(Mark One)

☒
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2017~~

2023

☐
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36579

Adverum Biotechnologies, Inc.

(Exact name of registrant as specified in its charter)

___________________________________________________________________


Delaware		20-5258327
~~Delaware~~	~~20-5258327~~
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

~~1035 O’Brien Drive,~~

~~Menlo Park,~~

100 Cardinal Way

Redwood City, CA

(Address of principal executive offices)

~~94025~~

94063

(Zip Code)

(650) ~~272-6269~~

656-9323

(Registrant’s telephone number, including area code)

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


Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, $0.0001 par value	ADVM	The NASDAQ Stock Market LLC (Nasdaq Capital Market)

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 ☒x 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 Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

Large accelerated filer

☐

Accelerated filer

☒

☐

Non-accelerated filer

☐ ~~(Do not check if a smaller reporting company)~~

Smaller reporting company

☐

Emerging growth company

☒

☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 31, ~~2017~~2023, there were ~~45,041,468~~101,027,174 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

Table of Contents

Adverum Biotechnologies, Inc.

TABLE OF CONTENTS

	~~Page~~
			Page

PART I—FINANCIAL INFORMATION			3 5

Item 1. Financial Statements			3 5
Condensed Consolidated Balance Sheets as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 (unaudited)			3 5
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 (unaudited)			4 6
Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022 (unaudited)		7
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 (unaudited)			5 9
Notes to Condensed Consolidated Financial Statements (unaudited)			6 10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operation~~Operations			21 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk			27 23
Item 4. Controls and Procedures			27 23

PART II—OTHER INFORMATION			29 24

Item 1. Legal Proceedings			29 24
Item 1A. Risk Factors			29 24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			29 66
Item 3. Defaults Upon Senior Securities			30 66
Item 4. Mine Safety Disclosures			30 66
Item 5. Other Information			30 66
Item 6. Exhibits			30 67

SIGNATURES			32 68

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RISK FACTORS SUMMARY

Investing in common stock involves numerous risks, including the risks described in Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q. Below are some of these risks, any one of which could materially adversely affect our business, financial condition, results of operations, and prospects.

•We have incurred significant operating losses since inception, and we expect to incur significant losses for the foreseeable future. We may never become profitable or, if achieved, be able to sustain profitability.

•We expect that our cash, cash equivalents, and short-term investments will be sufficient to fund our lead gene therapy programs into 2025. If this expectation proves to be wrong, we may be forced to delay, limit or terminate certain of our development efforts before then.

•We will need to raise additional funding, which may not be available on acceptable terms, or at all. If we fail to obtain additional capital necessary to fund our operations, we will be unable to successfully develop and commercialize our product candidates.

•Our business will depend substantially on the success of one or more of our product candidates. If we are unable to develop, obtain regulatory approval for, or successfully commercialize, any or all of our product candidates, our business will be materially harmed.

•Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of development, including after commencement of any of our clinical trials or any clinical trials using our proprietary viral vectors.

•The occurrence of serious complications or side effects that outweigh the therapeutic benefit in connection with or during use of our product candidates, whether in nonclinical studies or clinical trials or post-approval, could lead to discontinuation of our clinical development program, refusal of regulatory authorities to approve our product candidates or, post-approval, revocation of marketing authorizations or refusal to approve new indications, which could severely harm our business prospects, financial condition and results of operations.

•The results of nonclinical studies and early clinical trials are not always predictive of future results. Any product candidate we or any of our future development partners advance into clinical trials may not have favorable results in later clinical trials, if any, or receive regulatory approval.

•If we are unable to successfully develop and maintain robust and reliable manufacturing processes for our product candidates, we may be unable to advance clinical trials or licensure applications and may be forced to delay or terminate a program.

•If we are unable to produce sufficient quantities of our product candidates at acceptable costs, we may be unable to meet clinical or potential commercial demand, lose potential revenue, have reduced margins, or be forced to terminate a program.

•We and our contractors are subject to significant regulation with respect to manufacturing and testing our product candidates. We have a limited number of vendors on which we rely, including, in some cases, single source vendors, and the contract vendors on which we rely may not continue to meet regulatory requirements, may have limited capacity, or may have other factors limiting their ability to comply with their contracts with us.

•We are subject to many manufacturing and distribution risks, any of which could substantially increase our costs and limit supply of our product candidates.

•We have relied, and expect to continue to rely, on third parties under contracts and partnerships to conduct some or all aspects of our research and development, including vector production, process development, assay development, product candidates and product manufacturing and testing, protocol development, clinical trials, product distribution, commercialization, nonclinical studies, research and related activities, and these third parties may not perform satisfactorily.

•We will rely on third parties to conduct some nonclinical testing and all of our planned clinical trials. If these third parties do not meet our deadlines or otherwise fail to conduct the trials as required, our clinical development programs could be delayed or unsuccessful and we may not be able to obtain regulatory approval for or commercialize our product candidates when expected or at all.

•Our success depends on our ability to protect our intellectual property and our proprietary technologies.

•Claims by third parties that we infringe their proprietary rights may result in liability for damages or prevent or delay our developmental and commercialization efforts.

•We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses.

•Our rights to develop and commercialize our product candidates are subject in part to the terms and conditions of licenses granted to us by other companies and universities.

•The patent protection and patent prosecution for some of our product candidates are dependent on third parties.

•We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

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•Third party patent rights could delay or otherwise adversely affect our planned development and sale of product candidates of our programs.

•We may not be able to obtain intellectual property rights or protect our intellectual property rights throughout the world.

•Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

•If we do not obtain patent term extensions for patents covering our product candidates, our business may be materially harmed.

•Any suspension of, or delays in the commencement or completion of, clinical trials for our product candidates could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.

•Final marketing approval for our product candidates by the FDA or other regulatory authorities outside the U.S. for commercial use may be delayed, limited or denied, any of which would adversely affect our ability to generate operating revenue.

•Even if we receive regulatory approval, we still may not be able to successfully commercialize any of our product candidates, and the revenue that we generate from its sales, if any, could be limited.

•If our competitors develop treatments for the target indications of our product candidates that are approved, marketed more successfully, or demonstrated to be safer or more effective or easier to administer than our product candidates, our commercial opportunity will be reduced or eliminated.

•Even if we obtain marketing approval for any of our product candidates, they could be subject to restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our product candidates, when and if any of them are approved.

•Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us to sell our product candidates profitably.

•Healthcare and other reform legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and, if approved, may affect the prices we may obtain.

•Negative public opinion and increased regulatory scrutiny of gene therapy and genetic research may damage public perception of our product candidates or adversely affect our ability to conduct our business or obtain marketing approvals for our product candidates.

•We are dependent on the services of our key executives and clinical and scientific staff, and if we are not able to retain these members of our management or recruit additional management, clinical and scientific personnel, our business will suffer.

•We may encounter difficulties in managing our growth and expanding our operations successfully.

•The trading price of the shares of our common stock has been and could continue to be highly volatile, and purchasers of our common stock could incur substantial losses.

•If we sell shares of our common stock or securities convertible into or exercisable for shares of our common stock in future financings, pursuant to licensing, collaboration or other arrangements, stockholders may experience immediate dilution and, as a result, our stock price may decline.

Table of Contents

PART I—~~FINANCI~~ALFINANCIAL INFORMATION

~~Item 1.~~

~~Financial Statements~~

Item 1. Financial Statements

Adverum Biotechnologies, Inc.

Condensed Consolidated Balance Sheets

~~(Unaudited)~~

(In ~~thousands except share and per share data)~~

thousands)

September 30,

December 31,

2017

2016

(Unaudited)

Assets

Current assets:

Cash and cash equivalents
$
31,713

$
222,170

Short-term investments

154,929

—

Receivable from collaborative partner

—

886

Prepaid expenses and other current assets

2,881

2,218

Total current assets

189,523

225,274

Property and equipment, net

3,347

4,169

Deposit and other non-current assets

340

140

Intangible assets

5,000

5,000

Total assets
$
198,210

$
234,583

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable
$
1,580

$
1,474

Restructuring liabilities

—

25

Accrued expenses and other current liabilities

6,062

6,451

Deferred rent, current portion

121

96

Deferred revenue, current portion

1,850

1,850

Total current liabilities

9,613

9,896

Long-term liabilities:

Deferred rent, net of current portion

257

352

Deferred revenue, net of current portion

5,711

7,099

Deferred tax liability

1,250

1,250

Other non-current liabilities

387

386

Total liabilities

17,218

18,983

Commitments and contingencies (Note 10)

Stockholders’ equity:

Preferred stock, $0.0001 par value, 5,000,000 shares authorized; no shares issued
   and outstanding

—

—

Common stock, $0.0001 par value, 300,000,000 shares authorized at September 30,
   2017 and December 31, 2016; 43,517,412 and 41,805,009 shares issued and
   outstanding at September 30, 2017 and December 31, 2016, respectively

5

4

Additional paid-in capital

420,811

413,518

Accumulated other comprehensive loss

(551
)

(7
)
Accumulated deficit

(239,273
)

(197,915
)
Total stockholders’ equity

180,992

215,600

Total liabilities and stockholders’ equity
$
198,210

$
234,583

(Unaudited)


	September 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	105,366	$	68,431
Short-term investments	11,716		117,158

Prepaid expenses and other current assets	7,514		5,006
Total current assets	124,596		190,595
Operating lease right-of-use assets	52,757		78,934
Property and equipment, net	15,497		34,927

Restricted cash	2,650		2,503

Deposit and other long-term assets	1,270		1,413
Total assets	$	196,770	$	308,372
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,170	$	2,238
Accrued expenses and other current liabilities	16,362		16,767
Lease liability, current portion	10,324		13,241

Total current liabilities	28,856		32,246

Lease liability, net of current portion	65,200		93,561
Other non-current liabilities	—		1,047
Total liabilities	94,056		126,854

Stockholders’ equity:
Preferred stock	—		—
Common stock	10		10
Additional paid-in capital	999,319		985,651
Accumulated other comprehensive loss	(552)		(1,531)
Accumulated deficit	(896,063)		(802,612)
Total stockholders’ equity	102,714		181,518
Total liabilities and stockholders’ equity	$	196,770	$	308,372

See accompanying notes to condensed consolidated financial statements

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Adverum Biotechnologies, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

~~(Unaudited)~~

(In thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(Unaudited)

Collaboration revenue
$
463

$
395

$
1,388

$
967

Operating expenses:

Research and development

10,272

8,362

27,825

23,772

General and administrative

4,762

6,146

16,815

19,578

Goodwill impairment charge

—

394

—

49,514

Total operating expenses

15,034

14,902

44,640

92,864

Operating loss

(14,571
)

(14,507
)

(43,252
)

(91,897
)
Other income, net

Other income, net

742

206

1,894

544

Total other income, net

742

206

1,894

544

Net loss
$
(13,829
)

$
(14,301
)

$
(41,358
)

$
(91,353
)
Other comprehensive loss:

Net unrealized (loss) gain on marketable securities

35

(6
)

(102
)

—

Foreign currency translation adjustment

(183
)

(23
)

(442
)

(13
)
Comprehensive loss
$
(13,977
)

$
(14,330
)

$
(41,902
)

$
(91,366
)
Net loss per share attributable to common stockholders-basic and diluted
$
(0.32
)

$
(0.35
)

$
(0.97
)

$
(2.66
)
Weighted-average common shares outstanding-basic and diluted

43,381

41,416

42,849

34,382

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
License revenue	$	—	$	—	$	3,600	$	—

Operating expenses:
Research and development	20,740		23,849		62,398		77,078
General and administrative	13,789		17,188		39,035		46,117

Total operating expenses	34,529		41,037		101,433		123,195
Operating loss	(34,529)		(41,037)		(97,833)		(123,195)
Other income, net	1,661		923		4,437		1,450
Net loss before income taxes	(32,868)		(40,114)		(93,396)		(121,745)
Income tax provision	(17)		(17)		(55)		(55)
Net loss	(32,885)		(40,131)		(93,451)		(121,800)
Other comprehensive income (loss):
Net unrealized gain/(loss) on marketable securities	66		(127)		1,003		(1,189)
Foreign currency translation adjustment	(12)		(30)		(24)		(50)
Comprehensive loss	$	(32,831)	$	(40,288)	$	(92,472)	$	(123,039)
Net loss per share — basic and diluted	$	(0.33)	$	(0.40)	$	(0.93)	$	(1.23)
Weighted-average common shares used to compute net loss per share - basic and diluted	100,999		99,475		100,693		99,027

See accompanying notes to condensed consolidated financial statements

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Adverum Biotechnologies, Inc.

