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~~Yes ☒ NONo ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ~~YES~~Yes ☒ NONo ☐

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

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

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

As of April ~~24, 2020,~~23, 2021, there were ~~61,017,707~~75,768,936 shares of registrant’s common shares outstanding.

Throughout this Quarterly Report on Form 10-Q, the “Company,” “CRISPR,” “CRISPR Therapeutics,” “we,” “us,” and “our,” except where the context requires otherwise, refer to CRISPR Therapeutics AG and its consolidated subsidiaries.

“CRISPR ~~Therapeutics” is a registered trademark of CRISPR Therapeutics AG. The trademarks for~~Therapeutics®” standard character mark and design logo, “CTX001^TM,” “CTX110^TM,” “CTX120^TM,” and “CTX130^TM” are ~~pending in the United States~~trademarks and ~~the trademark for “CRISPR Therapeutics” is pending in the European Union, Switzerland~~registered trademarks of CRISPR Therapeutics AG. All other trademarks and ~~the United Kingdom. Other brands, logos, names and~~registered trademarkscontained in this Quarterly Report on Form 10-Q are the property of their respective ~~owners.~~owners. Solely for convenience, trademarks, service marks and trade names referred to in this Quarterly Report on Form 10-Q may appear without the ^® or ^™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks, service marks and trade names.

This Quarterly Report on Form 10-Q contains “forward-looking statements” that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q are forward-looking statements. These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “potential,” “will,” “would” or the negative or plural of these words or similar expressions or variations, although not all forward-looking statements contain these identifying words. Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and assumptions that could cause our actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors,” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q, if any, our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on February ~~12, 2020,~~16, 2021, and in other SEC filings. You should not rely upon forward-looking statements as predictions of future events. Such forward-looking statements speak only as of the date of this report. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results, performance or achievements may be materially different from what we expect. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Investors and others should note that we announce material information to our investors using our investor relations website (https://crisprtx.gcs-web.com/), SEC filings, press releases, public conference calls and webcasts. We use these channels as well as social media to communicate with the public about our company, our business, our product candidates and other matters. It is possible that the information we post on social media could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the social media channels listed on our investor relations website.

		As of							As of
		March 31,			December 31,				March 31,			December 31,
		2020			2019				2021			2020
Assets	Assets							Assets
Current assets:
Cash and cash equivalents		$	889,712		$	943,771			$	1,126,059		$	1,168,620
Marketable securities										680,144			521,713
Accounts receivable			25,117			99				150			144
Prepaid expenses and other current assets			14,453			43,677				26,006			26,143
Total current assets			929,282			987,547				1,832,359			1,716,620
Property and equipment, net			31,773			31,330				51,913			42,160
Intangible assets, net			221			235				167			180
Restricted cash			5,041			5,041				16,844			16,848
Operating lease assets			40,321			41,502				50,129			50,865
Other non-current assets			662			1,097				6,498			1,293
Total assets		$	1,007,300		$	1,066,752			$	1,957,910		$	1,827,966
Liabilities and shareholders’ equity	Liabilities and shareholders’ equity							Liabilities and shareholders’ equity
Current liabilities:
Accounts payable		$	11,277		$	5,944			$	13,072		$	9,094
Accrued expenses			21,924			30,180				49,864			53,782
Deferred revenue, current			803			960				1,802			2,341
Accrued tax liabilities			284			583				3,356			10,473
Operating lease liabilities			9,005			8,489				12,063			11,362
Other current liabilities			11,793			10,950				2,933			7,207
Total current liabilities			55,086			57,106				83,090			94,259
Deferred revenue, non-current			11,776			11,776				11,776			11,776
Operating lease liabilities, net of current portion			42,390			44,050				49,408			50,067
Other non-current liabilities			11,951			14,395				8,138			7,630
Total liabilities			121,203			127,327				152,412			163,732
Commitments and contingencies, see Note 4
Commitments and contingencies, see Note 6
Shareholders’ equity:
Common shares, CHF 0.03 par value, 103,901,006 and 103,901,006 shares authorized at March 31, 2020 and December 31, 2019, respectively, 61,122,431 and 61,034,025 shares issued at March 31, 2020 and December 31, 2019, respectively 60,890,035 and 60,783,799 shares outstanding at March 31, 2020 and December 31, 2019, respectively.			1,850			1,847
Treasury shares, at cost, 232,396 and 250,226 shares at March 31, 2020 and December 31, 2019, respectively.			(63	)		(63	)
Common shares, CHF 0.03 par value, 115,172,786 shares authorized at March 31, 2021 and December 31, 2020, 75,925,944 and 74,110,160 shares issued at March 31, 2021 and December 31, 2020, respectively, 75,730,628 and 73,914,844 shares outstanding at March 31, 2021 and December 31, 2020, respectively.										2,340			2,277
Treasury shares, at cost, 195,316 shares at March 31, 2021 and December 31, 2020.										(63	)		(63	)
Additional paid-in capital			1,178,770			1,162,345				2,490,421			2,235,679
Accumulated deficit			(294,442	)		(224,711	)			(686,739	)		(573,576	)
Accumulated other comprehensive (loss) income			(18	)		7
Accumulated other comprehensive loss										(461	)		(83	)
Total shareholders' equity			886,097			939,425				1,805,498			1,664,234
Total liabilities and shareholders’ equity		$	1,007,300		$	1,066,752			$	1,957,910		$	1,827,966

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

	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2020			2019			2021			2020
Collaboration revenue (1)	$	157		$	328
Revenue:
Collaboration revenue							$	202		$	157
Grant revenue								337			—
Total revenue								539			157
Operating expenses:
Research and development (2)		54,193			33,822
Research and development								90,565			54,193
General and administrative		19,550			14,929			24,517			19,550
Total operating expenses		73,743			48,751			115,082			73,743
Loss from operations		(73,586	)		(48,423	)		(114,543	)		(73,586	)
Other income (expense):
Loss from equity method investment		-			(1,025	)
Other income, net		4,232			1,125			1,955			4,232
Total other income, net		4,232			100
Total other income (expense), net								1,955			4,232
Net loss before income taxes		(69,354	)		(48,323	)		(112,588	)		(69,354	)
Provision for income taxes		(377	)		(85	)		(575	)		(377	)
Net loss		(69,731	)		(48,408	)		(113,163	)		(69,731	)
Foreign currency translation adjustment		(25	)		8			5			(25	)
Unrealized loss on marketable securities								(383	)		—
Comprehensive loss	$	(69,756	)	$	(48,400	)	$	(113,541	)	$	(69,756	)

Net loss per share attributable to common shareholders—basic and diluted	$	(1.15	)	$	(0.93	)
Weighted-average common shares outstanding used in net loss per share attributable to common shareholders—basic and diluted		60,847,683			52,093,208
Net loss per common share — basic							$	(1.51	)	$	(1.15	)
Basic weighted-average common shares outstanding								75,005,187			60,847,683
Net loss per common share — diluted							$	(1.51	)	$	(1.15	)
Diluted weighted-average common shares outstanding								75,005,187			60,847,683

(1) Including the following revenue from a related party, see Notes 5 & 10:	$	—		$	328
(2) Including the following research and development expense with a related party, see Notes 5 & 10:	$	—		$	7,587

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

Common Shares

Treasury Shares

Shares

CHF 0.03
Par Value

Shares

Amount,
at cost

Additional
Paid-in
Capital

Accumulated
Deficit

Accumulated Other
Comprehensive
Income (Loss)

Total Shareholders’
Equity

Balance at December 31, 2018

51,852,862

1,584

307,936

(57
)

682,245

(291,569
)

(8
)

392,195

Issuance of common shares, net of issuance costs of $1.2 million

631,580

—

—

—

23,472

—

—

23,472

Vesting of restricted shares

9,288

—

—

—

15

—

—

15

Exercise of vested options

141,915

5

—

—

1,827

—

—

1,832

Stock-based compensation expense

—

—

—

—

10,696

—

—

10,696

Other comprehensive income

—

—

—

—

—

—

8

8

Net loss

—

—

—

—

—

(48,408
)

—

(48,408
)
Balance at March 31, 2019

52,635,645

$
1,589

307,936

$
(57
)
$
718,255

$
(339,977
)
$
-

$
379,810

Balance at December 31, 2019

60,783,799

1,847

250,226

(63
)

1,162,345

(224,711
)

7

939,425

Vesting of restricted shares

5,000

—

—

—

—

—

—

-

Exercise of vested options

83,406

3

—

—

1,385

—

—

1,388

Stock-based compensation expense

—

—

—

—

14,151

—

—

14,151

Issuance of common shares related to license agreement

17,830

—

(17,830
)

—

889

—

—

889

Other comprehensive loss

—

—

—

—

—

—

(25
)

(25
)
Net loss

—

—

—

—

—

(69,731
)

—

(69,731
)
Balance at March 31, 2020

60,890,035

$
1,850

232,396

$
(63
)
$
1,178,770

$
(294,442
)
$
(18
)

$
886,097

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

Three Months Ended March 31,

2020

2019

Operating activities:

Net loss

$
(69,731
)

$
(48,408
)
Reconciliation of net loss to net cash used in operating activities:

Depreciation and amortization

2,091

812

Equity-based compensation

14,151

9,671

Loss from equity method investment

-

1,025

Other expense, non-cash

890

-

Changes in:

Accounts receivable

(25,018
)

(243
)
Prepaid expenses and other assets

29,659

(3,051
)
Accounts payable and accrued expenses

(2,496
)

(3,324
)
Deferred revenue

(157
)

(25
)
Operating lease assets and liabilities

37

—

Other liabilities, net

(1,601
)

(194
)
Net cash used in operating activities

(52,175
)

(43,737
)
Investing activities:

Purchase of property and equipment

(2,991
)

(1,097
)
Net cash used in investing activities

(2,991
)

(1,097
)
Financing activities:

Proceeds from issuance of common shares, net of issuance costs

-

23,894

Proceeds from exercise of options, net of issuance costs

1,132

1,832

Net cash provided by financing activities

1,132

25,726

Effect of exchange rate changes on cash

(25
)

8

Decrease in cash

(54,059
)

