-2, the Company has the right to terminate and revoke the license granted to Sanofi with respect toSARS-CoV-2 with sixty (60) days written notice, andSARS-CoV-2 shall cease to be a Licensed Field. Upon any such termination and revocation by the Company, the Company and Sanofi have agreed to negotiate in good faith a termination agreement with respect to the Company’s use of any technology arising from the collaboration that is owned by Sanofi or jointly owned by the Company and Sanofi, that is necessary or useful to the further development or commercialization of a product directed toSARS-CoV-2.

Accounting for the Amended Sanofi Agreement

The Company accounts for the Sanofi Amendment entered into on March 26, 2020, with the exception of the Licensed Field forSARS-CoV-2, under ASC 606. In determining the appropriate amount of revenue to be recognized under ASC 606, the Company performed the following steps: (i) identified the promised goods or services in the contract; (ii) determined 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) the Company satisfies each performance obligation.

The Company identified the following promised goods or services contained in the Original Sanofi Agreement: (i) the license it conveyed to Sanofi with respect to the Licensed Fields, (ii) the licensedknow-how to be conveyed to Sanofi with respect to the Licensed Fields, (iii) its obligation to perform research and development on the Licensed Fields, (iv) its obligation to transfer licensed materials to Sanofi, (v) its obligation to manufacture and supply certainnon-clinical and clinical mRNA vaccines and materials

containing mRNA until the Company transfers such manufacturing capabilities to Sanofi; and (vi) the technology and process transfer. The Company assessed whether each of these promised goods or services are distinct performance obligations on their own or if they need to be combined with other promises to create a bundle that is a distinct performance obligation. The Company determined that the promised goods and services do not have standalone value and are highly interrelated. Accordingly, the promised goods and services represent one performance obligation. Sanofi’s right to exercise options for up to two additional infectious disease pathogens within the granted licenses to the Licensed Fields are accounted for separately as they do not represent material rights, based on the criteria of ASC 606. Upon the exercise of any option by Sanofi, the contract promises associated with an option target would use a separate proportional performance model for purposes of revenue recognition under ASC 606. There is no significant financing component ornon-cash consideration included in the Amended Sanofi Agreement.

Under ASC 606, at the end of each reporting period, the Companyre-evaluates the probability that the consideration associated with each milestone or reimbursement will not be subject to a significant reversal in the cumulative amount of revenue recognized, and, if necessary, adjusts the estimate of the overall transaction price. The estimated collaboration budget is consistentlyre-evaluated and changes to the budget, if any, require approval by the Joint Steering Committee. If an approved change occurs, the Company willre-evaluate the transaction price which could potentially affect the cumulative amount of revenue recognized. In March 2020, the joint steering committee agreed to a revised budget and collaboration plan. As a result, during the three months ended March 31, 2020, the Company increased the overall transaction price by $30.5 million. The transaction price includes the upfront,non-refundable payment of $45.0 million for the transfer of the combined license, supply and development obligations under the Original Sanofi Agreement, an estimated $34.3 million in reimbursable employee costs, an estimated $88.3 million in reimbursable development costs includingout-of-pocket costs paid to third parties and manufacturing costs and an estimated $14.0 million in milestone payments.

Under ASC 606, the Company recognized revenue using thecost-to-cost input method, which it believes best depicts the transfer of control to the customer. Under thecost-to-cost input method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation. Under this method, revenue is recorded as a percentage of the estimated transaction price based on the extent of progress towards completion. The estimate of the Company’s measure of progress and estimate of variable consideration to be included in the transaction price will be updated at each reporting date as a change in estimate. The amount related to the unsatisfied portion will be recognized as that portion is satisfied over time.

The following table summarizes the Company’s collaboration revenue (in thousands):

TRANSLATE BIO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Under the Shire Agreement, the Company is also obligated to pay a quarterly earnout payment of amid-single-digit percentage of net sales of each MRT Product. The earnout period, which is determined on aproduct-by-product andcountry-by-country basis, will begin on the date of the first commercial sale of such MRT Product in such country and will end on the later of (i) ten years after such first commercial sale and (ii) the expiration of the last valid claim of the patent rights acquired from Shire or derived from patent rights orknow-how acquired from Shire covering such MRT Product in such country.

Under the Shire Agreement, the Company was obligated to consummate an equity financing of at least $100.0 million (the “Subsequent Financing”). As part of the Shire Agreement, the Company provided Shire anti-dilution rights whereby it agreed to issue Shire additional common stock such that Shire will own, upon the completion of the Subsequent Financing, either (i) 18.0% of the Company’s common stock on anas-converted and fully diluted basis or (ii) if less, 19.9% of the voting power of all then outstanding common stock of the Company, excluding shares of unvested restricted stock. Under the Shire Agreement, until the Subsequent Financing was consummated, the Company was obligated to use the first $50.0 million of gross proceeds from the Subsequent Financing solely for activities and expenses associated with the MRT Program. As a result of the Company’s IPO, the Company fully satisfied the Subsequent Financing obligation. In addition, as a result of and concurrent with the closing of the Company’s IPO on July 2, 2018, the Company issued 183,619 shares of common stock to Shire in full satisfaction of the Company’s anti-dilution obligations to Shire (see Notes 4 and 15).

Elements of Purchase ConsiderationIntangible Assets, Net

As part of its accounting for the business combination, the Company recorded the fair value of the common stock issued on the acquisition date as well as contingent consideration liabilities for the potential future milestone and earnout payments and for the anti-dilution rights provided to Shire through the completion of the Subsequent Financing. The aggregate acquisition-date fair value of consideration transferred was determined to be $112.2 million, consisting of the following (in thousands):

Identifiable intangible assets acquired in the acquisition of Shire’s MRT Program consisted of IPR&Din-process research and a lease-based asset. The development (“IPR&D&D”), which included ongoing projects that could further the Company’s preclinical and clinical development activities related to CF, OTC deficiency and other potential rare diseases. The lease-based intangible asset related toAs of the below-market rental expense thatdate of acquisition, the Company is expected to benefit from over the remaining lease period at one of its leased facilities. The IPR&D was determined to be indefinite-lived, andindefinite-lived.

Upon commencement of the lease-basedOriginal Sanofi Agreement, the IPR&D—MRT intangible asset was determinedreclassified from indefinite-lived to be definite-lived with an estimated useful life of 1.5 years. The fair values of the identifiable intangible assets as of the acquisition date were as follows (in thousands):