Condensed Consolidated Statements of ~~Cash Flows~~

~~(Unaudited)~~

Stockholders’ Equity

(In thousands)

Nine Months Ended September 30,

2017

2016

(Unaudited)

Cash flows from operating activities:

Net loss
$
(41,358
)

$
(91,353
)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

1,592

1,116

Stock-based compensation expense

6,839

9,852

Goodwill impairment charge

—

49,514

Amortization of premium and accrued interest on marketable securities

419

—

Non-cash research and development expense

60

24

Changes in operating assets and liabilities:

Receivable from collaborative partner

886

(532
)
Prepaid expenses and other current assets

(136
)

(1,317
)
Accounts payable

166

817

Accrued expenses and other current liabilities

(208
)

(46
)
Restructuring liabilities

(25
)

(988
)
Deferred revenue

(1,388
)

2,936

Deferred rent

(70
)

(47
)
Net cash used in operating activities

(33,223
)

(30,024
)
Cash flows from investing activities:

Purchases of investments

(201,038
)

—

Maturities of investments

45,061

37,738

Purchases of property and equipment

(918
)

(1,488
)
Cash acquired in business acquisition

—

3,449

Net cash provided by (used in) investing activities

(156,895
)

39,699

Cash flows from financing activities:

Proceeds from issuance of common stock pursuant to option exercises

312

633

Taxes paid related to net share settlement of restricted stock units

(292
)

(493
)
Proceeds from employee stock purchase plan

83

113

Proceeds from financing arrangement

—

100

Net cash provided by financing activities

103

353

Effect of foreign currency exchange rate on cash and cash equivalents

(442
)

(105
)
Net increase (decrease) in cash and cash equivalents

(190,457
)

9,923

Cash and cash equivalents at beginning of period

222,170

221,348

Cash and cash equivalents at end of period
$
31,713

$
231,271

Supplemental schedule of noncash investing and financing information

Unpaid deferred offering costs in accounts payable and accrued expenses
$
200

$
—

Issuance of common stock and exchange of stock options for business combination
$
—

$
64,845

Fixed assets in accounts payable, accrued expenses and other current liabilities
$
148

$
771

(Unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss)/Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2022	100,117	$	10	$	985,651	$	(1,531)	$	(802,612)	$	181,518
Stock-based compensation expense	—	—		4,563		—		—		4,563

Common stock issued upon release of restricted stock units	456	—		—		—		—		—

Foreign currency translation adjustments	—	—		—		(7)		—		(7)
Unrealized gain on marketable securities, net	—	—		—		739		—		739
Net loss	—	—		—		—		(29,056)		(29,056)
Balance at March 31, 2023	100,573	10		990,214		(799)		(831,668)		157,757
Stock-based compensation expense	—	—		4,469		—		—		4,469
Common stock issued upon release of restricted stock units	2	—		—		—		—		—
Common stock issued under employee stock purchase plan	418	—		246		—		—		246
Foreign currency translation adjustments	—	—		—		(5)		—		(5)
Unrealized gain on marketable securities, net	—	—		—		198		—		198
Net loss	—	—		—		—		(31,510)		(31,510)
Balance at June 30, 2023	100,993	10		994,929		(606)		(863,178)		131,155
Stock-based compensation expense	—	—		4,389		—		—		4,389
Common stock issued upon exercise of stock options	1	—		1		—		—		1
Common stock issued upon release of restricted stock units	33	—		—		—		—		—
Foreign currency translation adjustments	—	—		—		(12)		—		(12)
Unrealized gain on marketable securities, net	—	—		—		66		—		66
Net loss	—	—		—		—		(32,885)		(32,885)
Balance at September 30, 2023	101,027	$	10	$	999,319	$	(552)	$	(896,063)	$	102,714

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Adverum Biotechnologies, Inc.

Condensed Consolidated Statements of Stockholders’ Equity - continued

(In thousands)

(Unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss)/Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2021	98,381	$	10	$	964,965	$	(714)	$	(648,076)	$	316,185
Stock-based compensation expense	—	—		5,381		—		—		5,381
Common stock issued upon exercise of stock options	15	—		3		—		—		3
Common stock issued upon release of restricted stock units	371	—		—		—		—		—
Restricted stock surrendered for taxes	—	—		—		—		—		—
Foreign currency translation adjustments	—	—		—		14		—		14
Unrealized loss on marketable securities, net	—	—		—		(723)		—		(723)
Net loss	—	—		—				(37,908)		(37,908)
Balance at March 31, 2022	98,767	10		970,349		(1,423)		(685,984)		282,952
Stock-based compensation expense	—	—		4,942		—		—		4,942
Common stock issued upon release of restricted stock units	5	—		—		—		—		—
Common stock issued under employee stock purchase plan	499	—		362		—		—		362
Foreign currency translation adjustments	—	—		—		(34)		—		(34)
Unrealized loss on marketable securities, net	—	—		—		(339)		—		(339)
Net loss	—	—		—		—		(43,761)		(43,761)
Balance at June 30, 2022	99,271	10		975,653		(1,796)		(729,745)		244,122
Stock-based compensation expense	—	—		4,503		—		—		4,503
Common stock issued upon release of restricted stock units	457	—		—		—		—		—
Foreign currency translation adjustments	—	—		—		(30)		—		(30)
Unrealized loss on marketable securities, net	—	—		—		(127)		—		(127)
Net loss	—	—		—		—		(40,131)		(40,131)
Balance at September 30, 2022	99,728	$	10	$	980,156	$	(1,953)	$	(769,876)	$	208,337

See accompanying notes to condensed consolidated financial statements.

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Adverum Biotechnologies, Inc.

~~September 30, 2017~~

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(93,451)	$	(121,800)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	4,635		4,816
Stock-based compensation expense	13,421		14,826
Net accretion of discount on marketable securities	(1,835)		(277)
Non-cash lease expense	12,466		3,092
Loss on disposal of property and equipment	85		101
Impairment of long-lived assets	—		2,011
Other	(257)		(1,526)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(923)		(3,468)
Other assets	143		864
Accounts payable	(62)		(543)
Accrued expenses and other liabilities	(1,452)		(217)

Lease liability and lease incentive receivable	(2,344)		12,505

Net cash used in operating activities	(69,574)		(89,616)
Cash flows from investing activities:
Purchases of marketable securities	(20,232)		(81,782)
Maturities of marketable securities	127,601		232,899

Purchases of property and equipment	(616)		(11,631)
Net cash provided by investing activities	106,753		139,486
Cash flows from financing activities:


Proceeds from issuance of common stock pursuant to option exercises	1		3

Payment of deferred offering costs	(344)		—
Proceeds from employee stock purchase plan	246		362


Net cash (used in) provided by financing activities	(97)		365
Net increase in cash and cash equivalents and restricted cash	37,082		50,235
Cash and cash equivalents and restricted cash at beginning of period	70,934		36,698
Cash and cash equivalents and restricted cash at end of period	$	108,016	$	86,933
Cash and cash equivalents	105,366		84,430
Restricted cash	2,650		2,503
Cash and cash equivalents and restricted cash at end of period	$	108,016	$	86,933
Supplemental schedule of noncash investing and financing information

Non-cash settlement of operating lease liability	$	14,903	$	—
Remeasurement of operating lease right-of-use assets	$	13,711	$	2,842
Fixed assets in accounts payable, accrued expenses and other current liabilities	$	—	$	168
Deferred offering costs included in accounts payable	$	58	$	—

See accompanying notes to condensed consolidated financial statements.

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Adverum Biotechnologies, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Basis of Presentation

Adverum Biotechnologies, Inc. (the “Company”~~, “we”~~ or ~~“us”~~“Adverum”) was incorporated in Delaware on July 17, 2006 ~~as Avalanche Biotechnologies, Inc.~~ and ~~changed its name to Adverum Biotechnologies, Inc. on May 11, 2016. The Company~~ is headquartered in ~~Menlo Park,~~Redwood City, California. The Company ~~is a~~aims to establish gene therapy ~~company targeting unmet medical needs in serious rare and~~as a new standard of care for highly prevalent ocular diseases. ~~Since the Company’s inception, it has devoted its efforts principally~~The Company develops gene therapy product candidates intended to performing research and development activities, including conducting preclinical studies and, early clinical trials, filing patent applications, obtaining regulatory agreements, hiring personnel, and raising capital to support these activities.

provide durable efficacy by inducing sustained expression of a therapeutic protein.

The Company has not generated any revenue from the sale of products since its inception. The Company has experienced net losses since its inception and had an accumulated deficit of ~~$239.3~~$896.1 million as of September 30, ~~2017.~~2023. The Company expects to incur losses and have negative net cash flows from operating activities as it engages in further research and development activities. ~~The~~As of September 30, 2023, the Company had cash, cash equivalents and short-term investments of $117.1 million, which the Company believes ~~that it has~~will be sufficient ~~funds~~ to ~~continue~~fund its operations ~~through~~for at least twelve months from the ~~end~~date of ~~2019.~~

~~On May 11, 2016, the Company completed the acquisition~~issuance of ~~all the outstanding shares~~these financial statements.

Basis of ~~Annapurna Therapeutics SAS, a French simplified joint stock company (“Annapurna”). As a result, Annapurna is now a wholly owned subsidiary of the Company.~~

Upon completion of the acquisition of Annapurna, the Company changed its name to “Adverum Biotechnologies, Inc.”. The Company’s shares of common stock listed on The NASDAQ Global Market, previously trading through the close of business on Wednesday, May 11, 2016 under the ticker symbol “AAVL,” commenced trading on The NASDAQ Global Market under the ticker symbol “ADVM” on May 12, 2016.

Presentation — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ~~in the United States of America~~ (“U.S. GAAP”) and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP ~~have been~~can be condensed or omitted. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company’s consolidated financial information. The results of operations for the three and nine months ended September 30, ~~2017,~~2023 are not necessarily indicative of the results to be expected for the full year or any other future period. The balance sheet as of December 31, ~~2016 has been~~2022 is derived from the ~~Company’s~~ audited consolidated financial statements at that date but does not include all of the information required by U.S. GAAP for complete consolidated financial statements.

The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2022 filed with the SEC.

Liquidity, Risks and Uncertainties

As of September 30, 2023, the Company has devoted substantially all of its efforts to product development and has not realized product sales revenues from its planned principal operations. The Company has a limited operating history, and the sales and income potential of the Company’s business and market are unproven. The Company has experienced net losses since its inception and, as of September 30, 2023, had an accumulated deficit of $896.1 million. The Company expects to continue to incur net losses and operating cash outflows for at least the next several years. A successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure. The Company will need to raise additional capital through equity or debt financings, collaborative or other arrangements with corporate sources or through other sources of financing. The Company may be unable to raise additional funds or to enter into such agreements or arrangements on favorable terms, or at all. If the Company is unable to raise capital or enter into such agreements as and when needed, it may have to significantly delay, scale back or discontinue the development or commercialization of one or more of its product candidates. As of September 30, 2023, the Company had cash, cash equivalents and short-term investments of $117.1 million, which is sufficient to fund our operations into 2025.

2. Summary of Significant Accounting Policies

Use of Estimates

The ~~accounting policies followed in the preparation of the interim~~accompanying condensed consolidated financial statements ~~are consistent~~have been prepared in ~~all material respects~~accordance with ~~those presented in Note 2 to~~U.S. GAAP. The preparation of the condensed consolidated financial statements ~~included~~in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities and the reported amounts of expenses in the condensed consolidated financial statements and the accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to clinical trial accruals, fair value of assets and liabilities, impairment of long-lived assets, income taxes, and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

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Accrued Interest Receivable

Accrued interest receivable related to the Company’s ~~Annual Report~~available-for-sale debt securities is presented within prepaid expenses and other current assets on ~~Form 10-K~~the Company’s condensed consolidated balance sheets. The Company has elected to exclude accrued interest receivable from both the fair value and the amortized cost basis of available-for-sale debt securities for the ~~year ended December 31, 2016.~~

~~Recently-Issued~~purposes of identifying and ~~Not Yet~~measuring any impairment. The Company writes off accrued interest receivable once it has determined that the asset is not realizable. Any write offs of accrued interest receivable are recorded by reversing interest income, recognizing credit loss expense, or a combination of both. To date, the Company has not written off any accrued interest receivables associated with its available-for-sale debt securities.

Recently Adopted Accounting Pronouncements —

In ~~May 2014,~~June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“Topic 326”) and also issued subsequent amendments to the initial guidance: ASU ~~No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ ~~(Topic 606), which supersedes~~2018-19, ASU 2019-04, ASU 2019-05, and ASU 2019-11. The standard requires that financial assets measured at amortized cost be presented at the ~~revenue recognition requirements in ASC 605, Revenue Recognition. This ASU~~net amount expected to be collected. The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect collectability. Topic 326 also eliminates the ~~principle~~concept of “other-than-temporary” impairment when evaluating available-for-sale debt securities and instead focuses on determining whether any impairment is a result of a credit loss or other factors. An entity will recognize an allowance for credit losses on available-for-sale debt securities rather than an other-than-temporary impairment that ~~revenue is recognized to depict~~reduces the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is required to be adopted, using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures. In July 2015, the FASB voted to approve a one-year deferralcost basis of the

~~effective date~~ ~~to December 15, 2017 for interim and annual reporting periods beginning after that date and permitted early adoption of the standard, but not before the original effective date of December 15, 2016. The FASB issued supplemental adoption guidance and clarification to ASU 2014-09 in March 2016, April 2016, May 2016 and December 2016 within ASU 2016-08~~ ~~Revenue From Contracts With Customers: Principal vs. Agent Considerations, ASU 2016-10~~ ~~Revenue From Contracts with Customers: Identifying Performance Obligations and Licensing, ASU 2016-12~~ ~~Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients~~ ~~and ASU 2016-20~~ ~~Technical Corrections and Improvement to Topic 606 – Revenue from Contracts with Customers, respectively. The ASU will be effective for the Company in the first quarter of 2018.~~ investment. The Company ~~has commenced its implementation activities related to~~adopted ASU 2016-13 on January 1, 2023, using the modified retrospective approach. The adoption of ASU 2014-09 and is in the process of applying the five-step model of the new standard to its various revenue related arrangements. The Company has completed step 1 (Identify the contract(s) with a customer) and concluded that its collaboration agreements with Regeneron Pharmaceuticals, Inc. and Editas Medicine, Inc. will be impacted by the adoption of the new revenue standards. The Company is in the process of completing step 2 (Identify the performance obligations in the contract) and has not yet reached a conclusion on whether the distinct criteria evaluated under ASC 605-25 for each performance obligation would result in a similar conclusion under the new revenue standards. Preliminarily, the Company intends to adopt the new standard in the first quarter of 2018 using the retrospective approach noted in (ii) above. The Company is currently evaluating the impact of the adoption of this standard on its condensed consolidated financial statements and related disclosures.