(19,100
)
Cash, cash equivalents and restricted cash, beginning of period

948,812

459,812

Cash, cash equivalents and restricted cash, end of period

$
894,753

$
440,712

Supplemental disclosure of non-cash investing and financing activities

Property and equipment purchases in accounts payable and accrued expenses

$
1,340

$
579

Equity issuance costs in accounts payable and accrued expenses

$
39

$
181

As of March 31,

Reconciliation to amounts within the condensed consolidated balance sheets

2020

2019

Cash and cash equivalents

$
889,712

$
437,549

Restricted cash

5,041

3,163

Cash, cash equivalents and restricted cash at end of period

894,753

440,712

	Common Shares				Treasury Shares
	Shares		CHF 0.03 Par Value		Shares			Amount, at cost			Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
Balance at December 31, 2019		60,783,799		1,847		250,226			(63	)		1,162,345		(224,711	)		7			939,425
Vesting of restricted shares		5,000		—		—			—			—		—			—			-
Exercise of vested options		83,406		3		—			—			1,385		—			—			1,388
Stock-based compensation expense		—		—		—			—			14,151		—			—			14,151
Issuance of common shares related to license agreement		17,830		—		(17,830	)		—			889		—			—			889
Other comprehensive loss		—		—		—			—			—		—			(25	)		(25	)
Net loss		—		—		—			—			—		(69,731	)		—			(69,731	)
Balance at March 31, 2020		60,890,035	$	1,850		232,396		$	(63	)	$	1,178,770	$	(294,442	)	$	(18	)	$	886,097

Balance at December 31, 2020		73,914,844	$	2,277		195,316		$	(63	)	$	2,235,679	$	(573,576	)	$	(83	)	$	1,664,234
Issuance of common shares, net of issuance costs of $5.4 million		1,353,121		45		—			—			222,130		—			—			222,175
Vesting of restricted shares		109,355		3		—			—			—		—			—			3
Exercise of vested options, net of issuance costs of $1.5 million		342,051		15		—			—			9,769		—			—			9,784
Purchase of common stock under ESPP		11,257		—		—			—			751		—			—			751
Stock-based compensation expense		—		—		—			—			22,092		—			—			22,092
Other comprehensive loss		—		—		—			—			—		—			(378	)		(378	)
Net loss		—		—		—			—			—		(113,163	)		—			(113,163	)
Balance at March 31, 2021		75,730,628	$	2,340		195,316		$	(63	)	$	2,490,421	$	(686,739	)	$	(461	)	$	1,805,498

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

	Three Months Ended March 31,
	2021			2020
Operating activities:
Net loss	$	(113,163	)	$	(69,731	)
Reconciliation of net loss to net cash used in operating activities:
Depreciation and amortization		2,715			2,091
Equity-based compensation		22,092			14,151
Other income, non-cash		2,064			890
Changes in:
Accounts receivable		(6	)		(25,018	)
Prepaid expenses and other assets		(5,068	)		29,659
Accounts payable and accrued expenses		(5,770	)		(2,496	)
Deferred revenue		(539	)		(157	)
Operating lease assets and liabilities		778			37
Other liabilities, net		(3,766	)		(1,601	)
Net cash used in operating activities		(100,663	)		(52,175	)
Investing activities:
Purchase of property, plant and equipment		(7,024	)		(2,991	)
Purchases of marketable securities		(323,975	)		—
Maturities of marketable securities		163,101			—
Net cash used in investing activities		(167,898	)		(2,991	)
Financing activities:
Proceeds from issuance of common shares, net of issuance costs		214,592			-
Proceeds from exercise of options and ESPP contributions, net of issuance costs		11,399			1,132
Net cash provided by financing activities		225,991			1,132
Effect of exchange rate changes on cash		5			(25	)
Decrease in cash		(42,565	)		(54,059	)
Cash, cash equivalents and restricted cash, beginning of period		1,185,468			948,812
Cash, cash equivalents and restricted cash, end of period	$	1,142,903		$	894,753
Supplemental disclosure of non-cash investing and financing activities
Property and equipment purchases in accounts payable and accrued expenses	$	8,847		$	1,340
Equity issuance costs in accounts payable and accrued expenses	$	2,868		$	39

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

The accompanying condensed consolidated financial statements are unaudited and have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America, or GAAP.

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.Prior to December 13, 2019, the Company accounted for its 50% investment in Casebia Therapeutics Limited Liability Partnership, or Casebia, under the equity method. As described in Note 5, on December 13, 2019, Casebia became a fully-owned subsidiary and, as a result, the Company consolidated Casebia’s financial results from that date forward. All intercompany balances and transactions have been eliminated in consolidation. The Company views its operations and manages its business in 1 operating segment, which is the business of discovering, developing and commercializing therapies derived from or incorporating genome-editing technology. Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. These interim financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the financial position and results of operations for the three-month interim periods ended March 31, ~~2020~~2021 and ~~2019.~~2020.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, ~~2019,~~2020, which are contained in the ~~2019~~2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on February ~~12, 2020.~~16, 2021.

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

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three months ended March 31, ~~2020~~2021 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s ~~2019~~2020 Annual Report on Form 10-K filed with the SEC on February ~~12, 2020, except with respect~~16, 2021.

From time to time, new accounting pronouncements are issued by the ~~Company’s policy on credit losses noted within the “Recently adopted accounting standards” section below.~~

~~On January 1, 2020,~~FASB or other standard setting bodies that the Company ~~adopted ASU 2016-13,~~ ~~Financial Instruments – Credit Losses (Topic 326): Measurement~~adopts as of ~~Credit Losses on Financial Statements~~, or ASC 326. The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The targeted transition relief standard allows filers an option to irrevocably elect the fair value option of ASC 825-10~~, Financial Instruments-Overall, applied on an instrument-by-instrument basis for eligible instruments.~~specified effective date. The Company ~~adopted ASC 326 using~~does not believe that the ~~modified retrospective method for all financial assets measured at amortized cost. The~~ adoption of ~~ASU 2016-13 did not~~recently issued standards have or may have a material impact on its consolidated financial statements and disclosures.

The following table summarizes cash equivalents and marketable securities held at March 31, 2021 and December 31, 2020 (in thousands), which are recorded at fair value. The table below excludes $494.2 million and $395.1 million of cash at March 31, 2021 and December 31, 2020, respectively.

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2021
Cash equivalents:
Money market funds	$	629,357	$	—	$	—		$	629,357
Corporate debt securities		2,533		1		(2	)		2,532
Certificates of deposit		—		—		—			—
Commercial paper		—		—		—			—
Total cash equivalents		631,890		1		(2	)		631,889
Marketable securities:
U.S. Treasury securities		—		—		—			—
Corporate debt securities		536,144		37		(551	)		535,630
Certificates of deposit		54,273		—		—			54,273
Government-sponsored enterprise securities		3,120		—		(1	)		3,119
Commercial paper		87,120		2		—			87,122
Total marketable securities		680,657		39		(552	)		680,144
Total cash equivalents and marketable securities	$	1,312,547	$	40	$	(554	)	$	1,312,033
December 31, 2020
Cash equivalents:
Money market funds	$	742,958	$	—	$	—		$	742,958
Corporate debt securities		2,526		1		(24	)		2,503
Certificates of deposit		12,527		—		—			12,527
Commercial paper		15,549		—		—			15,549
Total cash equivalents		773,560		1		(24	)		773,537
Marketable securities:
U.S. Treasury securities		47,976		3		—			47,979
Corporate debt securities		324,569		43		(156	)		324,456
Certificates of deposit		25,162		—		—			25,162
Government-sponsored enterprise securities		33,738		5		(2	)		33,741
Commercial paper		90,375		—		—			90,375
Total marketable securities		521,820		51		(158	)		521,713
Total cash equivalents and marketable securities	$	1,295,380	$	52	$	(182	)	$	1,295,250

As of March 31, 2021 and December 31, 2020, the aggregate fair value of marketable securities that were in an unrealized loss position for less than twelve months was $473.7 million and $280.3 million, respectively. As of March 31, 2021 and December 31, 2020, 0 marketable securities were in an unrealized loss position for more than twelve months. The Company has recorded a net unrealized loss of $0.4 million during the three months ended March 31, 2021 related to its debt securities, which is included in comprehensive loss on the condensed consolidated statements of operations and comprehensive loss. NaN unrealized losses related to debt securities were recorded during the three months ended March 31, 2020.

The Company determined that there is no material credit risk associated with the above investments as of March 31, 2021. As such, an allowance for credit losses was not recognized. As of March 31, 2021, the Company does not intend to sell such securities and it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost basis. NaN available-for-sale debt securities held as of March 31, 2021 had remaining maturities greater than two years.

The following tables present information about the Company’s financial ~~position or results~~assets measured at fair value on a recurring basis and indicate the fair value hierarchy classification of ~~operations upon adoption.~~such fair values as of March 31, 2021 and December 31, 2020 (in thousands):

	Fair Value Measurements at
	March 31, 2021
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents:
Cash	$	494,170	$	494,170	$	—	$	—
Money market funds		629,357		629,357		—		—
Corporate debt securities		2,532		—		2,532		—
Certificates of deposit		—		—		—		—
Commercial paper		—		—		—		—
Marketable securities:
U.S. Treasury securities		—		—		—		—
Corporate debt securities		535,630		—		535,630		—
Certificates of deposit		54,273		—		54,273		—
Government-sponsored enterprise securities		3,119		—		3,119		—
Commercial paper		87,122		—		87,122		—
Other non-current assets		2,212		—		—		2,212
Total	$	1,808,415	$	1,123,527	$	682,676	$	2,212
	Fair Value Measurements at
	December 31, 2020
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents:
Cash	$	395,083	$	395,083	$	—	$	—
Money market funds		742,958		742,958		—		—
Corporate debt securities		2,503		—		2,503		—
Certificates of deposit		12,527		—		12,527		—
Commercial paper		15,549		—		15,549		—
Marketable securities:
U.S. Treasury securities		47,979		—		47,979		—
Corporate debt securities		324,456		—		324,456		—
Certificates of deposit		25,162		—		25,162		—
Government-sponsored enterprise securities		33,741		—		33,741		—
Commercial paper		90,375		—		90,375		—
Other non-current assets		600		—		—		600
Total	$	1,690,933	$	1,138,041	$	552,292	$	600

Marketable securities classified as Level 2 within the valuation hierarchy generally consist of U.S. treasury securities and government agency securities, corporate bonds, and commercial paper. The Company estimates the fair values of these marketable securities by taking into consideration valuations obtained from third-party pricing sources.