~~In January 2016, the FASB issued ASU No. 2016-01,~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities~~, which amends the current guidance on the classification and measurement of financial instruments. Although this ASU retains many current requirements, it significantly revises an entity’s accounting related to (i) the classification and measurement of investments in equity securities and (ii) the presentation of certain fair value changes for financial liabilities measured at fair value. This ASU also amends certain disclosure requirements associated with the fair value of financial instruments. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017, with early adoption permitted for certain changes. This ASU will be effective for the Company in the first quarter of 2018 and must be adopted using a modified retrospective approach, with certain exceptions. The adoption of this standard is not expected to have a2016-13 had no significant impact on the Company’s condensed consolidated financial ~~statements and related disclosures.~~

~~In February 2016, the FASB issued ASU No. 2016-2,~~ ~~Leases~~, which amends the current guidance on leasing activities to provide more transparency and comparability, and requires that all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, which are currently accounted for as operating leases. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018, with early adoption permitted. This ASU will be effective for the Company in the first quarter of 2019 and must be adopted using a modified retrospective transition approach. The Company has not yet determined whether it will elect early adoption and is currently evaluating the impact of the adoption of this standard on its condensed consolidated financial statements and related disclosures.

~~In June 2016, the FASB issued ASU No. 2016-13~~ ~~Measurement of Credit Losses on Financial Instruments~~. This ASU requires measurement and recognition of expected credit losses for financial assets held. The new standard is effective for fiscal years beginning after December 15, 2020 and interim periods beginning after December 15, 2021 with early adoption permitted beginning in the first quarter of 2019. This ASU will be effective for the Company in the first quarter of 2021 and must be adopted using a modified retrospective approach, with certain exceptions. The Company has not yet determined whether it will elect early adoption and is currently evaluating the impact of the adoption of this standard on its condensed consolidated financial statements and related disclosures.

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~, which clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This ASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within that reporting period. Early adoption is permitted. This ASU will be effective for the Company in the first quarter of 2018. The Company has not yet determined whether it will elect early adoption and is currently evaluating the impact of the adoption of this standard on its condensed consolidated financial statements and related disclosures.

~~In November 2016, the FASB issued ASU No. 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash~~, which provides amendments to current guidance to address the classification and presentation of changes in restricted cash in the statement of cash flows. This ASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within that reporting period. Early adoption is permitted. This ASU will be effective for the Company in the first quarter of 2018. The Company has not yet determined whether it will elect early adoption and is currently evaluating the impact of the adoption of these standards on its condensed consolidated financial statements and related disclosures.

~~In May 2017, the FASB issued ASU No. 2017-09,~~ ~~Scope of Modification Accounting~~, which provides amendments to the current guidance for modification accounting. This ASU clarifies that an entity should account for the effects of a modification unless all the following criteria are met: (1) the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. This ASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within that reporting period. Early adoption is permitted. This ASU will be effective for the Company in the first quarter of 2018. The Company has not yet determined whether it will elect early adoption and is currently evaluating the impact of the adoption of these standards on its condensed consolidated financial statements and related disclosures.

The Company has reviewed other recent accounting pronouncements and concluded they are either not applicable to the business or no material effect is expected on the consolidated financial statements as a result of future adoption.

~~3. Acquisition of Annapurna~~

~~(a)~~

~~Purchase Price Allocation~~

On May 11, 2016, the Company completed the acquisition of all outstanding equity interests of Annapurna. Annapurna was a privately held French limited liability company with two wholly-owned subsidiaries, Annapurna, Inc. in the U.S. and Annapurna Therapeutics Limited in Ireland. Annapurna is a biopharmaceutical company focused on discovering and developing novel gene therapy products for people living with severe rare diseases. The primary reasons for the acquisition were to expand the technology platforms within the Company’s research and development portfolio and to apply the Company’s resources and expertise in gene vectors development to advance Annapurna’s programs through development and clinical trials. Annapurna’s results of operations and fair value of assets acquired and liabilities assumed are included in the Company’s condensed consolidated financial statements from the date of acquisition.

The purchase price consideration was $64.8 million, which was based on the Company’s common stock closing price on NASDAQ on the acquisition closing date of $4.14 per share. A total of 14,087,246 shares of the Company’s common stock were issued to shareholders of Annapurna in exchange for all common and preferred stock outstanding at the closing date. Annapurna stockholders did not receive any fractional shares of the Company’s common stock in connection with the acquisition. Instead of receiving any fractional shares, each Annapurna stockholder was paid an amount in cash (without interest) equal to such fraction amount multiplied by the average 10 business days sale price of the Company’s common stock on NASDAQ from the acquisition date. Annapurna Series O preferred shares issued to founders were canceled prior to the acquisition date and were not included in the purchase price consideration. Vesting of certain of Annapurna’s options and unvested common stock shares was accelerated at the closing date. The fair value of awards related to the accelerated vesting of options and shares of $0.9 million was excluded from the purchase price consideration and included in the Company’s operating expenses post acquisition.

A portion of the purchase price was attributed to the exchange of Annapurna’s options and other rights to purchase capital stock outstanding at the acquisition closing date for corresponding common stock options of the Company at an exchange ratio of 9.54655.

The Company reserved 3,673,940 shares for the future exercise of the Company’s stock options. The total fair value of assumed Annapurna stock options and stock-based awards was estimated at $14.7 million on the acquisition date, using the Black-Scholes pricing model, assuming no dividends, expected volatilities of 80% and 89%, risk-free interest rates of 1.4% and 1.1%, and expected lives of six and ten years for employees and non-employees awards, respectively. Of the total fair value, $7.4 million was attributed as pre-combination service and included as part of the total purchase price consideration. The post-combination attribution of $7.2 million was recognized as compensation expense over the remaining requisite service period. The Company included $0.9 million in stock-based compensation expense related to the vesting of exchanged stock options and day-one post combination compensation expenses related to the accelerated vesting of options and shares in its condensed consolidated statement of operations during the second quarter of 2016.

~~Total purchase price consideration was estimated as follows (in thousands):~~

Fair value of common shares issued

$
58,321

Fair value of the Company's common share options
   exchanged for Annapurna stock options and other awards
   attributable to pre-combination services

7,422

Less: value of common stock and options accelerated
   vesting at the closing date

(898
)
Total purchase price consideration

$
64,845

~~The transaction was accounted for using the acquisition method based on ASC 805,~~ ~~Business Combinations,~~ with Adverum identified as the acquirer, based on the existence of a controlling financial interest of the combined entities. Under the acquisition method, assets acquired and liabilities assumed were recorded at their estimated fair values as of May 11, 2016. Goodwill, as well as intangible assets that do not qualify for separate recognition, is measured as of the acquisition date as the excess of consideration transferred, which is also measured at fair value, and the net of the fair values of the assets acquired and the liabilities assumed as of the acquisition closing date. Goodwill represented expected synergies of two combined companies. Acquisition costs were expensed as incurred and recorded as general and administrative expenses. The Company recorded zero and $2.5 million of acquisition costs for the three-months and nine-months ended September 30, 2016, respectively. No acquisition costs were incurred during the three and nine months ended September 30, 2017.

~~The allocation of total purchase price consideration is as follows (in thousands):~~

Cash

$
3,449

Prepaid expenses and other assets

865

Property and equipment

185

Acquired intangible assets

16,200

Goodwill

49,514

Accounts payable

(1,118
)
Accrued liabilities

(1,848
)
Other noncurrent liabilities

(377
)
Deferred tax liabilities

(2,025
)
Total purchase price allocation

$
64,845

~~The identifiable intangible assets acquired consist of IPR&D assets related to products in development, as summarized in the table below (in thousands):~~

IPR&D - Alpha-1 antitrypsin deficiency

$
11,700

IPR&D - Hereditary angioedema

4,500

Total acquired intangible assets

$
16,200

The fair value of each IPR&D asset is estimated using the income approach and calculated using cash flow projections adjusted for inherent risks regarding regulatory approval, promotion, and distribution, discounted at a rate of approximately ~~11.0%.~~ The Company acquired two additional intangible assets relating to the Friedreich’s Ataxia (“FA”) and severe allergy programs, but the fair value of each of these assets was determined to be nominal and is not included in the total acquired intangible assets. All IPR&D intangible assets acquired are currently classified as indefinite-lived and are not currently being amortized. During the year ended December 31, 2016, the Company recorded $11.2 million of IPR&D impairment charge related to these intangible assets.

~~Goodwill, which represents the excess of the purchase price over the fair values assigned to the net assets acquired, was estimated in the amount of~~ ~~$49.5 million~~ on the acquisition date. The full amount of the preliminary value of goodwill has been assigned to the entire Company, since management has determined that the Company has only one reporting unit. The goodwill is not deductible for tax purposes. As of September 30, 2016, goodwill was fully impaired.

The following pro forma financial information combines the results of operations of Adverum and Annapurna as though the businesses had been combined as of the beginning of fiscal year 2016. The pro forma financial information is presented for informational purposes only, and is not indicative of the results of operations that would have been achieved in the current or any future periods. The following table presents the unaudited pro forma results for the nine months ended September 30, 2016 (in thousands, except per share data).

Nine Months
Ended
September 30,

2016

Pro forma information

Collaboration revenue

$
967

Net loss

$
(95,167
)
Basic and diluted loss per share

$
(2.31
)
Weighted-average common shares outstanding - basic and
diluted

41,118

~~Pro-forma adjustments included the following:~~

~~Actual acquisition-related transaction costs of $2.5 million were excluded from pro forma results above as these expenses were incurred prior to the closing of the acquisition.~~

statements.

~~Stock-based compensation expense of $0.9 million related to accelerated vesting associated with the acquisition was excluded from the pro forma results above.~~

~~Stock-based compensation expense related to options granted to executives upon the acquisition closing of $0.2 million was included in pro forma results above.~~

Interest expense of $1.0 million related to convertible notes and changes in fair value of preferred stock warrants was excluded from the pro-forma results above, as the convertible notes and warrants were settled prior to the acquisition closing.

~~$0.4 million of bonuses paid in connection with the closing of the acquisition in May 2016 were excluded from the pro forma results above.~~

~~The unaudited condensed pro forma information does not include any anticipated synergies that may be achievable subsequent to the date of acquisition.~~

~~4. Cash Equivalents and Short-Term Investments~~

~~The following is a summary of the Company’s available-for-sale securities as of September 30, 2017 (in thousands):~~

September 30, 2017

Amortized
Cost Basis

Unrealized
Losses

Unrealized
Gains

Estimated
Fair Value

Money market funds

$
1,763

$
—

$
—

$
1,763

Certificates of deposit

9,978

—

—

9,978

Commercial paper

32,295

—

—

32,295

U.S. government agency

72,756

(70
)

1

72,687

Corporate bonds

63,105

(33
)

—

63,072

Total cash equivalents and
short-term investments

179,897

(103
)

1

179,795

Less: cash equivalents

(24,866
)

—

—

(24,866
)
Total short-term investments

$
155,031

$
(103
)

$
1

$
154,929

~~The following table is a summary of the cost and estimated fair value of the Company’s available-for-sale securities based on stated effective maturities as of September 30, 2017 (in thousands):~~

September 30, 2017

Amortized
Cost Basis

Estimated Fair Value

Mature within one year

$
151,769

$
151,725

Mature after one year to three years

28,128

28,070

Total cash equivalents and short-term
investments

$
179,897

$
179,795

As of December 31, 2016, all of the Company’s investments were held in money market funds and were treated as cash equivalents. Management determined that the gross unrealized losses of $0.1 million on the Company’s available-for-sale securities as of September 30, 2017 were temporary in nature. Therefore, none of the Company’s available-for-sale securities were other-than-temporarily impaired as of September 30, 2017.

5.3. Fair Value Measurements and Fair Value of Financial Instruments

The authoritative guidance on ~~fair value measurements establishes a three-tier~~the fair value hierarchy for disclosure of fair value measurements is as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The fair value of Level 1 securities ~~are~~is determined using quoted prices in active markets for identical assets. Level 1 securities consist of highly liquid money market funds. Financial assets and liabilities are considered Level 2 when their fair values are determined using inputs that are observable in the market or can be derived principally from or corroborated by observable market data such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities. In addition, Level 2 financial instruments are valued using comparisons to like-kind financial instruments and models that use readily observable market data as their basis. U.S. government and agency securities, commercial paper, and corporate bonds ~~and certificate of deposit~~ are valued primarily using market prices of comparable securities, bid/ask quotes, interest rate yields and prepayment spreads and are included in Level 2.

~~In certain cases where there~~

The following is ~~limited activity or~~a summary of the Company’s cash equivalents and short-term investments:


	September 30, 2023
	Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value
	(In thousands)
Level 1:
Money market funds	$	10,140	$	—	$	—	$	10,140
Level 2:
Commercial paper	91,259		—		(31)		91,228
U.S. government and agency securities	11,786		—		(71)		11,715

Total cash equivalents and short-term investments	113,185		—		(102)		113,083
Less: cash equivalents	(101,399)		—		32		(101,367)
Total short-term investments	$	11,786	$	—	$	(70)	$	11,716

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	December 31, 2022
	Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value
	(In thousands)
Level 1:
Money market funds	$	10,235	$	—	$	—	$	10,235
Level 2:
Commercial paper	102,722		—		(246)		102,476
U.S. government and agency securities	59,487		—		(824)		58,663
Corporate bonds	2,059		—		(35)		2,024

Total cash equivalents and short-term investments	174,503		—		(1,105)		173,398
Less: cash equivalents	(56,256)		—		16		(56,240)
Total short-term investments	$	118,247	$	—	$	(1,089)	$	117,158

As of September 30, 2023, all marketable securities have a remaining maturity of less ~~transparency around inputs to valuation, securities are classified as Level 3 within the valuation hierarchy. Level 3 liabilities that were measured at estimated~~than one year. The aggregate fair value ~~on a recurring basis consist~~ of ~~a financing arrangement entered into during the year ended~~debt securities in an unrealized loss position at September 30, 2023 and December 31, ~~2016.~~

~~During the periods presented, the~~2022 was $102.9 million and $155.5 million, respectively, which are highly liquid funds with high credit ratings that have final maturity of less than two years from date of purchase. The Company has not ~~changed the manner~~recorded an allowance for credit losses as of September 30, 2023 and December 31, 2022 related to these securities. The accrued interest receivable on available-for-sale marketable securities was immaterial at September 30, 2023 and December 31, 2022. The Company held 24 securities that were in ~~which it values liabilities that are measured at estimated fair value using Level 3 inputs.~~unrealized loss positions as of September 30, 2023. There were no ~~transfers within~~individual securities that were in a significant unrealized loss position as of September 30, 2023 and December 31, 2022. The Company regularly reviews the ~~hierarchy~~securities in an unrealized loss position and evaluates the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases.The Company has not recorded any impairment charges on available-for-sale securities.

4. License Revenue

Lexeo - On January 25, 2021, the Company and Lexeo Therapeutics, Inc (“Lexeo”) entered into a License Agreement pursuant to which the Company granted Lexeo an exclusive, worldwide, royalty-bearing license to certain of the Company’s intellectual property to develop, manufacture, and commercialize a gene therapy product to treat cardiomyopathy due to Friedreich’s Ataxia.

Under the terms of the agreement, the Company is eligible to receive additional payments upon the achievement of certain milestones. Additionally, the Company will receive royalty payments on net sales subject to a cap and reductions based on patent expiry, anti-stacking, and a defined royalty floor percentage.

In February 2023, Lexeo notified the Company that it achieved the first development milestone; accordingly the Company is eligible to receive additional payments. Therefore, the Company recognized $3.5 million of license revenue during the nine months ended September 30, 2023.

5. Leases

Redwood City, California

The Company has a lease for facilities in Redwood City, California (“Redwood City Premises”), which expires December 31, 2031, with option to extend for a period of eight years. Related to this lease, the Company provided the landlord with a letter of credit in the amount of $2.7 million as of September 30, 2023, which is classified as restricted cash under long term assets on the Company’s condensed consolidated balance sheets. In October 2023, the Company entered into an amendment to the letter of credit reducing the amount to $1.9 million.

In March 2023, the Company entered into an amendment to accelerate the expiration of one of the facilities in its Redwood City Premises from December 31, 2031 to September 30, 2023. Concurrently, the Company entered into an agreement for additional tenant improvement allowance towards its other Redwood City Premises. As a result of the modification the Company revalued the lease liability based on the new and remaining lease terms, which resulted in a reduction to the lease liability of $8.3 million, and recognized the remeasurement to the lease liabilities as an adjustment to the right-of-use asset. The estimated value of non-cash consideration, composed primarily of leasehold improvements and furniture and fixtures, was $14.9 million, which was fully amortized as of September 30, 2023.

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Durham, North Carolina

The Company has an operating lease agreement for a building in Durham, North Carolina (“NC Premises”). The lease commenced in April 2021 when the Company obtained control of the NC Premises, and the lease term expires in October 2037 with two options to extend the lease term for a period of five years each. In April 2023, the Company entered into an amendment to reduce the rent payments for the NC Premises, effective as of May 1, 2023.

On October 26, 2021, the Company entered into a sublease agreement with a subtenant for the NC Premises through October 2037, the remainder of the lease term. In line with the amendment to the NC Premises’ lease, sublease rent payments were correspondingly reduced. Sublease income for operating leases is recognized on a cash basis over the lease term based on assessment of probability of collection. In September 2022, the Company assessed the collectability of sublease income receivable to be less than probable and recognized an adjustment to eliminate the deferred rent receivable as an adjustment to sublease income, resulting in an increase in general and administrative expenses in the three and nine month periods ended September 30, 2022. As a result of the adjustment to eliminate the deferred rent receivable, sublease income for the three and nine months ended September 30, ~~2017.~~

~~The following table summarizes, for assets recorded at fair value on~~2022 was a ~~recurring basis, the respective fair value~~negative $4.1 million and ~~the classification by level of input within the fair value hierarchy as described above (in thousands):~~

Quoted Prices

Significant Other

Significant

Total

In Active
Markets

Observable
Inputs

Unobservable
Inputs

Carrying Value

(Level 1)

(Level 2)

(Level 3)

September 30, 2017

Assets:

Money market funds

$
1,763

$
1,763

$
—

$
—

Certificates of deposit

9,978

—

9,978

—

Commercial paper

32,295

—

32,295

—

U.S. government agency

72,687

—

72,687

—

Corporate bonds

63,072

—

63,072

—

Total cash equivalents and short
term investments

$
179,795

$
1,763

$
178,032

$
—

Other noncurrent liability:

Financing arrangement

$
74

$
—

$
—

$
74

December 31, 2016

Assets:

Money market funds

$
215,916

$
215,916

$
—

$
—

Total cash equivalents

$
215,916

$
215,916

$
—

$
—

Other noncurrent liability:

Financing arrangement

$
74

$
—

$
—

$
74

~~Non-financial assets such as intangible assets, property, plant,~~$0.8 million, respectively. Sublease income was $1.3 million and equipment are evaluated for impairment and adjusted to their fair value using Level 3 inputs, only when impairment is recognized. Fair values are considered Level 3 when management makes significant assumptions in developing a discounted cash flow model based upon a number of considerations including projections of revenues, earnings and a discount rate.

~~6. Significant Agreements~~

~~University of California~~— In May 2010, the Company entered into a license agreement with the Regents of University of California (“Regents”), as amended in September 2013. Under the license agreement, the Regents have granted to the Company an exclusive (even as to the Regents) license, with the right to grant sublicenses, under the Regents’ undivided interest in patent rights covering a method of using recombinant gene delivery vectors for treating or preventing diseases of the eye, to develop, make, have made, use offer for sale, import, export and sell products covered by such patent rights in all fields of use in the United States. The licensed patent rights are jointly owned by the Regents and Chiron Corporation, but the Company’s license extends only to the Regents’ interest in such patent rights.

Under the license agreement, the Company is required to diligently proceed with the development, manufacture and sale of licensed products, which includes obligations to meet certain development-stage milestones within specified periods of time, and to market the resulting licensed products in sufficient quantity to meet market demand. The Company has the right and option to extend the date by which it must meet any milestone by six-months up to two times by paying an extension fee for each such extension.

The Company has paid the Regents a license fee of $100,000. The Company is also obligated to make milestone payments totaling up to $900,000 upon reaching certain stages of development of the licensed products for one indication, and totaling up to $500,000 for each subsequent indication for which licensed products are developed, for up to a maximum of two additional indications. Through September 30, 2017, none of these goals had been achieved, and no milestones were payable. The Company must pay the Regents a low single-digit royalty on net sales of the licensed products by the Company or its sublicensees, subject to a minimum annual royalty payment of $50,000 beginning in the calendar year after the first commercial sale of a licensed product, until the patent rights upon which such royalties are based expire or are held invalid, which is currently expected to occur in 2020, subject to any potential patent term extensions. The Company is obligated to reimburse the Regents for expenses associated with the prosecution and maintenance of the licensed patents. Finally, the Company is obligated to pay the Regents a mid-teen percentage of non-royalty licensing revenue that the Company receives from sublicensees.

~~The Company’s license agreement with the Regents continues in effect~~$4.1 million for the life of the last-to-expire patent. The Company may terminate this agreement without cause at any time upon 30 days’ prior written notice to the Regents. The Regents may terminate this agreement for a breach by the Company that remains uncured for 60 days, if the Company becomes insolvent, if the Company directly or through a third party files a claim that a licensed patent right is invalid or unenforceable or if the Company fails to meet or extend the date for meeting certain diligence milestones.

~~Regeneron—In May 2014, the Company entered into a research collaboration~~three and license agreement with Regeneron Pharmaceuticals, Inc. (“Regeneron”) to discover, develop and commercialize novel gene therapy products for the treatment of ophthalmologic diseases. The collaboration covers up to eight distinct therapeutic targets (“collaboration targets”). The Company and Regeneron collaborate during the initial research period of three years that can be extended by Regeneron for up to an additional five years. During the research period, Regeneron has the option to obtain an exclusive worldwide license for a collaboration target’s further development by giving written notice to the Company and paying $2.0 million per target. If Regeneron exercises its option, it will be responsible for all further development and commercialization of the target. The Company is then eligible to receive contingent payments of up to $80.0 million upon achievement of certain development and regulatory milestones for product candidates directed toward each collaboration target, for a combined total of up to $640.0 million in potential milestone payments for product candidates directed toward all eight collaboration targets, plus a royalty in the low- to mid-single-digits on worldwide net sales of collaboration products.

For any two collaboration targets, the Company has an option to share up to 35% of the worldwide product candidate development costs and profits. If the Company exercises this option, the Company will not be eligible for milestone and royalty payments as discussed above but rather the Company will share development costs and profits with Regeneron.

The agreement will expire with respect to each collaboration target upon the earlier of the (a) expiration of the research term if the option right has not been triggered by the end of the research term or (b) expiration of the option right if the option right has not been exercised by Regeneron. If the option right has been exercised, the agreement in connection with each collaboration target will expire upon expiration of all payment obligations by Regeneron. In addition, the agreement, or Regeneron’s rights to any target development under the agreement, may terminate early under the following situations:

~~Regeneron may terminate the agreement for convenience at any time on a target by target basis or in totality upon a 30-day notice.~~

~~Each party can terminate the agreement if another party commits a material breach or material default in performance of its obligations and such breach or default is not cured within 60 days.~~

~~The agreement is automatically terminated upon initiation of any bankruptcy proceedings, reorganization or dissolution of either party.~~

~~The Company can terminate the agreement upon 30-day notice if Regeneron challenges the validity, scope or enforceability of any Company patent.~~

On February 23, 2017, Regeneron notified Adverum that, pursuant to the terms of the research collaboration and license agreement, it extended the research term of the collaboration for an additional three years, through May 1, 2020.

Under the Company’s research, collaboration and license agreement with Regeneron, the Company is required to have a mutually agreed-on research plan with Regeneron in order to invoice Regeneron for services performed. The Company does not currently have a research plan in place, and, consequently, we are not currently receiving any reimbursements from Regeneron.

~~Editas—~~In August 2016, the Company entered into a collaboration, option and license agreement with Editas Medicine, Inc. (“Editas”) pursuant to which the Company and Editas will collaborate on certain studies using adeno-associated viral (“AAV”) vectors in connection with Editas’ genome editing technology and the Company will grant to Editas an exclusive option to obtain certain exclusive rights to use the Company’s proprietary vectors in up to five ophthalmic indications (“Indications”). The Company received a $1.0 million non-refundable upfront payment during the year ended December 31, 2016, with $0.5 million of such payment to be credited against Editas’ obligation to fund research and development costs. Under the terms of the agreement, both the Company and Editas will be subject to exclusivity obligations.

Under the terms of the agreement, Editas may exercise the option, with respect to a designated initial Indication, until the first anniversary of the effective date of the agreement. With respect to the four other Indications, Editas may exercise the option until the third anniversary of the effective date, provided that the option will expire on the second anniversary of the effective date if Editas has not exercised the option with respect to the initial Indication or any other Indication by such date. Upon each exercise of the option, Editas will pay the Company a $1.0 million fee per Indication. If Editas elects to develop a product using certain of the Company’s proprietary vectors, the Company will be eligible to receive up to $15.5 million in development and commercialization milestone

~~payments for such product, and tiered royalties between the mid-single digits and low teens on net sales of such product, subject to certain adjustments.~~

~~Unless earlier terminated, the agreement will be in effect until the later of the expiration of the option exercise period or the expiration of the royalty term of the last product.~~ At any time after the option is first exercised, Editas may terminate the agreement for convenience in its entirety or on an indication-by indication or country-by-country basis, upon prior written notice to the Company. The Company may also terminate the agreement if Editas challenges the Company’s patents relating to its proprietary vectors and does not withdraw such challenge within a defined period of time. In addition, either party may terminate the agreement with written notice upon a bankruptcy of the other party or upon an uncured material breach by the other party.

~~Cornell University—~~The Company had been a party to a master service agreement (“MSA”) with Cornell University (“Cornell”) originally established in August 2014 and amended in December 2015. In December 2016, the Company informed Cornell that the Company decided to terminate the MSA for material breach, effective January 6, 2017. Subsequently, Cornell informed the Company that it disputes the validity of the Company’s termination of the MSA. Although the Company intends to defend the validity of its termination of the MSA, the Company recorded $2.0 million of estimated costs associated with the termination of the MSA as of September 30, 2017. This MSA included services relating to the Company’s gene therapy programs ADVM-043, ADVM-053 and severe allergy. The Company’s three licensing agreements with Cornell for these programs remain unchanged.

The decision to terminate the MSA was due to Cornell’s failure to deliver therapeutic material of ADVM-043 suitable for use in human patients. As a result of this decision, the Company has contracted with large-scale contract manufacturing organizations that comply with current good manufacturing practice industry standards and can produce product quantities for both the Company’s planned clinical trials and potential commercial supply. This is part of the Company’s upgrade of the manufacturing process for ADVM-043, implementing its proprietary, highly-scalable baculovirus-based production system, in advance of the Company’s plans to begin patient enrollment in a Phase 1/2 clinical trial in the fourth quarter of 2017.

Under the MSA, Cornell provided assistance in regulatory affairs, overall project management, and parameter development. The MSA, as amended, provided for Annapurna to pay Cornell $13.3 million ratably over 4 years for these services as services were performed.

In December 2015, Annapurna entered into three licensing agreements with Cornell, pursuant to which Annapurna will advance its gene therapy programs ADVM-043, ADVM-053, and severe allergy, which originally were initiated at the Department of Genetic Medicine at Weill Cornell.

~~A1AT Deficiency License Agreement~~: Under this agreement, Annapurna holds an exclusive license to certain technology related to alpha-1 antitrypsin (A1AT) deficiency and rights to an Investigational New Drug (IND) application to initiate clinical studies of gene therapy for A1AT.

~~HAE License Agreement~~: Under this agreement, Annapurna holds an exclusive license to certain technology related to hereditary angioedema (HAE) and a non-exclusive license to certain other intellectual property related to the HAE program.