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

	As of						As of
	March 31,			December 31,			March 31,			December 31,
	2020			2019			2021			2020
Computer equipment	$	727		$	727		$	1,472		$	727
Furniture, fixtures and other		3,215			3,215			3,420			3,416
Laboratory equipment		18,555			16,640			27,956			25,353
Leasehold improvements		21,400			21,400			25,977			25,473
Construction work in process		1,999			1,394			16,969			8,366
Total property and equipment, gross		45,896			43,376			75,794			63,335
Accumulated depreciation		(14,123	)		(12,046	)		(23,881	)		(21,175	)
Total property and equipment, net	$	31,773		$	31,330		$	51,913		$	42,160

Depreciation expense for the three months ended March 31, 2021 and 2020 was $2.7 million and ~~2019 was~~ $2.1 million, ~~and $1.0 million,~~ respectively.

	As of				As of
	March 31,		December 31,		March 31,		December 31,
	2020		2019		2021		2020
Payroll and employee-related costs	$	5,431	$	15,229	$	11,565	$	22,402
Research costs		11,113		9,434		22,034		21,684
Licensing fees		—		750		930		1,401
Professional fees		1,694		2,040		1,874		1,670
Intellectual property costs		2,780		2,311		5,229		3,625
Accrued property and equipment		148		407		6,869		2,835
Other		758		9		1,363		165
Total	$	21,924	$	30,180	$	49,864	$	53,782

The Company has entered into certain leasing commitments for which right of use assets and right of use liabilities are not reflected on the consolidated balance sheet as the leases have not yet commenced.

In November 2019, the Company, together with one of its partners, committed to making $3.9 million in annual rental payments to a clinical manufacturing organization under a lease arrangement for a five-year period following commencement of the lease arrangement. The lease arrangement is expected to commence in the second ~~half~~quarter of ~~2020, at which time an upfront payment of $2.6 million is due. In addition, the Company~~2021 and ~~its partner have committed to paying approximately $3.7 million in annual rental payments for a~~ ~~five-year~~ ~~period following commencement. All~~all payments will be split equally between the Company and its partner.

In July 2020, the Company entered into a lease agreement for an office and laboratory facility in Boston, Massachusetts, or the 2020 Boston Lease. In accordance with ASC 842, Leases, lease commencement for the 2020 Boston Lease is expected in the second half of 2021. Rent commencement is expected in the first half of 2022. In connection therewith, the Company has committed to making at least $292.5 million in rental payments over a lease term of 152 months. The Company is also obligated to make certain future payments related to the construction of leasehold improvements.

In the ordinary course of business, the Company is from time to time involved in lawsuits, ~~claims,~~ investigations, proceedings and threats of litigation ~~relating~~related to, among other things, the Company’s intellectual property estate (including certain in-licensed intellectual property), commercial arrangements ~~employment~~ and other matters. ~~While~~Such proceedings may include quasi-litigation, inter partes administrative proceedings in the U.S. Patent and Trademark Office and the European Patent Office involving the Company’s intellectual property estate including certain in-licensed intellectual property. The outcome of ~~those proceedings~~any of the foregoing, regardless of the merits, is inherently uncertain. In addition, litigation and ~~claims cannot~~related matters are costly and may divert the attention of Company’s management and other resources that would otherwise be ~~predicted with certainty,~~engaged in other activities. If the Company is ~~not party~~unable to prevail in any ~~legal or arbitration~~such proceedings, ~~that may have significant effects on its~~the Company’s business, results of operations, liquidity and financial position. It is not a party to any material proceedings in which any director, member of executive management or affiliate of the Company is either a party adverse to it or its subsidiaries or has a material interest adverse to it or its subsidiaries.condition could be adversely affected.

As of March 31, ~~2020,~~2021, the Company had restricted cash of ~~$5.0~~$16.8 million, representing letters of credit securing the Company’s obligations under certain leased ~~facilities in Cambridge, Massachusetts, as well as certain credit card arrangements.~~facilities. The letters of credit are secured by cash held in a restricted depository account. The cash deposit is recorded in restricted cash in the accompanying condensed consolidated balance sheet as of March 31, ~~2020.~~2021.

The Company has engaged several research institutions and companies to identify new delivery strategies and applications of the Company’s gene-editing technology. The Company is also a party to a number of ~~research~~ license agreements which require significant upfront payments and may be required to make future royalty payments and potential milestone payments from time to time. In addition, the Company is also a party to intellectual property agreements, which require maintenance and milestone payments from time to time. Further, the Company is a party to a number of manufacturing agreements that require upfront payments for the future performance of services.

In association with these agreements, on a product-by-product basis, the counterparties are eligible to receive up to low eight-digit potential payments upon specified research, development and regulatory milestones. In addition, on a product-by-product basis, the counterparties are eligible to receive potential commercial milestone payments based on specified annual sales thresholds. The potential payments are low-single digit percentages of the specified annual sales thresholds. The counterparties are also eligible to receive low single-digit royalties on future net sales.

Under certain circumstances and if certain contingent future events occur, Vertex Pharmaceuticals Incorporated and certain of its subsidiaries, or Vertex, is eligible to receive up to $395.0 million in potential specified research, development, regulatory and commercial milestones and tiered single-digit percentage royalties on future net sales. Refer to Note 57 for further discussion on the Company’s arrangements with Vertex.

Agreements with Vertex Pharmaceuticals Incorporated and certain of its subsidiaries

On October 26, 2015, the Company entered into a strategic collaboration, option and license agreement, or the 2015 Collaboration Agreement, with Vertex. The 2015 Collaboration Agreement is focused on the use of the Company’s CRISPR/Cas9 gene-editing technology to discover and develop potential new treatments aimed at the underlying genetic causes of human disease.

On December 12, 2017, the Company and Vertex entered into Amendment No. 1 to the 2015 Collaboration Agreement, or Amendment No. 1, and the Joint Development Agreement, or the JDA. Amendment No. 1, among other things, modified certain definitions and provisions of the 2015 Collaboration Agreement to make them consistent with the JDA and clarified how many options are exercised (or deemed exercised) in connection with certain targets specified under the 2015 Collaboration Agreement. Amendment No. 1 also amended other provisions of the 2015 Collaboration Agreement, including the expiration terms.

In connection with the 2015 Collaboration Agreement, Vertex made a nonrefundable upfront payment of $75.0 million. Under the 2015 Collaboration Agreement, Vertex agreed to fund the discovery activities conducted pursuant to the agreement while retaining options to co-exclusive and exclusive licenses. In December 2017, upon execution of the JDA and Amendment No. 1, Vertex exercised its option to obtain a co-exclusive license to develop and commercialize hemoglobinopathy and beta-globin targets. As such, for potential hemoglobinopathy treatments, including treatments for sickle cell disease, the Company and Vertex will share equally all research and development costs and worldwide revenues. In connection with the JDA, the Company received a $7.0 million up-front payment from Vertex and subsequently received a one-time low seven-digit milestone payment upon the dosing of the second patient in a clinical trial with the initial product candidate. In addition, upon execution of the JDA and Amendment No. 1, it was clarified that Vertex may elect to license up to four remaining targets, for which it will lead global development and commercialization activities and the Company received the right to receive up to $420.0 million in development, regulatory and commercial milestones and royalties on net product sales for each of the targets (inclusive of $10 million due upon exercise of each exclusive option).

In June 2019, the Company and Vertex entered into a series of agreements, which closed on July 23, 2019, including a strategic collaboration and license agreement, or the 2019 Collaboration Agreement, for the development and commercialization of products for the treatment of Duchenne muscular dystrophy, or DMD, and ~~myotonic dystrophy type~~Myotonic Dystrophy Type 1, or DM1. Under the terms of the 2019 Collaboration Agreement, the Company received an upfront, nonrefundable payment of $175.0 million. In addition, the Company is eligible to receive potential aggregate payments of up to $825.0 million based upon the successful achievement of specified research, development, regulatory and commercial milestones for the DMD and DM1 programs. The Company is also eligible to receive tiered royalties on future net sales on any products that may result from this collaboration. For the DMD program, Vertex is responsible for all research, development, manufacturing and commercialization activities and all related costs. For the DM1 program, the Company will perform specified guide RNA research and Vertex is responsible for all other research, development, manufacturing and commercialization costs. Upon Investigational New Drug, or IND, application filing, the Company has the option to forego the DM1 milestones and royalties and instead, co-develop and co-commercialize all DM1 products globally in exchange for payment of 50% of research and development costs incurred by Vertex from the effective date of the agreement through IND filing.

In connection with the execution of the 2019 Collaboration Agreement, the Company and Vertex entered into a second amendment to the 2015 Collaboration Agreement, or Amendment No. 2. Among other things, Amendment No. 2 modified certain definitions and provisions of the 2015 Collaboration Agreement to make them consistent with the 2019 Collaboration Agreement and set forth the number and identity of the collaboration targets under the 2015 Collaboration Agreement. The Company and Vertex agreed that 1 of the 4 remaining options under the 2015 Collaboration Agreement, as amended, would not be exercised; instead, the Company ~~will reacquire~~reacquired the exclusive rights and ~~will~~agreed to conduct research and development activities for the specified target. Vertex will have the option to co-develop and co-commercialize the specified target upon IND filing in exchange for payment of 50% of research and development costs incurred by the Company from the effective date of the agreement through IND filing. If Vertex does not exercise its option to co-develop and co-commercialize the specified target, Vertex is eligible to receive up to $395.0 million in potential specified research, development, regulatory and commercial milestones and tiered single-digit royalties on future net sales.

In October 2019, Vertex exercised the remaining 3 options granted to it under the 2015 Collaboration Agreement to exclusively license the collaboration targets developed under the 2015 Collaboration Agreement, resulting in a payment of $30.0 million to the Company in the fourth quarter of 2019. ~~The~~In addition, the Company achieved the first milestone under the 2019 Collaboration Agreement in the first quarter of 2020 and, in connection therewith, received a payment of $25.0 million in April 2020.