~~Allergy License Agreement: Under this agreement, Annapurna holds an exclusive license to certain patents related to allergens and a non-exclusive license to certain other technology related to allergens.~~

Across these three license agreements, Cornell is entitled to receive aggregate annual maintenance fees ranging from $30,000 to $300,000 per year, up to $16.0 million in aggregate milestone payments and royalties on sales in the low single-digits, subject to adjustments and minimum thresholds. For the nine months ended September 30, ~~2017, annual maintenance fees were immaterial. No milestone payments were probable to achieve and none were recorded~~2023, respectively. The sublease income is classified as a reduction of rent expense in operating expenses.

As of September 30, ~~2017.~~

Annapurna may terminate any of these license agreements for convenience upon ninety days written notice. Cornell may terminate any of the license agreements for material breach if such breach is not cured within a specified number of days. Cornell may also terminate the HAE License Agreement and/or the Allergy License Agreement if Annapurna commences any action and files a written claim asserting that any portion of the licensed patent rights is invalid or unenforceable.

Ronald Crystal, M.D., Chairman, Department of Genetic Medicine, the Bruce Webster Professor of Internal Medicine and a Professor of Genetic Medicine and of Medicine at Weill Cornell Medicine, served as a consultant to Annapurna since inception and continues to provide services to the Company for the annual compensation of up to $0.3 million.

~~REGENXBIO—A1AT Deficiency/Allergy License Agreement~~: In October 2015, Annapurna entered into an exclusive worldwide license to certain intellectual property in order to make, have made, use, import, sell and offer for sale certain licensed products for the treatment of~~A1AT deficiency. Also, under this agreement, Annapurna has an option to be granted an exclusive worldwide license to~~

certain intellectual property related to the treatment of severe allergies, which option expired in October 2016. Under this license agreement, REGENXBIO, Inc. (“REGENXBIO”) is eligible to receive annual maintenance fees, up to approximately $20.0 million in combined milestone2023, undiscounted future non-cancellable lease payments ~~and royalties in the mid-to-high single digits.~~

Unless earlier terminated, this license agreement will be in effect on a country-by-country, licensed product-by-licensed product basis until the expiration, lapse, abandonment, or invalidation of the last claim of the licensed intellectual property to expire, lapse, or become abandoned or unenforceable for the applicable licensed product. Annapurna may terminate this license agreement for any reason upon six months’ prior written notice. REGENXBIO may terminate this license agreement if Annapurna is a specified number of days late in paying money due under the license agreement, or if Annapurna, its affiliates, or any sublicensees become insolvent or, effective immediately, if they commence any action against REGENEXBIO or its licensors to declare or render any claim of the licensed patent rights invalid or unenforceable. Either party may terminate this license agreement for material breach if such breach is not cured within a specified number of days.

In April 2017, the Company notified REGENXBIO that Annapurna exercised its right to terminate the license agreement for any reason upon six months’ prior written notice. The termination is effective in October 2017.

~~Friedreich’s Ataxia License Agreement~~: In April 2014, Annapurna entered into an exclusive worldwide license to certain intellectual property related to the FA program to make, have made, use, import, sell and offer for sale licensed products using AAVrh10 for FA where the vector is administered by any route except directly to the central nervous system (“FA Systemic”). Under the terms of this license agreement, Annapurna also had an option to obtain a non-exclusive worldwide license to make, have made, use, import, sell and offer for sale licensed products using a single vector for each of FA where the vector is administered directly to the central nervous system (“FA CNS”) and FA Systemic. Under this license agreement, REGENXBIO is eligible to receive annual maintenance fees, up to $13.85 million in combined milestone fees and royalties in the mid-to-high single digits. The option to obtain a non-exclusive license to FA Systemic expired in April 2015 and the option to obtain a non-exclusive license for FA CNS expired in April 2016. Annapurna is obligated to achieve certain development milestones with respect to each licensed disease indication, including the filing of an IND application for each licensed disease indication within a specified time period, which Annapurna may extend for additional time for a specified number of extensions upon the payment of a fee.

Unless earlier terminated, this license agreement expires upon the expiration, lapse, abandonment, or invalidation of the last claim of the licensed intellectual property to expire, lapse, or become abandoned or unenforceable in all the countries of the world. Annapurna Therapeutics Limited may terminate this license agreement upon six months’ prior written notice. REGENXBIO may terminate this license agreement if Annapurna Therapeutics Limited is a specified number of days late in paying money due under the license agreement, or if Annapurna Therapeutics Limited, its affiliates, or any sublicensees become insolvent or, effective immediately, if they commence any action against REGENXBIO or its licensors to declare or render any claim of the licensed patent rights invalid or unenforceable. Either party may terminate this license agreement for material breach if such breach is not cured within a specified number of days.

~~During the nine months ended September 30, 2017, expenses associated with the REGENXBIO~~lease agreements ~~were $0.2 million.~~

~~Inserm Transfert—~~In July 2014, Annapurna entered into an agreement with Inserm Transfert (Inserm) whereby Annapurna holds an exclusive license to certain patents to develop, make, have made, use, import, offer for sale and sell or otherwise distribute products for the treatment of FA and a non-exclusive license to certain other intellectual property related to the FA program. The agreement was amended in October 2015 to increase the scope of the intellectual property under the licenses. Under this agreement, Inserm is entitled to receive certain de minimis license payments, certain development milestone payments of up to approximately €2.0 million in the aggregate and royalties on sales in the low single-digits, subject to adjustments. No milestone payments were probable to achieve and none were recordedare as ~~of September 30, 2017.~~

~~Unless earlier terminated, this agreement~~ ~~will be in effect on a country-by-country, licensed product-by-licensed product basis~~ ~~until the later of the expiration of~~ ~~the last claim of the licensed intellectual property~~ which cover the manufacture, use or sale of such product in such country or 10 years after the first commercial sale of such product in such country in which such product is sold. Upon a country-by-country and product-by-product basis, Annapurna will have a fully paid up, perpetual, irrevocable license with respect to such product in such country under the licensed intellectual property following expiration of this agreement with respect to such product in the applicable country. Annapurna may terminate this agreement upon 60 days’ prior written notice. Inserm may terminate this license agreement if Annapurna becomes the subject of a voluntary or involuntary petition in bankruptcy or fails to meet development milestones and such failure is not cured within a specified number of days. Inserm may also terminate the license granted to Annapurna in a given country if Annapurna (i) before regulatory approval of a product in any country, has ceased conducting any development of products in all countries for 12 consecutive months or (ii) after regulatory approval of a product in a given country, has ceased marketing such product in such country for 12 consecutive months.

follows (in thousands):


Year ending December 31,	Operating Leases		Sublease Payments Receivable
2023 (remaining three months)	$	2,696	$	1,286
2024	11,086		5,248
2025	11,448		5,405
2026	11,821		5,568
2027	12,207		5,735
Thereafter	94,653		66,416
Total undiscounted lease payments	$	143,911	$	89,658
Less: Present value adjustments	$	(68,387)
Total lease liability	$	75,524

Pursuant to the terms of the agreement with Inserm, the Company’s acquisition of Annapurna triggered a one-time payment to Inserm of €250,000, which was recorded to research and development expense in the Company’s consolidated statement of operations during the year ended December 31, 2016.

~~During the nine months ended September 30, 2017, expenses associated with the Inserm Transfert agreements were $0.3 million.~~

6. Balance Sheet Components

Property and Equipment, Net

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

following:


	September 30, 2023		December 31, 2022
	(In thousands)
Laboratory equipment	$	14,452	$	14,382
Leasehold improvements	13,586		34,336
Computer equipment and software	868		1,325
Furniture and fixtures	—		868
Construction in progress	93		1,010
Total property and equipment	28,999		51,921
Less accumulated depreciation and amortization	(13,502)		(16,994)
Property and equipment, net	$	15,497	$	34,927

September 30, 2017

December 31, 2016

Computer equipment and software

$
480

$
300

Laboratory equipment

4,933

4,285

Furniture and fixtures

552

552

Leasehold improvements

1,541

1,522

Construction in progress

16

104

Total property and equipment

7,522

6,763

Less accumulated depreciation and amortization

(4,175
)

(2,594
)
Property and equipment, net

$
3,347

$
4,169

Depreciation and amortization expense related to property and equipment for the three months ended September 30, 2017 and 2016 was $0.5 million and $0.4 million, respectively. Depreciation and amortization expense related to property and equipment for the nine months ended September 30, 2017 and 2016 was $1.6 million and $1.1 million, respectively.

Table of Contents

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the ~~following (in thousands):~~

following:


	September 30, 2023		December 31, 2022
	(In thousands)
Employee compensation	$	7,281	$	8,710
Accrued nonclinical, clinical and process development costs	6,728		6,854
Accrued professional services	588		532
State income tax payable	102		254
Other	1,663		417
Total accrued expenses and other current liabilities	$	16,362	$	16,767

September 30, 2017

December 31, 2016

Employees’ compensation expenses

$
1,628

$
2,570

Accrued preclinical costs

805

1,683

Accrued clinical and process development costs

669

1,142

Accrued professional services

725

894

Accrued contract settlement

2,000

—

Other

235

162

Total accrued expenses and other current liabilities

$
6,062

$
6,451

~~9. Other Non-current Liabilities~~

In August 2015, Banque Publique d’Investissement (“BPI France”) granted Annapurna a €0.5 million interest free conditional advance. Payments are scheduled in equal quarterly amounts of €25,000 from September 30, 2017 to June 30, 2022. This payment schedule will be modified if the Company receives revenue from license or product sales before advances are paid in full. The Company calculated 7% imputed interest expense on these advances that was recorded as a discount at the issuance date. The discount is amortized as an interest expense over the life of the advances. As of September 30, 2017, the carrying value of this interest-free conditional advance, which approximates its fair value, was $0.4 million, of which $0.3 million is recorded within other non-current liabilities and $0.1 million within accrued expenses and other current liabilities in the Company’s condensed consolidated balance sheets. Interest expense for this interest-free conditional advance was immaterial for the three and nine months ended September 30, 2017.

In July 2016, the Company entered into a sponsored research agreement with The Alpha-1 Project, Inc. (“TAP”) to fund the Company’s A1AT research activities of up to $0.3 million, of which $0.1 million was received during the year ended December 31, 2016 (“TAP financing arrangement”). The Company may repay up to 4.5 times the received amount if and when certain product approval and sales milestones are achieved. As of September 30, 2017, the estimated fair value of the TAP financing arrangement was $0.1 million, which was recorded within other noncurrent liabilities in the Company’s condensed consolidated balance sheets.

~~10. Commitments and Contingencies~~

~~Facility Lease Agreement~~

The Company leases its office building under a non-cancelable lease agreement, which expires on May 8, 2020. The Company may extend this lease for up to four years. The lease agreement provides for an escalation of rent payments each year. The Company records rent expense on a straight-line basis over the term of the lease.

Rent expense recognized under the operating lease, including additional rent charges for utilities, parking, maintenance, and real estate taxes was $1.4 million and $1.3 million for the nine months ended September 30, 2017 and 2016, respectively.

~~Collaborations and License Agreements~~

The Company is a party to various agreements, principally relating to licensed technology that requires payment of annual maintenance fees and future payments relating to milestones or royalties on future sales of specified products. The Company expenses the annual maintenance fees on a straight-line basis and accrues the aggregate balances until invoiced or paid. Through September 30, 2017, none of the goals had been achieved under the license agreements and no cash milestones were accrued or payable. Since the achievement of these milestones is not fixed and determinable, such commitments have not been included in the Company’s condensed consolidated balance sheets.

~~Guarantees and Indemnifications~~

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for indemnification for certain liabilities. The exposure under these agreements is unknown because it involves claims that may be made against the Company in the future but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations. The Company also has indemnification obligations to its directors and executive officers for specified events or occurrences, subject to some limits, while they are serving at the Company’s request in such capacities. There have been no claims to date and the Company believes the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of September 30, 2017.

~~Legal Proceedings~~

From time to time, the Company may become involved in litigation and other legal actions. The Company estimates the range of liability related to any pending litigation where the amount and range of loss can be estimated. The Company records its best estimate of a loss when the loss is considered probable. Where a liability is probable and there is a range of estimated loss with no best estimate in the range, the Company records a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that a liability had been incurred at the date of the financial statements and (ii) the range of loss can be reasonably estimated.

In July 2015, three securities class action lawsuits were filed against the Company and certain of its officers in the United States District Court for the Northern District of California, each on behalf of a purported class of persons and entities who purchased or otherwise acquired the Company’s publicly traded securities between July 31, 2014 and June 15, 2015. The lawsuits assert claims under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Securities Act of 1933, as amended (the “Securities Act”) and allege that the defendants made materially false and misleading statements and omitted allegedly material information related to, among other things, the Phase 2a clinical trial for AVA-101, a product candidate which is no longer being developed, and the prospects of AVA-101. The complaints seek unspecified damages, attorneys’ fees and other costs.

In December 2015, a putative securities class action lawsuit was filed against the Company, the Company’s board of directors, underwriters of the Company’s January 13, 2015, follow-on public stock offering, and two of the Company’s institutional stockholders, in the Superior Court of the State of California for the County of San Mateo. The complaint alleges that, in connection with the Company’s follow-on stock offering, the defendants violated the Securities Act by allegedly making materially false and misleading statements and by allegedly omitting material information related to the Phase 2a clinical trial for AVA-101 and the prospects of AVA-101. The complaint seeks unspecified compensatory and rescissory damages, attorneys’ fees and other costs. The plaintiff has dismissed the two institutional stockholder defendants.

On March 16, 2017, the Company reached an agreement to settle the asserted actions. The proposed aggregate amount of the settlement is $13.0 million, of which $1.0 million would be contributed by the Company to cover its indemnification obligations to the underwriters, and the remainder would be contributed by the Company’s insurers. The settlement is subject to definitive documentation, shareholder notice and court approval. The Company and the defendants have denied and continue to deny each and all of the claims alleged in the actions, and the settlement does not assign or reflect any admission of fault, wrongdoing or liability as to any defendant. If final court approval is not obtained with respect to the settlement or the settlement otherwise does not become effective and litigation resumes, adverse outcomes in the actions could result in substantial damages. The Company recorded $1.0 million as general and administrative expense during the three months ended March 31, 2017, when the amount and time of settlement became estimable and probable.

~~11. Stock Plans~~

~~The Company’s 2014~~7. Equity Incentive ~~Award Plan (“2014 Plan”) permits the issuance of stock options (“options”), restricted stock units (RSUs) and other types of awards to employees, directors, and consultants.~~

~~As of September 30, 2017, a total of 14,834,856 shares of common stock were authorized for issuance and 1,631,908 shares were available for future grants under the 2014 Plan.~~

~~In July 2014, the Company’s board of directors and its stockholders approved the establishment of the 2014 Employee~~ Awards

Stock Purchase Plan (“2014 ESPP”). During the nine months ended September 30, 2017 and 2016, 35,954 shares and 52,002 shares, respectively, were issued under the 2014 ESPP. A total of 1,000,783 shares of common stock were reserved for issuance under the 2014 ESPP and were available for issuance under the 2014 ESPP as of September 30, 2017.

~~The following table summarizes option activity under the Company’s stock plans and related information:~~

Options

Weighted-

Number

Weighted-

Average Remaining

Aggregate

of Options

Average Exercise

Contractual Life

Intrinsic Value ^(a)

(in thousands)

Price

(In years)

(in thousands)

Balance at December 31, 2016

7,449

$
4.46

Options granted

1,897

2.80

Options exercised

(1,491
)

0.21

Options cancelled

(485
)

10.08

Balance at September 30, 2017

7,370

$
4.52

7.8

$
11,518

Vested and expected to vest as of September 30, 2017

7,370

$
4.52

7.8

$
11,518

Exercisable as of September 30, 2017

3,459

$
4.91

6.8

$
7,227

^(a)	~~The aggregate intrinsic value is calculated as the difference between the option exercise price and the closing price of common stock of $3.65 per share as of September 30, 2017.~~

The options granted during 2016, included stock options for 3,673,940 shares of the Company’s common stock granted in exchange for Annapurna stock options at $0.21 exercise price per share. A total of 1,428,000 shares of stock options granted outside of the 2014 Plan in June 2016 and December 2015 were not included in the table above.

The weighted-average fair values of options granted during the nine months ended September 30, 2017 and 2016 were $1.95 and $1.27, respectively. The total intrinsic value of options exercised during the nine months ended September 30, 2017 and 2016 were $3.7 million and $7.1 million, respectively.

The Company has recorded aggregate stock-based compensation expense related to the issuance of stock awards to employees and nonemployees in the condensed consolidated statement of operations and comprehensive loss as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Research and development
$
1,698

$
1,608

$
4,335

$
5,748

General and administrative

1,002

1,334

2,504

4,104

Total share-based compensation
$
2,700

$
2,942

$
6,839

$
9,852

During the three and nine months ended September 30, 2016, respectively, stock-based compensation expense included additional charges related to stock modifications in connection with the separation agreements for certain of the Company’s executive officers. For the three months ended September 30, 2016, an additional charge of $0.5 million was recorded within general and administrative expense. For the nine months ended September 30, 2016, an additional charge of $1.4 million was recorded within research and development expense and $1.5 million was recorded within general and administrative expense.

As of September 30, 2017, unrecognized compensation cost related to unvested employee options was $10.5 million, which is expected to be recognized over a weighted-average remaining period of 2.4 years.

~~Restricted Stock Units~~

RSUs are share awards that entitle the holder to receive freely tradable shares of the Company’s common stock upon vesting. The fair value of RSUs is based upon the closing sales price of the Company’s common stock on the grant date. RSUs granted to employees generally vest over a two to four year period.

The following table summarizes the ~~RSU~~Company’s option activity ~~under~~and related information:
Number of
Options
(in thousands) Weighted-
Average
Exercise Price
Balance at December 31, 2022 19,320 $ 5.79
Options granted 6,056 1.05
Options exercised (1) 1.29
Options forfeited (1,314) 3.05
Balance at September 30, 2023 24,061 $ 4.74
Exercisable as of September 30, 2023 9,724 $ 8.54

Restricted Stock Units (“RSUs”)

The following table summarizes the Company’s ~~stock plans~~RSUs activity and related information:


	Number of Units (in thousands)	Weighted- Average Grant- Date Fair Value
Outstanding at December 31, 2022	1,693	$	2.90
Granted	539	0.77
Vested and released	(491)	3.14
Forfeited	(128)	1.94
Outstanding at September 30, 2023	1,613	$	2.20

Weighted-Average

Weighted-Average

Number of

Grant-Date

Remaining

Units
(in thousands)

Fair Value
(in dollars)

Contractual Term
(in years)

Outstanding at December 31, 2016

1,049

$
5.47

1.7

Granted

2,246

2.72

Vested and released

(290
)

6.64

Forfeited

(537
)

3.90

Outstanding at September 30, 2017

2,468

$
3.17

1.8

Stock-Based Compensation Expense

The total fair value of RSUs that vested during the nine months ended September 30, 2017 and 2016 was $1.9 million and $4.0 million, respectively. As of September 30, 2017, unrecognized compensation cost related to unvested RSUs was $6.5 million, which is expected to be recognized over a weighted-average remaining period of 3.1 years.

~~Stock Options Granted to Employees~~

~~The fair value of each option issued to employees was estimated at the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Option grants:

Expected volatility

84
%

81
%

81
%

81
%
Expected term (in years)

5.8

6.0

6.0

5.9

Expected dividend yield

—

—

—

—

Risk-free interest rate

1.8
%

1.4
%

1.9
%

1.3
%

~~Stock Options Granted to Non-Employees~~

Stock-based compensation related to options granted to non-employees is measured and recognized as the options are earned. The Company believes that the estimated fair value of the options is more readily measurable than the fair value of the services rendered. The following ~~weighted-average assumptions were used in estimating non-employees’~~table presents, by operating expense, the Company’s stock-based compensation ~~expenses:~~

expense:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(In thousands)
Research and development	$	1,164	$	1,432	$	3,925	$	5,195
General and administrative	3,225		3,071		9,496		9,631
Total stock-based compensation expense	$	4,389	$	4,503	$	13,421	$	14,826

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Option grants:

Expected volatility

87
%

84
%

84
%

83
%
Expected term (in years)

8.8

8.0

8.9

7.5

Expected dividend yield

—

—

—

—

Risk-free interest rate

2.2
%

1.6
%

2.2
%

1.6
%

Table of September 30, 2017, unrecognized stock-based compensation expense related to non-employees’ options was $0.7 million, which was expected to be recognized over a weighted-average remaining period of 1.8 years.

~~12. 401(k) Savings Plan~~

The Company established a defined-contribution savings plan under Section 401(k) of the Code (the 401(k) Plan). The 401(k) Plan covers all employees who meet defined minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pretax basis. For the nine months ended September 30, 2017 and 2016, the Company contributed $0.3 million and $0.2 million, respectively, to the 401(k) Plan.

~~13.~~Contents

8. Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding for the ~~period. Diluted net loss per share is~~period using the ~~same as basic net loss per share for all periods presented, since~~treasury stock method. Outstanding stock options, RSUs, rights under the ~~effects of potentially dilutive securities~~employee stock purchase plan (“ESPP”) and warrants are ~~antidilutive.~~

~~We have excluded warrants and equity awards~~considered to ~~purchase approximately 10.0 million and 8.7 million shares of the Company’s~~be common stock ~~that were outstanding as of September 30, 2017~~equivalents and ~~2016, respectively,~~are only included in the ~~computation~~calculation of diluted net loss per share ~~attributable to common stockholders because~~when their effect ~~was antidilutive.~~

~~14. Subsequent Event~~

~~On October 6, 2017, our Board~~is dilutive.

The following common stock equivalents outstanding at the end of ~~Directors adopted~~ the ~~Adverum Biotechnologies, Inc. 2017 Inducement Plan (the “Inducement Plan”) pursuant to which we reserved 600,000 shares~~periods presented were excluded from the calculation of diluted net loss per share for ~~issuance pursuant to stock options~~the periods indicated because including them would have had an anti-dilutive effect:


	September 30, 2023	September 30, 2022
	(In thousands)
Stock options	24,062	19,221
Restricted stock units	1,613	1,724
ESPP	394	760

	26,069	21,705

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Item 2. Management’s Discussion and ~~restricted stock units under the Inducement Plan. The only persons eligible to receive grants~~Analysis of ~~stock options~~Financial Condition and restricted stock units under Inducement Plan are individuals who satisfy the standards for inducement grants under Nasdaq Marketplace Rule 5635(c)(4) and the related guidance under Nasdaq IM 5635-1 – that is, generally, a person not previously an employee or directorResults of ~~Adverum, or following a bona fide period of non-employment, as an inducement material to the individual's entering into employment with Adverum.~~

Operations

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operation~~

The interim financial statements included in this Quarterly Report on Form 10-Q and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto for the year ended December 31, ~~2016,~~2022, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K, as filed with the U.S. Securities and Exchange Commission (SEC) on March ~~9, 2017.~~30, 2023. In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ~~(Securities Act)~~(“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended ~~(Exchange Act)~~(“Exchange Act”). In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These forward-looking and other statements are subject to risks and uncertainties, including those ~~risks described~~discussed in ~~“Part I -~~the section titled “Risk Factors,” set forth in Part II – Other Information, Item ~~1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016, and in our Quarterly Report on Form 10-Q for the period ended March 31, 2017,~~1A below and elsewhere in this report that could cause actual results to differ materially from historical results or anticipated results.

Overview

Adverum is a clinical-stage company that aims to establish gene therapy ~~company targeting unmet medical needs in serious rare and~~as a new standard of care for highly prevalent ocular diseases. We ~~are leveraging our next-generation adeno-associated virus (“AAV”)-based directed evolution platform to generate~~discover and develop gene therapy product candidates ~~designed~~intended to provide durable efficacy by inducing sustained expression of a therapeutic protein. Our core capabilities include ~~clinical development,~~ novel vector ~~development,~~evaluation, cassette engineering, and ocular IND-enabling nonclinical and clinical development. In addition, we have in-house manufacturing expertise, specifically in scalable process development, assay development, and current Good Manufacturing Practices (“GMP”) quality control.

Ixo-vec (ADVM-022)

Our ~~leadership team has significant drug development and~~lead product candidate, ixoberogene soroparvovec (“Ixo-vec”), formerly referred to as ADVM-022, is a single, in-office intravitreal (“IVT”) injection gene therapy ~~expertise.~~

~~We are advancing our robust pipeline of gene therapy candidates~~product designed to ~~treat rare diseases alpha-1 antitrypsin~~deliver long-term durable therapeutic levels of aflibercept associated with a robust, sustained treatment response, reducing the treatment burden and fluctuations in macular fluid associated with bolus anti-vascular endothelial growth factor (“~~A1AT”~~VEGF”) ~~deficiency~~IVT injections. Ixo-vec utilizes an engineered, proprietary vector capsid, AAV.7m8, carrying an aflibercept coding sequence under the control of a proprietary expression cassette capable of transducing retinal cells after a single in-office IVT injection. This “biofactory” approach is designed to enable the transduced cells to continuously express aflibercept, reducing or eliminating the need for ongoing anti-VEGF IVT injections. This product candidate is intended to improve both real-world vision and ~~hereditary angioedema (“HAE”) as well as in~~quality of life outcomes for patients. Ixo-vec is currently being developed for the treatment of patients with wet age-related macular degeneration (“~~wAMD”~~wet AMD”).

~~For~~ who are responsive to anti-VEGF therapy.

Wet AMD is a leading cause of blindness in patients over 65 years of age, with a prevalence of approximately 20 million individuals worldwide living with wet AMD. Age-related macular degeneration (“AMD”) is expected to impact 288 million people worldwide by 2040, with wet AMD accounting for approximately ten percent of those cases. Up to 42% of wet AMD patients experience neovascularization in the second eye in the first two to three years following diagnosis in the primary eye. In recognition of the need for new treatment of A1AT deficiency, we are advancing our gene therapy candidate ADVM-043 (AAVrh10-A1AT) into clinical development. This therapy has the potential to induce stable, long-term A1AT expression at therapeutic levels following a single-administration treatment, as seen in preclinical proof-of-concept studies. ADVM-043 has an open Investigational New Drug (“IND”) application withoptions for wet AMD, the U.S. Food and Drug Administration (“FDA”)~~. We plan to begin patient enrollment in a Phase 1/2 trial (the ADVANCE trial) in~~ and European Medicines Agency (“EMA”) granted Fast Track designation and Priority Medicines (“PRIME”) designation, respectively, for Ixo-vec for the ~~fourth quarter~~treatment of ~~2017. Site activation is underway at five leading centers in~~wet AMD. Additionally, the United ~~States~~Kingdom’s Medicines and Healthcare products Regulatory Agency (“MHRA”) had granted Ixo-vec an Innovation Passport under the Innovative Licensing and Access Pathway (“ILAP”).