The 2015 Collaboration Agreement, Amendment No. 1, and JDA are collectively the “2015 Agreements” and the 2019 Collaboration Agreement and Amendment No. 2. are collectively the “2019 Agreements.” The 2015 Collaboration Agreement, Amendment No. 1, Amendment No. 2, JDA and 2019 Collaboration Agreement are collectively the “Vertex Agreements.”

The Vertex Agreements include components of a customer-vendor relationship as defined under ASC 606, Revenue from Contracts with Customers, or ASC 606, collaborative arrangements as defined under ASC 808, Collaborative Agreements, or ASC 808, and research and development costs as defined under ASC 730, Research and Development, or ASC 730.

The 2019 Agreements represented a contract modification to the 2015 Agreements. As a result, the 2019 Agreements and the 2015 Agreements are combined for accounting purposes and treated as a single arrangement.

The Company concluded the following material promises were both capable of being distinct and distinct within the context of the Vertex Agreements and represented separate performance obligations: (i) an exclusive license for worldwide rights for DMD gene editing products, or DMD License; (ii) an exclusive license for worldwide rights for DM1 gene editing products, or DM1 License; (iii) the performance of specified guide RNA research for DM1, or DM1 R&D Services; (iv) a material right representing the option to obtain a co-exclusive development and commercialization license for a specified target, or Specified Target Option; (v) three material rights representing the option for up to three exclusive licenses to develop and commercialize the collaboration targets, or Collaboration Target Options; and (vi) the waiving of Vertex’s material right associated with its option to a fourth exclusive license in connection with the Company’s reacquisition of exclusive rights to the specified target.

The overall transaction price was determined based on the remaining transaction price from the 2015 Agreements, as well as the transaction price from the 2019 Agreements. The transaction price includes variable consideration estimated using the most likely amount methodology. As such, the Company determined the transaction price totaling $268.6 million was comprised of: (i) $57.8 million of pre-existing deferred revenue from the 2015 Agreements; (ii) non-cash consideration of $10.0 million related to the waiving of Vertex’s material right associated with its option to a fourth exclusive license in connection with the Company’s reacquisition of exclusive rights to the specified target; (iii) an upfront payment of $175.0 million; (iv) variable consideration of $25.0 million which represented the Company’s estimate related to a near-term research and development milestone for which the Company determined that it is not probable that a significant reversal of cumulative consideration will occur at the onset of the transaction; and (v) variable consideration of $0.8 million which represents the Company’s estimate of payments from Vertex for DM1 R&D Services.

The Company determined that all other possible variable consideration resulting from milestones and royalties discussed above was fully constrained as of March 31, ~~2020.~~2021. The Company will re-evaluate the transaction price in each reporting period.

The selling price of each performance obligation was determined based on the Company’s estimated standalone selling price, or the ESSP. The Company developed the ESSP for all the performance obligations included in the Vertex Agreements with the objective of determining the price at which it would sell such an item if it were to be sold regularly on a standalone basis. The Company then allocated the transaction price to each performance obligation on a relative standalone selling price basis.

The ESSP for the DMD License and DM1 License was determined to be $224.6 million and $76.2 million, respectively. The ESSP was determined based on probability and present value adjusted cash flows from projected worldwide net profit for each of the respective programs based on probability assessments, projections based on internal forecasts, industry data, and information from other guideline companies within the same industry and other relevant factors. On a relative basis, $151.1 million and $51.3 million of the transaction price was allocated to the DMD License and DM1 License, respectively.

The ESSP for the Specified Target Option material right was determined to be $17.5 million, which was based on the incremental discount between (i) the value of the probability and present value adjusted cash flows from the equal sharing of projected worldwide net profit increased by the value of the option provided to Vertex less (ii) the expected exercise price at the time of option exercise. The present value adjusted cash flows also considered projections based on internal forecasts, industry data, and information from other guideline companies within the same industry and other relevant factors. On a relative basis, $11.8 million of the transaction price was allocated to the Specified Target Option material right.

The ESSP for each of the three Collaboration Target Option material rights was determined to be $25.0 million, $22.2 million and $22.2 million, respectively, which was determined based on the probability and present value adjusted cash flows from milestone payments owed for exclusive licenses, less the price paid to exercise each option. On a relative basis, $46.7 million of the transaction price was allocated to the Collaboration Target Option material rights.

The aforementioned ESSPs reflect the level of risk and expected probability of success inherent in the nature of the associated research area.

The ESSP for the waiving of Vertex’s material right associated with its option to a fourth exclusive license under the 2015 Agreements was determined to be $10.0 million, or the contractual value of the option. On a relative basis, $6.7 million of the transaction price was allocated to the waiving of Vertex’s material right associated with its option to a fourth exclusive license under the 2015 Agreements.

The ESSP for the DM1 R&D Services was determined to be $1.7 million, which was based on estimates of the associated effort and cost of the services, adjusted for a reasonable profit margin that would be expected to be realized under similar contracts. On a relative basis, $1.1 million of the transaction price was allocated to the DM1 R&D Services.

The Company determined that the DMD License and DM1 License represent functional intellectual property, as the intellectual property provides Vertex with the ability to perform a function or task in the form of research and development. As such, the revenue related to the licenses was recognized at the point in time in which they were delivered during the third quarter of 2019.

The revenue allocated to the waiving of Vertex’s material right associated with its option to a fourth exclusive license in connection with Company’s reacquisition of exclusive rights to the specified target was recognized at the point in time in which the option was waived, on the effective date of the 2019 Agreements.

The Company concluded that the Specified Target Option and Collaboration Target Options were considered material rights under the Vertex Agreements. Revenue related to the three Collaboration Target Options material right was recognized at the point in time in which Vertex exercised the Collaboration Target Options, which occurred in the fourth quarter of 2019. ~~Revenue related to the Specified Target Option will be recognized at the point in time in which the option is exercised.~~

The Company recognizes revenue related to the DM1 R&D Services over time as the services are rendered, which iswas originally expected to be over an 18-month period from the effective date of the 2019 Agreements and is now expected to be over a 24-month period from the effective date of the 2019 Agreements.

Accounting for the 2015 Agreements (prior to the execution of the 2019 Agreements)

On January 1, 2018, the Company adopted ASC 606 using the modified retrospective approach. The Company applied the practical expedient in ASC 606-10-65-1 in identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating the transaction price under the practical expedient in ASC 606. There was no significant impact on revenue recognized under ASC 606 and the prior revenue recognition as a result of the adoption.

Amendment No. 1 and the JDA represented a contract modification to the 2015 Collaboration Agreement. As a result, the 2015 Agreements are combined for accounting purposes and treated as a single arrangement.

The Company concluded the following material promises were both capable of being distinct and distinct within the context of the 2015 Agreements and represented separate performance obligations: (i) the non-exclusive research license; (ii) four material rights representing the option for up to four exclusive licenses to develop and commercialize the collaboration targets; (iii) a combined performance obligation representing the co-exclusive research license, and a development and commercialization license to develop and commercialize hemoglobinopathies and beta-globin targets; and (iv) the performance of R&D Services.

The overall transaction price was comprised of: (i) original upfront payment of $75.0 million, (ii) an upfront payment of $7.0 million under the JDA, and (iii) $19.3 million of variable consideration associated with the R&D services.

The Company determined that all other possible variable consideration resulting from milestones and royalties discussed above was fully constrained at the time of the transaction.

The selling price of each performance obligation was determined based on the Company’s ESSP. The Company developed the ESSP for all the performance obligations included in the 2015 Agreements with the objective of determining the price at which it would sell such an item if it were to be sold regularly on a standalone basis. The Company then allocated the transaction price to each performance obligation on a relative standalone selling price basis.

The ESSP for R&D Services was determined to be $19.3 million. The Company developed the ESSP for the R&D Services primarily based on the nature of the services to be performed and estimates of the associated effort and cost of the services, adjusted for a reasonable profit margin that would be expected to be realized under similar contracts. The Company allocated $19.3 million of the transaction price to R&D Services.

The Company’s ESSP for each of the remaining material rights to obtain an exclusive license to develop and commercialize a single collaboration target are $45.6 million, $38.4 million, $17.3 million and $17.3 million for a total of $118.6 million. ESSPs for these items were determined based on the probability and present value adjusted cash flows from milestone payments owed for exclusive licenses, less the price paid to exercise each option. On a relative basis, $57.7 million of the transaction price was allocated to these material rights.

The Company’s ESSP for the co-exclusive research license and the development and commercialization licenses for hemoglobinopathy and beta-globin targets is $48.9 million. The ESSP for this item was determined based on probability and present value adjusted cash flows from the equal sharing of projected worldwide net profit. ESSP reflects the level of risk and expected probability of success inherent in the nature of the associated research area. On a relative basis, $23.8 million of the transaction price was allocated to the co-exclusive research license and the development and commercialization licenses for hemoglobinopathy and beta-globin targets.

The Company used a market-based approach to determine the ESSP of the non-exclusive research license of $1.0 million. The Company determined ESSP by use of comparative data, including in-licensed research agreements negotiated and executed within the Company. On a relative basis, $0.5 million of the transaction price was allocated to the non-exclusive research license.

The aforementioned ESSPs reflect the level of risk and expected probability of success inherent in the nature of the associated research area.

The Company determined that the non-exclusive research license is symbolic intellectual property as Vertex receives value from the license through the Company’s ongoing activities, and, as such, the revenue related to the non-exclusive research license was recognized ratably over the term of the arrangement. Upon the execution of the JDA, a co-exclusive research, development and commercialization license was granted for hemoglobinopathy and beta-globin targets. The Company determined that the revenue related to these licenses was recognized at a point in time, in which they were delivered at inception of the JDA in December 2017. As Vertex has the material right in its option to obtain four additional exclusive licenses to develop and commercialize four additional collaboration targets, the Company determined that consideration allocated to these material rights would be included in the transaction price of the exclusive license and recognized at a point in time, upon the exercise of the option by Vertex or expiration. As the Company has a right to consideration from Vertex in an amount that corresponds directly with the value of the Company’s performance completed to date for the R&D services, the Company recognized revenue related to the R&D services as invoiced, in line with the practical expedient in ASC 606-10-55-18.