In November 2018, we initiated the OPTIC trial, designed as a multi-center, open-label, dose-ranging, safety and efficacy trial of Ixo-vec in subjects with wet AMD who have demonstrated responsiveness to anti-VEGF treatment. Subjects in OPTIC are treatment experienced, and previously required frequent anti-VEGF injections to manage their wet AMD and to maintain functional vision. The OPTIC trial was fully enrolled in July 2020 and completed in 2022. We will continue to ~~prepare~~present updated efficacy, aflibercept protein levels and safety data as we follow our subjects for ~~release~~an additional three years for a total of ~~ADVM-043 drug product~~five years. To date, we have seen strong signals of therapeutic efficacy in OPTIC in both the 6 x 10^11 vg/eye (“6E11”) and 2 x 10^11 vg/eye (“2E11”) doses, including continuous stable aflibercept protein levels from 10 weeks toup to 4.5 years, maintenance to improvement in best-corrected visual acuity and central subfield thickness (“CST”), a measure of fluid in and beneath the ~~sites to support first patient dosing. In addition, we are working closely~~retina, as well as a reduction in CST fluctuations through three years. Ixo-vec has been generally well tolerated, with the ~~Alpha-1 Foundation~~most common adverse events beingdose-dependent adeno-associated virus (“AAV”) associated ocular inflammation that has been responsive to identify potential patients for this trial. This multi-center, open-label, dose-escalation clinical trial plans to evaluate ADVM-043 in three cohorts of patients receiving intravenous administration and one cohort receiving intrapleural administration. The trial is designed to assess the safety and protein expression of ADVM-043, and further details about the study can be found at ClinicalTrials.gov under trial identifier number NCT02168686. We expect to report preliminary data from this trial in the second half of 2018.

~~We are also advancing ADVM-053 (AAVrh10-C1EI) to treat the rare disease HAE. In~~topical corticosteroid therapy.

Nonclinical studies have indicated that a ~~prior preclinical study, a single intravenous administration of ADVM-053 increased C1 esterase inhibitor~~6 x 10^10 vg/eye (“~~C1EI”~~6E10”) ~~protein expression above therapeutic levels and decreased vascular permeability. We held a pre-IND meeting with the FDA in the first quarter of 2017 and plan to file an IND in the second half of 2018.~~

For the ocular disease wAMD, we are advancing a new anti-VEGF gene therapy candidate, ADVM-022 (AAV.7m8-aflibercept) and plan to file an IND application with the FDA in the second half of 2018. ADMV-022 utilizes a proprietary vector capsid (AAV.7m8) and a proprietary expression cassette and is administered intravitreally. Preclinical data demonstrate that ADVM-022dose has the potential to achieve therapeutic levels of aflibercept. In April 2022, we announced we received feedback from the FDA via a Type C meeting written response related to

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our planned Phase 2 trial of Ixo-vec in wet AMD. We requested the FDA’s feedback to ensure alignment with the regulatory agency ahead of filing the Investigational New Drug (“IND”) amendment for our Phase 2 LUNA (“LUNA”) trial, which was submitted on May 26, 2022.

In September 2022, we dosed the first subject in our LUNA trial of Ixo-vec. The LUNA trial is a multicenter, double-masked, randomized, parallel-group Phase 2 trial evaluating two doses of Ixo-vec - 2E11 and a new, lower 6E10 dose - in up to 72 subjects with wet AMD. The LUNA trial will evaluate the efficacy and safety of the Ixo-vec doses, while optimizing the prophylactic corticosteroid regimens. The LUNA trial will assess four enhanced prophylactic corticosteroid regimens, including local corticosteroids and combinations of local and systemic corticosteroids. The corticosteroid regimens in the LUNA trial were designed to cover the period of peak immunogenicity observed in non-clinical studies and in the Phase 1 OPTIC study.

The LUNA trial was fully enrolled in August 2023 and in September 2023, we announced initial aflibercept protein expression data at 14 weeks for a percentage of cohort at both the 2E11 and 6E10 doses, suggesting that both doses deliver aflibercept levels that are within the therapeutic range.

The LUNA trial enrolled 60 subjects randomized equally between the two Ixo-vec doses. The LUNA trial primary endpoints are similar to the OPTIC trial and will focus on mean change in best-corrected visual acuity and CST from baseline to one year, and incidence and severity of adverse events. Other endpoints include aflibercept protein levels at 14 weeks, an interim efficacy and safety analysis at 26 weeks and reduction in CST fluctuations and in treatment burden. The study will also evaluate the effectiveness and tolerability of the prophylactic corticosteroid regimens. We will maintain the optionality to enroll an additional cohort of approximately 12 additional subjects that may provide further data to inform our global development plan.

In September 2018, we announced that the FDA had granted Ixo-vec Fast Track designation. Fast Track is a process designed to facilitate the development and expedite the review of drugs and biologics to treat serious conditions and fill unmet medical needs. The designation enables more frequent meetings and communication with the FDA throughout a product candidate’s development and review process, often leading to earlier drug approval and access by patients. The designation also provides eligibility for Priority Review, Accelerated Approval, and Rolling Review, which may potentially result in a shorter FDA review process. The purpose of the Fast Track process is to get important new drugs and biologics to patients earlier.

In June 2022, we announced that the EMA had granted Ixo-vec PRIME designation. PRIME is a program launched by the EMA to enhance support for research on and development of medicines that have demonstrated preliminary safety and efficacy and thus the potential to target a significant unmet medical need and bring a major therapeutic advantage to patients. This regulatory program offers developers of promising medicines enhanced interaction and early dialogue and is designed to optimize development plans and speed evaluation ensuring these medicines reach patients as early as possible. In November 2022, a PRIME kickoff meeting was held to initiate interaction with the EMA experts and to familiarize EMA with the product, development program, and planned regulatory strategy.

In April 2023, we announced that the MHRA had granted Ixo-vec an Innovation Passport under the ILAP. The Innovation Passport is the first step in the ILAP process, triggering the MHRA and its partner agencies, including the All Wales Therapeutics and Toxicology Centre, the National Institute for Health and Care Excellence, and the Scottish Medicines Consortium to partner with Adverum to charter a roadmap for regulatory and development milestones with the goal of early patient access in the United Kingdom (“UK”).

Immunogenicity to AAV therapy has been broadly reported to be associated both with systemic and ocular gene therapies, regardless of route of administration, and is generally understood to be dose-related. Based on an extensive evaluation of data from all of our subjects treated with Ixo-vec and all of our nonclinical data by internal and external experts, we believe that utilizing the 2E11 and 6E10 doses, along with the new enhanced prophylactic corticosteroid regimens, which include local corticosteroids and combinations of local and systemic corticosteroids, will allow us to minimize post-prophylaxis inflammation in our trial subjects going forward.

As we advance Ixo-vec for wet AMD, we are continuing to develop our manufacturing expertise for ongoing supply. We maintain control of key aspects of the ~~treatment burden~~manufacturing process, specifically in scalable process development, assay development, and GMP quality controls.

ADVM-062

Our second product candidate, ADVM-062 (AAV.7m8-L-opsin), is a novel gene therapy product candidate being developed to deliver a functional copy of ~~frequent injections. At scientific meetings~~the OPN1LW gene to the foveal cones of patients suffering from blue cone monochromacy (“BCM”) via a single IVT injection. ADVM-062 utilizes Adverum’s propriety vector capsid, AAV.7m8. In January 2022, we announced that the FDA granted Orphan Drug Designation to ADVM-062.

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BCM affects approximately 1 in ~~2016,~~100,000 males, worldwide. This X-linked recessive hereditary condition is caused by the absence of function in the L and the M opsin gene(s) and can manifest in loss of visual acuity, photosensitivity, myopia and infantile nystagmus that can persist into adulthood. Consequently, individuals with BCM have visual impairments to important aspects of daily living such as facial recognition, learning, reading, and daylight vision. Currently, there is no cure for BCM and to our knowledge, no other therapies to treat BCM are in development. In September 2023, we granted an exclusive license for the rights to ADVM-062 to a non-profit organization that will now lead all research and development activities for the program.

Dry AMD / Geographic Atrophy Program

In May 2023, we presented preclinical proof-of-concept data of ADVM-022’s anti-angiogenic effect in the laser-induced choroidal neovascularization (“CNV”) model in non-human primates, the industry standard for testing new wAMD therapies. The data from a single injection of ADVM-022 showed efficacy that was comparable to the anti-VEGF standard of care, the positive control in the CNV model. At scientific meetings in September 2017, additional long-term data from Adverum were presented, which continued to demonstrate sustained expression of anti-VEGF protein following a single intravitreal injection of ADVM-022. Pharmacokineticnonclinical data on one non-human primate demonstrated sustained expression for 52 weeks. In a separate ongoing study, sustained expression for at least seven months has been observed in several non-human primates. In this ongoing preclinical study, we continue to assess the durability of protein expression in non-human primates and expect to report 12-month efficacy data in the first half of 2018.

~~Our earlier-stage research programs include~~an IVT gene ~~therapies targeting cardiomyopathy associated with Friedreich’s ataxia and severe allergy.~~

Our partnered programs include vectors we are developing under collaboration agreements. Under an agreement with Editas Medicine, we are leveraging our AAV-vectors for use with Editas’ leading CRISPR-based genome editing technologies to treat up to

~~five inherited retinal diseases. Our agreement with Regeneron provides for development of up to eight distinct ocular therapeutic targets, four of which are already identified, including AVA-311~~therapy for the treatment of ~~juvenile X-Linked Retinoschisis (XLRS).~~

geographic atrophy (“GA”) secondary to dry age-related macular degeneration (“dry AMD”) via expression of Complement Factor I at the American Society of Gene & Cell Therapy’s (“ASGCT”) 2023 Annual Meeting. Dry AMD is a highly prevalent disease in which patients experience a chronic progressive deterioration of the macula, leading to central blind spots and permanent vision loss. Geographic atrophy can be seen as part of late-stage AMD.

Optogenetics Program

In May 2023, we presented data on an optogenetic approach to vision restoration at ASGCT’s 2023 Annual Meeting. Melanopsin through its ability to regenerate chromophore has the potential to be an effective light sensor candidate by generating pseudo-photoreceptors. Our engineered melanopsin demonstrated favorable kinetics in vitro, and may have utility as a therapeutic transgene for optogenetic vision restoration.

Impact of COVID-19

Our results of operations and financial condition for the nine months ended September 30, 2023 were not significantly impacted by the continued existence of COVID-19. To date, we believe we have experienced limited impact due to COVID-19 on our completed and ongoing clinical programs, including the OPTIC and LUNA clinical trials; however, the ultimate impact of the continued existence of COVID-19 on our ongoing and planned clinical trials is uncertain and subject to change. Please refer to the Part II, Item 1A. “Risk Factors” for further discussion of the risks we face as a result of COVID-19.

Financial Overview

Summary

We have not generated positive cash flow or net income from operations since our inception and, as of September 30, ~~2017,~~2023, we had an accumulated deficit of ~~$239.3 million, primarily as a result of research and development, general and administrative expenses, impairment of goodwill and intangible assets, and restructuring charges.~~$896.1 million. We expect to incur substantial expenses and ~~increasing~~continuing losses from operations in the foreseeable future as we ~~continue~~conduct our research and development efforts, advance our product candidates through ~~preclinical~~nonclinical and clinical development, manufacture clinical study materials, seek regulatory approval, and prepare for and, if approved, proceed to commercialization. We are at an early stage of development and may never be successful in developing or commercializing our product candidates.

While we may in the future generate revenue from a variety of sources, including license fees, milestone and research and development payments in connection with strategic partnerships, and potentially revenue from ~~approved~~ product sales if any of our product candidates are approved, to date we have not ~~yet~~ generated any revenue from ~~approved therapeutic~~ product ~~candidates.~~

sales.

We entered into our first research, collaboration and license revenue-generating agreement with Regeneron in May 2014. We entered into the collaboration, option and license agreement with Editas in August 2016 that also is a revenue agreement as discussed in Note 6, ~~Significant Agreements, of the notes to condensed consolidated financial statements included in this Form 10-Q. We~~currently have no operational clinical or commercial manufacturing facilities, and all of our clinical manufacturing activities are currently contracted out to third parties. Additionally, we ~~plan to~~ use third-party ~~clinical~~contract research organizations ~~(CROs)~~(“CROs”) to carry out our clinical development and we do not ~~yet~~ have a sales organization.

~~We expect to incur substantial and increasing expenditures in the foreseeable future for the development and potential commercialization of our product candidates.~~

We will need substantial additional funding in the future to support our operating activities as we advance our product candidates through ~~preclinical~~nonclinical and clinical development, seek regulatory approval and prepare for and, if approved, proceed to commercialization. Adequate funding may not be available to us on acceptable terms, or at all. If we are unable to raise capital, or to do so on acceptable terms, when needed, or to form additional collaboration partnerships to support our efforts, we could be forced to delay, reduce or eliminate our research and development programs or potential commercialization efforts.

As of September 30, ~~2017,~~2023, we had ~~$186.6~~$117.1 million in cash, cash equivalents and short-term investments. We believe that our cash, cash equivalents and short-term investments are sufficient to fund operations into 2025. However, we ~~have~~may need to raise additional funds sooner as a result of a number of risks and uncertainties, including those set forth in Part II, Item 1A. Risk Factors – “We expect that our cash, cash equivalents, and short-term investments will be sufficient ~~funds~~ to ~~continue~~fund our ~~operations through the end~~lead gene therapy programs into 2025. If this expectation proves to be wrong, we may be forced to delay, limit or terminate certain of ~~2019.~~

our development efforts before then.”

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Revenue

To date we have not generated any revenue from the sale of our products. ~~In May 2014, we entered into a~~We have generated revenue through research, collaboration and license ~~agreement~~arrangements with Regeneron. Under the terms of the agreement, we received initial payments of $8.0 million that included payment for research license fees, prepaid collaboration research costs and the right of first negotiation for a potential license to develop and commercialize AVA-101, a prior wAMD gene therapy that is no longer in development. As the agreement provides for multiple deliverables, we account for this agreement as a multiple elements revenue arrangement. If deliverables do not appear to have a standalone fair value, they were combined with other deliverables into a unit of accounting with standalone fair value. We allocated the $8.0 million received to the fair values of the two units of accounting identified in the arrangement. We expect to recognize $6.5 million for research licenses and related research and development services ratably over the associated period of performance, which is the maximum research period of eight years. As there is no discernible pattern of performance and/or objectively measurable performance measures do not exist, we will recognize revenue on a straight-line basis over the eight-year performance period. The remaining $1.5 million allocated to the second unit of accounting for the time-limited right of first negotiation for AVA-101 was deferred. On November 2, 2015, Regeneron notified the management that it was not exercising this right of first negotiation and we recognized the entire $1.5 million as revenue in 2015. On February 23, 2017, Regeneron notified us that pursuant to the terms of the research, collaboration and license agreement, it is extending the research term of the license and development agreement for an additional three years, through May 1, 2020.