Revenue recognized under the ~~2019 Agreements and revenue recognized under the 2015~~Vertex Agreements for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively, was ~~not~~0t material.

As of March 31, 2021 and December 31, 2020, there was ~~$0.8~~$0.2 million and $0.4 million of current deferred revenue related to the collaboration with ~~Vertex compared to $0.9 million as of December 31, 2019.~~Vertex. As of March 31, ~~2020,~~2021, there was $11.8 million of non-current deferred revenue related to the collaboration with Vertex, which is unchanged from December 31, ~~2019.~~2020. The transaction price allocated to the remaining performance obligations was ~~$12.6~~$11.8 million.

The Company has evaluated the milestones that may be received in connection with the Vertex Agreements. As discussed above, the Company is eligible to receive up to $410.0 million in additional development, regulatory and commercial milestones and royalties on net product sales for each of the three collaboration targets that Vertex licensed in the fourth quarter of 2019. Each milestone is payable only once per collaboration target, regardless of the number of products directed to such collaboration target that achieve the relevant milestone event.

The Company is eligible to receive additional potential future payments of up to $800.0 million based upon the successful achievement of specified research, development, regulatory and commercial milestones for the DMD and DM1 programs. ~~As discussed above, the first research milestone of $25.0 million was included in the transaction price. This amount was recorded as a contract asset within prepaid expenses and other current assets on the condensed consolidated balance sheet at December 31, 2019.~~ This milestone was achieved during the first quarter of 2020 and paid during the second quarter of 2020. As of March 31, 2020, the $25.0 million milestone was recorded in accounts receivable on the condensed consolidated balance sheet. The Company is also eligible to receive tiered royalties on future net sales on any products that may result from this collaboration; however, the Company has the option to forego the DM1 milestones and royalties to co-develop and co-commercialize all DM1 products globally.

Each of the remaining milestones are fully constrained as of March 31, ~~2020.~~2021. There is uncertainty that the events to obtain the research and developmental milestones will be achieved given the nature of clinical development and the stage of the CRISPR/Cas9 technology. The remaining research, development and regulatory milestones will be constrained until it is probable that a significant revenue reversal will not occur. Commercial milestones and royalties relate predominantly to a license of intellectual property and are determined by sales or usage-based thresholds. The commercial milestones and royalties are accounted for under the royalty recognition constraint and will be accounted for as constrained variable consideration. The Company applies the royalty recognition constraint for each commercial milestone and will not recognize revenue for each until the subsequent sale of a licensed product (achievement of each) occurs.

In connection with the 2019 Agreements, the Company identified the following collaborative elements, which were unchanged as those identified with the 2015 Agreements and are accounted for under ASC 808: (i) development and commercialization services for shared products; (ii) R&D Services for follow-on products; and (iii) committee participation. The related impact of the cost sharing associated with research and development is included in research and development expense. Expenses related to services performed by the Company are classified as research and development expense. Payments received from Vertex for partial reimbursement of expenses are recorded as a reduction of research and development expense.

During the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, the Company recognized ~~$9.1~~$19.9 million and ~~$7.1~~$9.1 million of research and development expense related to the Vertex ~~Agreements.~~Agreements, respectively. Research and development expense for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 was net of ~~$5.5~~$10.6 million and ~~$4.5~~$5.5 million of reimbursements from Vertex, respectively.

In connection with the 2019 ~~Vertex~~ Agreements, the Company and Vertex agreed that 1 of the 4 remaining options under the 2015 Agreements, as amended, would not be exercised; instead, the Company will conduct research and development activities for a specified target. Vertex will have the option to co-develop and co-commercialize the specified target upon IND filing in exchange for payment of 50% of research and development costs incurred by the Company from the effective date of the agreement through IND filing. If Vertex does not exercise its option to do so within a specified time period, Vertex is eligible to receive up to $395.0 million in potential specified research, development, regulatory and commercial milestones and tiered single-digit royalties on future net sales.

In connection therewith, the Company determined that in order for the Company to obtain the right to conduct research and development activities on the specified target, the Company had waived its right to receive an option exercise payment of $10.0 million from Vertex, which was included as non-cash consideration in the transaction price for the 2019 Agreements described above. The Company then subsequently reacquired its rights to the specified target by waiving payment owed by Vertex of $10.0 million for a license that represents in-process research and development and therefore, $10.0 million of non-cash consideration was fully expensed upon the execution of the 2019 Agreements. The Company also determined that research and development services through IND for the specified target and any payment of future development and commercialization milestones, as well as sales-based milestones and royalties for the specified target, would be accounted for as research and development costs under ASC 730 and expensed as incurred. In addition, the Company also determined that should the Company elect its option to co-develop and co-commercialize all DM1 products globally, it will record the option fee as research and development expense upon exercise.

On December 19, 2015, the Company entered into an agreement with Bayer, to establish a joint venture to focus on the research and the development of new therapeutics to cure blood disorders, blindness and congenital heart disease. On February 12, 2016, the Company and Bayer completed the formation of the joint venture entity, Casebia. Bayer and the Company each received a 50% equity interest in the entity in exchange for their respective contributions to the entity. At that time, the Company also entered into a separate service agreement with Casebia, under which the Company agreed to provide compensated research and development services. Collectively, these agreements are referred to as the “2015 Casebia Agreements.”

On December 13, 2019, the Company, Bayer and Casebia entered into a series of transactions by which, among other things, the Company acquired 100% of the partnership interests in Casebia, or the Retirement Agreement, the Company and Bayer terminated their joint venture, or the Joint Venture Termination Agreement, and the Company and Bayer entered into a new option agreement, or the 2019 Option Agreement. Collectively, these agreements are referred to as the “2019 Casebia Agreements.”

In connection with the Retirement Agreement, Casebia retired Bayer’s outstanding partnership interests in exchange for $22.0 million less certain estimated interim operating expenses of $6.0 million, and the Company acquired 100% of the partnership interests in Casebia.

In connection with entering into the Retirement Agreement, the Company, Bayer and Casebia entered into the Joint Venture Termination Agreement. In connection therewith, the Company and Bayer agreed to terminate the Joint Venture Agreement from December 2015. Under the Joint Venture Termination Agreement, Casebia-owned patents are now co-owned by the Company and Bayer, subject to certain exclusive licenses granted therein. Under the Joint Venture Termination Agreement, the Company and Bayer each retained rights to their respective contributed intellectual property.

In connection with entering into the Retirement Agreement and the Joint Venture Termination Agreement, the Company and Bayer also entered into the 2019 Option Agreement, under which, among other things, the Company committed to invest a specified

amount in certain research and development activities as described under “Accounting Analysis – Accounting for 2019 Casebia Agreements”. In addition, Bayer has an option (exercisable during a specified exercise period defined by future events, but in no event longer than 5 years after the effective date of the 2019 Option Agreement) to co-develop and co-commercialize 2 products for the diagnosis, treatment or prevention of certain autoimmune disorders, eye disorders or hemophilia A disorders. In the event Bayer elects to co-develop and co-commercialize a product, the parties will negotiate and enter into a co-development and co-commercialization agreement, or the Co-Commercialization Agreement, for such product, and Bayer would be responsible for 50% of the research and development costs incurred by the Company for such product going forward. Bayer would receive 50% of all profits from sales of such product and would be responsible for 50% of all losses.

If Bayer elects to exercise its option to co-develop and co-commercialize a product, Bayer will make a one-time $20.0 million payment, or the Option Payment, to the Company that will become non-refundable once the parties execute a Co-Commercialization Agreement with respect to such optioned product. The Option Payment is payable only once with respect to the first time Bayer exercises an option under the 2019 Option Agreement.

In addition, following Bayer’s exercise of its option and/or the execution of the Co-Commercialization Agreement for an optioned product, for a period beginning on the effective date of such Co-Commercialization Agreement and ending on the earlier of the three month anniversary of such effective date or during the 90-day negotiation process of such Co-Commercialization Agreement, Bayer has a right to negotiate an exclusive license to develop and commercialize such optioned product. If Bayer exercises such right, the parties will enter into an exclusive license agreement for such optioned product on terms mutually agreeable to the parties. Further, the Option Payment paid for such optioned product would become credited against payments due under such exclusive license or any other exclusive license entered into in connection with the 2019 Option Agreement.

Either party may terminate the 2019 Option Agreement upon the other party’s material breach, subject to specified notice and cure provisions. The Company may also terminate the 2019 Option Agreement in the event Bayer commences or participates in any action or proceeding challenging the validity or enforceability of any Company patent necessary or useful for the research, development, manufacture or commercialization of a product that is the subject of the 2019 Option Agreement. Bayer may also terminate the 2019 Option Agreement upon the Company’s bankruptcy or insolvency, or for convenience at any time, after giving written notice.

~~During 2016,~~Transactions under the ~~Company recorded an equity method investment of $36.5 million equal to~~2015 Casebia Agreements ceased on the ~~fair value~~effective date of the ~~Company’s interest in~~2019 Casebia ~~and subsequently recorded unrealized equity method losses for~~Agreements. There was no financial impact of the ~~same amount. The Company had no further contractual obligations to provide cash financing to~~2015 Casebia ~~and accordingly, no additional losses were recorded beyond the initial equity amount. Casebia’s net losses were $14.2 million~~Agreements for the three months ended March 31, ~~2019~~2021 and ~~unrecognized equity method losses in excess of the Company’s equity method investment in Casebia were $51.9 million as of March 31, 2019.~~

The remaining performance obligations prior to the 2019 Casebia Agreements included research and development services, which were recorded as revenue under ASC 606, and cost sharing activities with Casebia related to shared research and technology licenses, which were recorded as a cost/profit sharing arrangement under ASC 808, with the related impact of the cost sharing included as research and development expense. All performance obligations were terminated upon the execution of the 2019 Casebia Agreements.

During the three months ended March 31, 2019, the Company recognized $0.2 million of revenue related to the collaboration with Casebia. During the three months ended March 31, 2019, the Company recognized $0.5 million of research and development expense related to the collaboration with Casebia. During the three months ended March 31, 2019, the Company recognized a loss from equity method investment of $1.0 million related to stock-based compensation expense for Casebia employees.2020.

The Company determined that the Retirement Agreement and Joint Venture Termination Agreement resulted in the Company obtaining a controlling interest in Casebia and should be accounted for as a separate component from the 2019 Option Agreement. In doing so, the Company allocated the consideration transferred of $41.0 million (consisting of $16.0 million of assets acquired net of the purchase price, as displayed in the table below, and $25.0 million of cash allocated to the 2019 Option Agreement) between the two components using a relative fair value approach. The Company determined the relative fair value related to obtaining a controlling interest in Casebia was $32.0 million and the relative fair value of the consideration transferred related to the 2019 Option Agreement was $25.0 million, which is comprised of $20.2 million related to certain research and development activities and $4.8 million related to certain options as described above.

As a result of the Retirement Agreement, the Company determined that it had obtained a controlling interest in a variable interest entity, for which it became the primary beneficiary. As such, under ASC 810, Consolidation, the Company accounted for the net assets obtained under ASC 805, Business Combinations. In accordance therewith, the Company determined the set of acquired assets and assumed liabilities did not meet the definition of a business, as the Company did not acquire an assembled workforce and thus the Company did not acquire substantive processes capable of producing outputs. As such, no goodwill was recorded. The Company measured the fair value of the assets and liabilities received, determining the relative fair value was $16.0 million (after paying the $16.0 million for Bayer’s 50% interest) and recorded the difference between that amount and the Company’s carrying amount, which was 0, as a gain within other income (expense). The relative fair value of the assets and liabilities received (exclusive of the $16.0 million paid from Casebia to Bayer to retire Bayer’s interest in the JV) was determined as follows (in thousands):

The value of the reacquired rights related to the intellectual property was determined to be insignificant.

The Company determined that the 2019 Option Agreement should be accounted for under ASC 730-20, Research and Development Expense. This determination was based on the fact that the financial risk associated with the research and development has been transferred to the Company because repayment of any of the funds provided by Bayer depends solely on the results of the research and development having a future economic benefit. The Company further determined that it had two separate obligations under the 2019 Option Agreements, which consist of (i) research and development services and (ii) future delivery of up to 2 options for products in defined fields. The relative fair value of the obligations was determined to be $20.2 million and $4.8 million, respectively. As the Company has accounted for its obligations as a contract to perform research and development for others, with respect to the obligation to perform research and development services the Company will recognize an offset to research and development expense as the research is performed and, with respect to the future delivery of up to two option for products in defined fields, at the earlier of option exercise (at or near IND application filing), expiration, or when commercially reasonable efforts to progress the program have been exhausted.

During the three months ended March 31, 2021 and 2020, the Company recorded a benefit of $4.3 million and $1.9 million, respectively, to research and development expense for qualifying expenses incurred under the 2019 Option Agreement. As of March 31, 2021 and December 31, 2020, t~~The~~he Company has recorded ~~$11.8~~$2.7 million and $7.0 million, respectively, in other current liabilities relating to certain research and development obligations to be satisfied within one year of the balance sheet ~~date and $11.3~~date. As of March 31, 2021, the Company has recorded $4.8 million in other long-term liabilities consisting of the ~~relative fair~~previously allocated value of such obligations to be satisfied beyond one year from the balance sheet date as well as the relative fair value of the options, which is unchanged from December 31, 2020.

The Company had ~~103,901,006~~115,172,786 authorized common shares as of March 31, ~~2020,~~2021, with a par value of CHF 0.03 per share. Share Capital consisted of the following:

		As of					As of
Type of Share Capital	Conditional Capital	March 31, 2020		December 31, 2019		Conditional Capital	March 31, 2021		December 31, 2020
Common shares	Registered share capital		61,036,566		61,036,566	Registered share capital		80,321,227		75,133,951
Common shares	Authorized share capital		19,246,503		19,246,503	Authorized share capital		14,125,426		17,625,426
Common shares	Conditional share capital - Bonds or similar debt instruments		4,919,700		4,919,700	Conditional share capital - Bonds or similar debt instruments		4,919,700		4,919,700
Common shares	Conditional share capital - Employee benefit plans		18,698,237		18,698,237	Conditional share capital - Employee benefit plans		15,806,433		17,493,709
	Total		103,901,006		103,901,006	Total		115,172,786		115,172,786

In August ~~2018,~~2019, the Company entered into an Open Market Sale Agreement^SM~~, or the 2018 ATM,~~ with ~~Jefferies LLC, or~~ Jefferies under which ~~Jefferies~~the Company was able to offer and sell, from time to time at its sole discretion through Jefferies, as its sales agent, its common shares, par value of CHF 0.03 per share, or the August 2019 Sales Agreement. In August 2019, the Company filed a prospectus supplement with the SEC to offer and sell, from time to time, common shares having aggregate gross proceeds of up to ~~$125.0~~$200.0 million, or the 2019 ATM. During the year ended December 31, 2020, the Company issued and sold an aggregate of 2.2 million common shares under the 2019 ATM at an average price of $89.47 per share for aggregate proceeds of $195.5 million, which were net of equity issuance costs of $4.5 million.

In December 2020, in connection with the August 2019 ~~following the termination of the 2018 ATM by its terms,~~Sales Agreement, the Company ~~entered into~~filed a ~~new Open Market Sale Agreement~~^SMprospectus supplement with ~~Jefferies, or~~ the ~~2019 ATM, under which the Company may~~SEC to offer and sell, from time to time, common shares having aggregate gross proceeds of up to ~~$200.0 million.~~

~~During~~$350.0 million, or the ~~three months ended March 31, 2019, the Company sold 631,580 shares of common stock under the 2018 ATM for net cash proceeds of $23.9 million, after deducting commission fees of $0.7 million. For~~2020 ATM. During the year ended December 31, ~~2019,~~2020, the Company issued and sold an aggregate of ~~2.8~~1.8 million common shares under the ~~2018~~2020 ATM at an average price of ~~$44.38~~$169.57 per share for aggregate proceeds of ~~$120.6~~$298.0 million, which were net of equity issuance costs of ~~$4.4~~$4.5 million. Additional equity issuance costs for stamp taxes related to shares sold in 2020 related to the 2019 ATM and 2020 ATM were $4.9 million, of which $4.0 million was payable as of December 31, 2020.

In January 2021, the Company issued and sold under the 2020 ATM an aggregate of 0.3 million common shares at an average price of $162.46 per share with aggregate proceeds of $46.7 million, which were net of equity issuance costs of $0.7 million. An additional $0.5 million of stamp taxes on this amount was payable as of March 31, 2021.

In January 2021, in connection with the August 2019 Sales Agreement, the Company filed a prospectus supplement with the SEC to offer and sell, from time to time, common shares having aggregate gross proceeds of up to $600.0 million, or the 2021 ATM. As of March 31, 2021, the Company has issued and sold an aggregate of 1.1 million common shares under the 2021 ATM at an average price of $169.82 per share for aggregate proceeds of $177.8 million, which were net of equity issuance costs of $2.4 million. An additional $1.8 million of stamp taxes on this amount was payable as of March 31, 2021.

In July 2020, the Company ~~has 0t yet issued or~~ sold ~~any securities under~~7.4 million common shares through an underwritten public offering (inclusive of shares sold pursuant to the ~~2019 ATM.~~ exercise of the underwriters’ option to purchase additional shares) at a public offering price of $70.00 per share for aggregate net proceeds of $484.8 million, which were net of equity issuance costs and stamp tax of $32.5 million.

During the three months ended March 31, ~~2020 and 2019,~~2021, the Company recognized the following stock-based compensation expense (in thousands):

	Three Months Ended March 31,				Three Months Ended March 31,
	2020		2019		2021		2020
Research and development	$	7,362	$	4,962	$	12,845	$	7,362
General and administrative		6,789		4,709		9,247		6,789
Loss from equity method investment		-		1,025
Total	$	14,151	$	10,696	$	22,092	$	14,151

The following table summarizes stock option activity for the three months ended March 31, ~~2020:~~2021:

Shares
(in thousands)

Weighted-
average
exercise price
per share

Outstanding at December 31, 2019

7,782,437

$
31.30

Granted

887,458

$
45.73

Exercised

(88,466
)

$
19.37

Cancelled or forfeited

(86,114
)

$
42.20

Outstanding at March 31, 2020

8,495,315

$
32.82

Exercisable at March 31, 2020

3,697,079

$
25.25

Vested and expected to vest at March 31, 2020

8,495,315

$
32.82

	Shares			Weighted- average exercise price per share
Outstanding at December 31, 2020		8,101,980		$	42.44
Granted		882,558			139.05
Exercised		(342,471	)		33.12
Cancelled or forfeited		(69,404	)		43.31
Outstanding at March 31, 2021		8,572,663		$	52.76
Exercisable at March 31, 2021		3,962,897		$	31.48
Vested and expected to vest at March 31, 2021		8,572,663		$	52.76

As of March 31, ~~2020,~~2021, total unrecognized compensation expense related to stock options was ~~$107.3~~$191.3 million, which the Company expects to recognize over a remaining weighted-average period of ~~2.8~~3.1 years.

The following table summarizes restricted stock activity for the three months ended March 31, ~~2020:~~ 2021:

	Restricted Stock			Weighted- Average Grant Date Fair Value		Restricted Stock			Weighted- Average Grant Date Fair Value
Unvested balance as of December 31, 2019		699,534		$	56.53
Unvested balance as of December 31, 2020							894,092		$	70.55
Granted		277,970			45.78		278,645			136.16
Vested		(5,000	)		33.58		(109,355	)		40.64
Cancelled or forfeited		(5,444	)		51.18		(11,003	)		57.94
Unvested balance as of March 31, 2020		967,060		$	53.59
Unvested balance as of March 31, 2021							1,052,379		$	91.16

As of March 31, ~~2020,~~2021, total unrecognized compensation expense related to unvested restricted common shares was ~~$39.9~~$76.5 million, which the Company expects to recognize over a remaining weighted-average vesting period of ~~2.4~~2.8 years.

Basic net loss per share is calculated by dividing net loss attributable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is calculated by dividing the net loss attributable to common shareholders by the weighted-average number of common share equivalents outstanding for the period, including any dilutive effect from outstanding stock options and warrants using the treasury stock method. The Company’s net loss is net loss attributable to common shareholders for all periods presented.