The portion of the upfront payment that was applied to the original research budget was fully used in the fourth quarter of 2015, and Adverum and Regeneron, through a joint review committee, are to agree annually on an updated research and development services budget through the research period. We invoice Regeneron quarterly for services, if any, performed in the prior quarter. These

additional research fees are added to the research licenses and related research and development services unit of accounting, recorded as deferred revenue and recognized to revenue over the remaining maximum research term.

Under our research, collaboration and license agreement with Regeneron, we are required to have a mutually agreed-on research plan with Regeneron in order to invoice Regeneron for services performed. We do not currently have a research plan in place, and, consequently, we are not currently receiving any reimbursements from Regeneron.

In August 2016, we entered into a collaboration, option and license agreement with Editas. Under the terms of the agreement, we received initial payments of $1.0 million that included $0.5 million for research services. As the agreement provides for multiple deliverables, we accounted for this agreement as a multiple elements revenue arrangement. At the inception of the agreement, identified deliverables include research services, manufacturing of viral vectors for research, participation in the joint research committee and exclusivity during the option period. These deliverables did not appear to have a standalone value and were combined into one unit of accounting. Options for each indication to license our AAV vector are considered substantive options and do not include significant incremental discounts. Therefore, they are not considered as deliverables under the agreement. We allocated the $1.0 million received to a single unit of accounting identified in the arrangement. We recognize $1.0 million ratably over the associated period of performance, which is the maximum research period of three years. As there is no discernible pattern of performance and/or objectively measurable performance measures do not exist, we recognize revenue on a straight-line basis.

As of September 30, 2017, we had total deferred revenue of $7.6 million. We recognized $0.5 million and $0.4 million of revenue during the three months ended September 30, 2017 and 2016, respectively, and $1.4 million and $1.0 million of revenue during the nine months ended September 30, 2017 and 2016, respectively.

strategic partners. Our ability to generate product revenue and become profitable depends upon our ability to successfully develop and commercialize our product candidates. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the amount or timing of product revenue. Even if we are able to generate revenue from the sale of our products, our sales may not be sufficient to generate cash from operations, in which case we may be unable to continue our operations at planned levels and be forced to reduce our operations.

Research and Development Expenses

Conducting a significant amount of research and development is central to our business model. Research and development expenses primarily include ~~certain payroll and personnel expenses,~~personnel-related costs, stock-based compensation ~~expense,~~expenses, laboratory supplies, consulting costs, external contract research and development expenses, including expenses incurred under agreements with CROs, the cost of acquiring, developing and manufacturing clinical study materials, and overhead expenses, ~~including~~such as rent, equipment depreciation, insurance and utilities.

~~Research~~

We expense research and development costs ~~are expensed~~ as incurred. ~~Advance~~We defer and expense advance payments for goods or services for future research and development activities ~~are deferred and expensed~~ as the goods are delivered or the related services are performed.

We estimate ~~preclinical~~nonclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and CROs that conduct and manage ~~preclinical~~nonclinical studies and clinical trials on our behalf. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. We estimate the amounts incurred through communications with third party service providers and our estimates of accrued expenses as of each balance sheet date are based on information available at the time. If the actual timing of the performance of services or the level of effort varies from the estimate, we will need to adjust the accrual accordingly.

At this time, we cannot reasonably estimate the nature, timing or aggregate costs of the efforts that will be necessary to complete the development of any of our product candidates. The successful development and commercialization of a product candidate is highly uncertain, and clinical development timelines, the probability of success, and development and commercialization costs can differ materially from expectations.

We have received refundable tax credits from the Australian and French tax authorities in connection with certain research costs incurred by our subsidiary conducting research in Australia and France. These refunds do not depend on our taxable income or tax position and therefore we do not account for them under an income tax accounting model. We recognize such refunds as government grants in the period when qualified expenses are incurred as a reduction of research expenses. We have recorded the reimbursement from the Australian and French tax authorities as a reduction of research and development expense in the consolidated statements of operations and comprehensive loss for the applicable period. During the nine months ended September 30, 2017 and 2016, tax credits received were immaterial.

General and Administrative Expenses

Net cash provided by investing activities for the nine months ended September 30, ~~2016 was $39.7 million, primarily a result~~2022 consisted of ~~$37.7 million from the maturities of marketable securities and $3.5~~$151.1 million of ~~cash acquired in a business combination,~~net maturities from our marketable securities, partially offset by ~~$1.5~~$11.6 million of purchases of property and ~~equipment.~~

~~Purchases of property and~~ equipment primarily ~~consisted of the acquisition of~~related to laboratory equipment ~~to support our research~~ and ~~development activities.~~

~~There have not been any material changes to our exposure to market risk during the nine months ended September 30, 2017. For additional information regarding market risk, refer to the~~ ~~Qualitative and Quantitative Disclosures About Market Risk~~ ~~section of our Annual Report on Form 10-K.~~

Evaluation of disclosure controls and procedures. Management, including our ~~Principal~~Chief Executive Officer and ~~Principal~~Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of September 30, ~~2017.~~2023. The evaluation of our disclosure controls and procedures included a review of our processes and implementation and the effect on the information generated for use in this Quarterly Report on Form 10-Q. ~~In the course of~~We conduct this evaluation, we sought to identify any material weaknesses in our disclosure controls and procedures to determine whether we had identified any acts of fraud involving personnel who have a significant role in our disclosure controls and procedures, and to confirm that necessary corrective action, including process improvements, was taken. This type of evaluation ~~is done~~ quarterly so that our conclusions concerning the effectiveness of these controls can be reported in our periodic reports filed with the SEC. The overall goals of these evaluation activities are to monitor our disclosure controls and procedures and to make modifications as necessary. We intend to maintain these disclosure controls and procedures, modifying them as circumstances warrant.

~~In July 2015, three~~We have been subject to securities class action lawsuits ~~were filed against us~~in the past and could be subject to additional such lawsuits in the future, which could result in substantial losses and may divert management’s time and attention from our business.

				Incorporated by Reference
EXHIBIT NUMBER	EXHIBIT DESCRIPTION	Form	File Number		Date	EXHIBIT Number	PROVIDED Herewith

2.1	Acquisition Agreement, dated as of January 29, 2016, by and among Avalanche Biotechnologies, Inc., Annapurna Therapeutics SAS, the Contributors identified therein, and Shareholder Representative Services LLC as the Contributors’ Representative	8-K	001-36579		February 1, 2016	2.1

2.2	Amendment No. 1 to the Acquisition Agreement, dated as of April 6, 2016	8-K	001-36579		April 7, 2016	2.1

3.1	Amended and Restated Certificate of Incorporation	10-K	001-36579		March 9, 2017	3.1

3.2	Amended and Restated Bylaws	8-K	001-36579		May 12 2016	3.2

4.1	Reference is made to Exhibits 3.1 through 3.2.

4.2	Form of Common Stock Certificate	S-1/A	333-197133		July 25, 2014	4.1

10.1	Separation Agreement, dated September 1, 2017, between Samuel B. Barone, M.D., and Adverum Biotechnologies, Inc.	8-K	001-36579		September 1, 2017	10.1

10.2	2017 Inducement Plan	S-8	333-220894		October 11, 2017	99.1

~~Date: November 8, 2017~~
	ADVERUM BIOTECHNOLOGIES, INC.

Date: November 9, 2023	By:	~~By:~~	~~/s/ Amber Salzman~~ /s/ Laurent Fischer
			~~Amber Salzman~~ Laurent Fischer, M.D.
			President and Chief Executive Officer (~~Duly Authorized Officer~~) Principal Executive Officer)

	~~By:~~		~~/s/ Leone Patterson~~
Date: November 9, 2023		By:			~~Leone Patterson~~ /s/ Linda Rubinstein
				Linda Rubinstein
				Chief Financial Officer (Principal Financial Officer and Principal Accounting ~~Officer~~) Officer)

	September 30,			December 31,
	2017			2016
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	31,713		$	222,170
Short-term investments		154,929			—
Receivable from collaborative partner		—			886
Prepaid expenses and other current assets		2,881			2,218
Total current assets		189,523			225,274
Property and equipment, net		3,347			4,169
Deposit and other non-current assets		340			140
Intangible assets		5,000			5,000
Total assets	$	198,210		$	234,583
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,580		$	1,474
Restructuring liabilities		—			25
Accrued expenses and other current liabilities		6,062			6,451
Deferred rent, current portion		121			96
Deferred revenue, current portion		1,850			1,850
Total current liabilities		9,613			9,896
Long-term liabilities:
Deferred rent, net of current portion		257			352
Deferred revenue, net of current portion		5,711			7,099
Deferred tax liability		1,250			1,250
Other non-current liabilities		387			386
Total liabilities		17,218			18,983
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.0001 par value, 300,000,000 shares authorized at September 30, 2017 and December 31, 2016; 43,517,412 and 41,805,009 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		5			4
Additional paid-in capital		420,811			413,518
Accumulated other comprehensive loss		(551	)		(7	)
Accumulated deficit		(239,273	)		(197,915	)
Total stockholders’ equity		180,992			215,600
Total liabilities and stockholders’ equity	$	198,210		$	234,583

Fair value of common shares issued	$	58,321
Fair value of the Company's common share options exchanged for Annapurna stock options and other awards attributable to pre-combination services		7,422
Less: value of common stock and options accelerated vesting at the closing date		(898	)
Total purchase price consideration	$	64,845

Cash	$	3,449
Prepaid expenses and other assets		865
Property and equipment		185
Acquired intangible assets		16,200
Goodwill		49,514
Accounts payable		(1,118	)
Accrued liabilities		(1,848	)
Other noncurrent liabilities		(377	)
Deferred tax liabilities		(2,025	)
Total purchase price allocation	$	64,845

IPR&D - Alpha-1 antitrypsin deficiency	$	11,700
IPR&D - Hereditary angioedema		4,500
Total acquired intangible assets	$	16,200

	Nine Months Ended September 30,
	2016
Pro forma information
Collaboration revenue	$	967
Net loss	$	(95,167	)
Basic and diluted loss per share	$	(2.31	)
Weighted-average common shares outstanding - basic and diluted		41,118

	September 30, 2017
	Amortized Cost Basis			Unrealized Losses			Unrealized Gains		Estimated Fair Value
Money market funds	$	1,763		$	—		$	—	$	1,763
Certificates of deposit		9,978			—			—		9,978
Commercial paper		32,295			—			—		32,295
U.S. government agency		72,756			(70	)		1		72,687
Corporate bonds		63,105			(33	)		—		63,072
Total cash equivalents and short-term investments		179,897			(103	)		1		179,795
Less: cash equivalents		(24,866	)		—			—		(24,866	)
Total short-term investments	$	155,031		$	(103	)	$	1	$	154,929

	September 30, 2017
	Amortized Cost Basis		Estimated Fair Value
Mature within one year	$	151,769	$	151,725
Mature after one year to three years		28,128		28,070
Total cash equivalents and short-term investments	$	179,897	$	179,795

			Quoted Prices		Significant Other		Significant
	Total		In Active Markets		Observable Inputs		Unobservable Inputs
	Carrying Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2017
Assets:
Money market funds	$	1,763	$	1,763	$	—	$	—
Certificates of deposit		9,978		—		9,978		—
Commercial paper		32,295		—		32,295		—
U.S. government agency		72,687		—		72,687		—
Corporate bonds		63,072		—		63,072		—
Total cash equivalents and short term investments	$	179,795	$	1,763	$	178,032	$	—

Other noncurrent liability:
Financing arrangement	$	74	$	—	$	—	$	74

December 31, 2016
Assets:
Money market funds	$	215,916	$	215,916	$	—	$	—
Total cash equivalents	$	215,916	$	215,916	$	—	$	—

Other noncurrent liability:
Financing arrangement	$	74	$	—	$	—	$	74

	September 30, 2017		December 31, 2016
Employees’ compensation expenses	$	1,628	$	2,570
Accrued preclinical costs		805		1,683
Accrued clinical and process development costs		669		1,142
Accrued professional services		725		894
Accrued contract settlement		2,000		—
Other		235		162
Total accrued expenses and other current liabilities	$	6,062	$	6,451

						Weighted-
	Number			Weighted-		Average Remaining		Aggregate
	of Options			Average Exercise		Contractual Life		Intrinsic Value ^(a)
	(in thousands)			Price		(In years)		(in thousands)
Balance at December 31, 2016		7,449		$	4.46
Options granted		1,897			2.80
Options exercised		(1,491	)		0.21
Options cancelled		(485	)		10.08
Balance at September 30, 2017		7,370		$	4.52		7.8	$	11,518
Vested and expected to vest as of September 30, 2017		7,370		$	4.52		7.8	$	11,518
Exercisable as of September 30, 2017		3,459		$	4.91		6.8	$	7,227

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Research and development	$	1,698	$	1,608	$	4,335	$	5,748
General and administrative		1,002		1,334		2,504		4,104
Total share-based compensation	$	2,700	$	2,942	$	6,839	$	9,852


	Number of Options (in thousands)	Weighted- Average Exercise Price
Balance at December 31, 2022	19,320	$	5.79
Options granted	6,056	1.05
Options exercised	(1)	1.29
Options forfeited	(1,314)	3.05
Balance at September 30, 2023	24,061	$	4.74
Exercisable as of September 30, 2023	9,724	$	8.54

				Weighted-Average		Weighted-Average
	Number of			Grant-Date		Remaining
	Units (in thousands)			Fair Value (in dollars)		Contractual Term (in years)
Outstanding at December 31, 2016		1,049		$	5.47		1.7
Granted		2,246			2.72
Vested and released		(290	)		6.64
Forfeited		(537	)		3.90
Outstanding at September 30, 2017		2,468		$	3.17		1.8