The following common stock equivalents were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect (in thousands):

	Three Months Ended March 31,				Three Months Ended March 31,
	2020		2019		2021		2020
Outstanding options		8,495,315		8,032,582		8,572,663		8,495,315
Unvested restricted common shares		967,060		345,296		1,052,379		967,060
ESPP						10,594		—
Total		9,462,375		8,377,878		9,635,636		9,462,375

During the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, the Company recorded an income tax provision of ~~$0.4~~$0.6 million and ~~$0.1~~$0.4 million, respectively, representing an effective tax rate of -0.5% and ~~-0.2%~~-0.5%, respectively. The income tax provision is primarily attributable to the year-to-date pre-tax income earned by the Company’s U.S. subsidiary. The difference in the statutory tax rate and effective tax rate is primarily a result of the jurisdictional mix of earnings and losses that are not benefited. The Company maintains a valuation allowance against certain deferred tax assets that are not more-likely-than-not realizable. As a result, the Company has not recognized a tax benefit related to losses generated in Switzerland in the current periods. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, was enacted in the United ~~States. The~~States, the impact of ~~the CARES Act on~~which was not material.

As described in Note 7, in December 2017, the Company and Vertex entered into the JDA pursuant to which the parties agreed to, among other things, co-develop and co-commercialize CTX001 and other product candidates specified in the JDA.

On April 16, 2021, the Company and Vertex agreed to amend and restate the JDA and entered into an Amended and Restated Joint Development and Commercialization Agreement (the “A&R JDCA”), pursuant to which the parties agreed to, among other things, (a) adjust the governance structure for the ~~period ending March 31, 2020 was not material.~~

~~Prior~~collaboration and adjust the responsibilities of each party thereunder; (b) adjust the allocation of net profits and net losses between the parties with respect to CTX001 only; and (c) exclusively license (subject to the ~~termination~~Company’s reserved rights to conduct certain activities) certain intellectual property rights to Vertex relating to the specified product candidates and products (including CTX001) that may be researched, developed, manufactured and commercialized under such agreement.

The A&R JDCA includes, among other things, provisions relating to the following:

Governance; Activities. The Company and Vertex will establish the following committees: (i) a joint oversight committee to provide high-level oversight and (ii) a transition committee to provide for forum planning, discussing and sharing information regarding certain transition activities until completion of such activities. Effective as of the ~~joint venture in December 2019, Casebia was a related party under ASC 850,~~ ~~Related Party Disclosures, or ASC 850~~. ~~Refer to Note 5, “Joint Venture with Bayer Healthcare LLC.~~”

~~In the fourth quarter of 2018, upon becoming owners of record of more than 10%~~closing of the ~~voting interest~~transaction contemplated by the A&R JDCA, the previously established collaboration strategy team and all working groups established by such team will be disbanded. Each of the committees will contain an equal number of representatives from each of the Company and Vertex. The A&R JDCA provides that, subject to the terms and conditions of such agreement, Vertex ~~became a related party under ASC 850~~will have the right to conduct all research, development, manufacturing and commercialization activities relating to the specified product candidates and products (including CTX001) throughout the world subject to the Company’s reserved right to conduct certain activities. The Company continues to participate in certain aspects of such activities in an observer capacity unless and to the extent otherwise agreed to by the parties.

Financial Terms. ~~As of July 2, 2019, upon becoming owners of record of less than 10%~~In connection with the closing of the ~~voting interest~~transaction contemplated by the A&R JDCA, the Company will receive a $900 million up-front payment from Vertex and a one-time $200 million milestone payment upon receipt by Vertex of the first marketing approval of the initial product candidate from the U.S. Food and Drug Administration or the European Commission. The net profits and net losses, as applicable, incurred under the A&R JDCA with respect to all product candidates and products specified in the A&R JDCA other than CTX001 shall be shared equally between the Company and Vertex. With respect to CTX001 only, the net profits and net losses, as applicable, incurred under the A&R JDCA through July 1, 2021 (or such applicable later date in the event HSR clearance has not been received by October 1, 2021) in connection with the initial shared product (i.e., CTX001) will be shared equally between the Company and Vertex, ~~was~~and beginning July 1, 2021 (or such applicable later date in the event HSR clearance has not been received by October 1, 2021), the net profits and net losses, as applicable, incurred under the A&R JDCA will be allocated 40% to the Company and 60% to Vertex.

Termination. Either party can terminate the A&R JDCA upon the other party’s material breach, subject to specified notice and cure provisions, or, in the case of Vertex, in the event that the Company becomes subject to specified bankruptcy, winding up or similar circumstances. Either party may terminate the A&R JDCA in the event the other party commences or participates in any action or proceeding challenging the validity or enforceability of any patent that is licensed to such challenging party pursuant to the A&R JDCA. Vertex also has the right to terminate the A&R JDCA for convenience at any time after giving prior written notice.

If circumstances arise pursuant to which a party would have the right to terminate the A&R JDCA on account of an uncured material breach, such party may elect to keep the A&R JDCA in effect and cause such breaching party to be treated as if it had exercised its opt-out rights with respect to the products associated with such uncured material breach (described below) and the royalties payable to the breaching party would be reduced by a specified percentage.

Opt-Out Rights. Either party may opt out of the development of a product candidate under the A&R JDCA after predetermined points in the development of the product candidate, on a candidate-by-candidate basis. In the event of such opt-out, the party opting-out will no longer ~~a related~~share in the net profits and net losses associated with such product candidate and, instead, the opting-out party will be entitled to high single to mid-teen percentage royalties on the net sales of such product, if commercialized.

The closing of the transaction contemplated by the A&R JDCA is subject to certain conditions including the expiration of the waiting period under ~~ASC 850. Refer to Note 5, “Agreements with Vertex Pharmaceuticals Incorporated~~the Hart-Scott-Rodino Antitrust Improvements Act and ~~certain of its subsidiaries~~.”

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (i) our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and (ii) our audited consolidated financial statements and related notes and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the Securities and Exchange Commission, or the SEC, on February ~~12, 2020.~~16, 2021. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and impact and potential impacts on our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including, without limitation, those factors set forth in the “Risk Factors” section of ~~this Quarterly Report on Form 10-Q and the “Risk Factors” section of~~ our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020 and the “Risk Factors” section of subsequent Quarterly Reports on Form 10-Q, including this Quarterly Report on Form 10-Q, our actual results or timing of certain events could differ materially from the results or timing described in, or implied by, these forward-looking statements.

InSince March 2020, we ~~announced initial~~have been evaluating the actual and potential business impacts related to the outbreak of a novel strain of virus named SARS-CoV-2 (severe acute respiratory syndrome 2), or coronavirus, which causes coronavirus disease, or COVID-19. As a result of the coronavirus pandemic, we have experienced, and may further experience, disruptions, pauses and/or delays that have and could further adversely impact our business operations, and/or associated timelines. As we gradually return to work in accordance with state and local regulations, we maintain temporary work-from-home procedures for all employees other than for those personnel and contractors who perform essential activities that must be completed on-site. If negative developments relating to the coronavirus pandemic continue, including as ~~well as~~a result of a continued so-called “resurgence” or additional “waves”, we may be required to restrict on-site staff at our ~~preclinical studies~~offices and laboratories again and at times have limited access to our offices on a temporary and intermittent basis; with respect to our hemoglobinopathies clinical ~~trials.~~ ~~Specifically, while each~~trials, we may elect to pause patient dosing in certain of our ~~Phase 1/2 open-label clinical~~ trials ~~of CTX001~~ ~~for severe hemoglobinopathies~~ (~~CLIMB THAL-111 and~~ ~~CLIMB SCD-121) are currently open for enrollment,~~ ~~since~~again if ICU beds and related healthcare resources ~~are~~become significantly constrained ~~in light of the coronavirus pandemic, no~~again or governmental authorities impose additional ~~patients are currently scheduled to begin dosing in either study at this time. In addition,~~business or travel restrictions; with respect to our immuno-oncology clinical trials, ~~(which are also currently open for enrollment),~~ investigators participating in our clinical trials may not want to take the risk of exposing cancer patients to ~~COVID-19~~the coronavirus since the dosing of patients is conducted within an in-patient ~~setting.~~ ~~In addition,~~setting; and certain aspects of our supply chain ~~have been~~could be disrupted ~~as certain of~~if our third party suppliers and manufacturers ~~have~~ paused their operations again in response to ~~the coronavirus pandemic~~ such negative developments and/or ~~have otherwise encountered delays in providing their services. We continue to evaluate the extent to which these pauses~~as a result of national and ~~delays will impact our ability to manufacture our product candidates for our clinical trials and conduct other research and development operations and maintain applicable timelines.~~local regulations. The ultimate impact of the coronavirus pandemic on our business operations ~~as well as our preclinical studies and clinical trials~~ remains uncertain and subject to change and will depend on future developments, which cannot be accurately predicted. We will continue to monitor the situation closely.

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

We have established a portfolio of therapeutic programs across a broad range of disease areas including hemoglobinopathies, oncology, regenerative medicine and rare diseases.

Our lead product candidate, CTX001, is an investigational, autologous, gene-edited hematopoietic stem cell therapy that is being evaluated for the treatment of transfusion-dependent beta thalassemia, or TDT, and severe sickle cell disease, or SCD. CTX001 is being developed under a ~~co-development~~joint development and ~~co-commercialization~~commercialization agreement between us and Vertex Pharmaceuticals Incorporated and certain of its subsidiaries, or Vertex. Please see Part II, Item 5 of this Quarterly Report on Form 10-Q for additional information regarding this collaboration.

We and Vertex are investigating CTX001 in aan ongoing Phase 1/2 open-label clinical trial, CLIMB THAL-111, that is designed to assess the safety and efficacy of a single dose of CTX001 in patients ages 1812 to 35 with TDT. In the fourth quarter of 2019, we expanded the TDT ~~non-beta~~patient population for CTX001 to include beta zero/beta zero subtypes. The first two patients in the trial ~~will be~~were treated sequentially and, ~~pending~~following data from the initial two patients indicating successful engraftment and an acceptable safety profile, the trial ~~will open~~opened for ~~broader~~ concurrent ~~enrollment.~~dosing. CLIMB THAL-111 is designed to ~~enroll up to 45 patients and~~ follow patients for approximately two years after infusion. Each patient will be asked to participate in a long-term follow-up study. CTX001 has been granted Regenerative Medicine Advanced Therapy, or RMAT, designation, as well as Fast Track Designation and Rare Pediatric Disease designation by the ~~United States Federal~~U.S. Food and Drug Administration, or FDA, for the treatment of TDT. In addition, CTX001 for the treatment of TDT ~~as well as~~ has ~~been granted~~received orphan drug designation, or ODD, by the FDA and European ~~Commission. Enrollment is ongoing at multiple clinical trial sites globally.~~Commission; and CTX001 has been granted Priority Medicines (PRIME) designation by the European Medicines Agency for the treatment of TDT. In the fourth quarter of ~~2019,~~2020, we released ~~preliminary~~updated clinical data from the first ~~patient~~seven patients with TDT treated with CTX001 ~~with TDT,~~during the Scientific Plenary Session at the ASH Annual Meeting and ~~we expanded the TDT patient population for CTX001 to include beta zero/beta zero subtypes.~~Exposition.

We and Vertex are also investigating CTX001 in aan ongoing Phase 1/2 open-label clinical trial, CLIMB SCD-121, that is designed to assess the safety and efficacy of a single dose of CTX001 in patients ages 1812 to 35 with severe SCD. Similar to the trial in ~~beta thalassemia,~~TDT, the first two patients in the trial ~~will be~~were treated sequentially and, ~~pending~~following data from the initial two patients indicating successful engraftment and an acceptable safety profile, the trial ~~will open~~opened for ~~broader~~ concurrent ~~enrollment.~~dosing. CLIMB SCD-121 is designed to ~~enroll up to 45 patients and~~ follow patients for approximately two years after infusion. Each patient will be asked to participate in a long-term follow-up study. CTX001 has been granted RMAT Designation, as well as Fast Track Designation and Rare Pediatric Disease designation by the FDA for the treatment of SCD. In addition, CTX001 for the treatment of SCD ~~as well as~~has received ODD by the FDA and European ~~Commission. Enrollment is ongoing at multiple clinical trial sites globally.~~Commission; and CTX001 has been granted Priority Medicines (PRIME) designation by the European Medicines Agency for the treatment of SCD. In the fourth quarter of ~~2019,~~2020, we released ~~preliminary~~updated clinical data from the first ~~patient~~three patients with SCD treated with CTX001 ~~with severe SCD.~~during the Scientific Plenary Session at the ASH Annual Meeting and Exposition.

In addition, we are developing our own portfolio of CAR-T cell product candidates based on our gene-editing technology.

CTX110. Our lead immuno-oncology product candidate, CTX110, is a healthy donor-derived gene-edited allogeneic CAR-T investigational therapy targeting cluster of differentiation 19, or ~~CD19, for the treatment of CD19+ malignancies.~~CD19. CTX110 is being investigated in aan ongoing Phase 1 single-arm, multi-center, open-label clinical trial, CARBON, that is designed to assess the safety and efficacy of several dose levels of CTX110 for the treatment of relapsed or refractory B-cell malignancies. In October 2020, we released initial top-line data from the ongoing CARBON clinical trial.

CTX120. CTX120 is a healthy donor-derived gene-edited allogeneic CAR-T investigational therapy targeting B-cell maturation antigen. CTX120 is being investigated in an ongoing Phase 1 single-arm, multi-center, open-label clinical trial that is designed to assess the safety and efficacy of ~~CTX110 for the treatment of relapsed or refractory B-cell malignancies. The multi-center, open-label clinical trial is designed to enroll up to 95 patients and investigate~~ several dose levels ~~of CTX110. The trial is currently enrolling at multiple clinical trial sites globally.~~

~~CTX120~~. CTX120 is a healthy donor-derived gene-edited allogeneic CAR-T therapy targeting B-cell maturation antigen. CTX120 is being investigated in a Phase 1 clinical trial that is designed to assess the safety and efficacy of CTX120 for the treatment of relapsed or refractory multiple myeloma. ~~The multi-center, open-label clinical trial is designed to enroll up to 80 patients and investigate several dose levels of CTX120. The trial is currently enrolling.~~CTX120 has received ODD by the FDA.

CTX130. CTX130 is a healthy donor-derived gene-edited allogeneic CAR-T investigational therapy targeting cluster of differentiation 70, or CD70, an antigen expressed on various solid tumors and hematologic malignancies. CTX130 is being developed for the treatment of both solid tumors, such as renal cell carcinoma, and T-cell and B-cell hematologic malignancies. CTX130 is being investigated in two ongoing independent Phase 1 single-arm, multi-center, open-label clinical trials that are designed to assess the safety and efficacy of several dose levels of CTX130 for the treatment of relapsed or refractory renal cell carcinoma and various types of lymphoma, respectively.

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

Vertex. We established our initial collaboration agreement in 2015 with ~~Vertex Pharmaceuticals Incorporated and certain subsidiaries, or~~ Vertex, which focused on TDT, SCD, cystic fibrosis and select additional indications. In December 2017, we entered into a joint development and commercialization agreement with Vertex pursuant to ~~co-develop~~which, among other things, we are co-developing and preparing to co-commercialize CTX001 ~~as part~~for TDT and SCD. On April 16, 2021 we and Vertex agreed to amend and restate our existing joint development and commercialization agreement, pursuant to which, among other things, we will continue to develop and prepare to commercialize CTX001 for TDT and SCD in partnership with Vertex, subject to, among other things, certain adjustments to the governance structure for the collaboration and responsibilities of ~~that collaboration.~~ the parties. Please see Part II, Item 5 of this Quarterly Report on Form 10-Q for additional information. In addition, in June 2019, we ~~expanded our collaboration and~~ entered into a strategic collaboration and license agreement for the development and commercialization of products for the treatment of Duchenne muscular dystrophy and myotonic dystrophy type 1.1.

ViaCyte. We entered into the ViaCyte Collaboration Agreement in September 2018 with ViaCyte, Inc., or ViaCyte, to pursue the discovery, development and commercialization of gene-edited allogeneic stem cell therapies for the treatment of diabetes. The combination of ViaCyte’s stem cell capabilities and our ~~gene-editing~~gene editing capabilities has the potential to enable a beta-cell replacement product that may deliver durable benefit to patients without the need for immune suppression.

Bayer. In the fourth quarter of 2019, we entered into a series of transactions, or the Bayer Transaction, pursuant to which we and Bayer terminated our 2015 agreement, which created the joint venture, Casebia Therapeutics Limited Liability Partnership, or Casebia, to discover, develop and commercialize CRISPR/Cas9 gene-editing therapeutics to treat the genetic causes of bleeding disorders, autoimmune disease, blindness, hearing loss and heart disease. In connection thereto, Casebia became a wholly-owned subsidiary of ours. We and Bayer also entered into a new option agreement pursuant to which Bayer has an option to co-develop and co-commercialize two products for the diagnosis, treatment or prevention of certain autoimmune disorders, eye disorders, or hemophilia A disorders for a specified period of time, or, under certain circumstances, exclusively license such optioned products.

Refer to Note 79 of the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on February 16, 2021 for a description of the key terms of our arrangement with ViaCyte. Refer to Note 57 of the notes to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of the key terms of our arrangements with Vertex and Bayer.

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

~~All of our~~Our revenue to date has been ~~collaboration revenue.~~primarily derived from collaborations with partners. We were profitable for the year ended December 31, 2019 due to collaboration revenue from Vertex and the gain from consolidating Casebia, but we do not expect to sustain our profitability in future years. With the exception of the year ended December 31, 2019, we have incurred significant net operating losses each year since our inception and we expect to

continue to incur net operating losses for the foreseeable future. As of March 31, ~~2020,~~2021, we had ~~$889.7~~$1,806.2 million in cash, ~~and~~ cash equivalents and marketable securities and an accumulated deficit of ~~$294.4~~$686.7 million. We expect to continue to incur significant expenses and increasing operating losses for the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase significantly as we continue our current research programs and development activities; seek to identify additional research programs and additional product candidates; conduct initial drug application supporting preclinical studies and initiate clinical trials for our product candidates; initiate preclinical testing and clinical trials for any other product candidates we identify and develop; maintain, expand and protect our intellectual property estate; further develop our gene editing platform; hire additional research, clinical and scientific personnel; incur facilities costs associated with such personnel growth; develop manufacturing infrastructure; and incur additional costs associated with operating as a public company.

~~Financial Overview~~ In addition, we expect to spend significantly more on capital expenditures than we have historically incurred in order to construct and build out our new U.S. headquarters for research and development in Boston, Massachusetts, and our cell therapy manufacturing facility in Framingham, Massachusetts. Please refer to Part I, Item 2 of our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 16, 2021 for more information about these facilities.

We have not generated any revenue to date from product sales and do not expect to do so in the near future. Revenue recognized for the three months ended March 31, ~~2020~~2021 and ~~2019, respectively,~~2020 was not material. For additional information about our revenue recognition policy, see Note 2, “Summary of Significant Accounting Policies,” in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on February ~~12, 2020,~~16, 2021, as well as Note 57 of the notes to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

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

Research and development costs are expensed as incurred. Nonrefundable advance payments for research and development goods or services to be received in the future are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed. At this time, we cannot reasonably estimate or know the nature, timing or estimated costs of the efforts that will be necessary to complete the development of any product candidates we may identify and develop. This is due to the numerous risks and uncertainties associated with developing such product candidates, including the uncertainty of:

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

Except for activities we perform in connection with our collaboration with Vertex and ViaCyte, as well as ~~certain arrangements we had~~in connection with ~~Casebia prior to~~ the Bayer Transaction, we do not track research and development costs on a program-by-program basis.

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

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

We anticipate that our general and administrative expenses will increase in the future to support continued research and development activities, and potential commercialization of our product ~~candidates and increased costs of operating as a public company.~~candidates. In addition, we anticipate increased expenses related to the reimbursements of third-party patent related expenses in connection with certain of our in-licensed intellectual property.

Other income (expense), net consists primarily of interest income earned on investments.

Comparison of three months ended March 31, ~~2020~~2021 and ~~2019~~2020 (in thousands):

	Three Months Ended March 31,						Period to Period			Three Months Ended March 31,						Period to Period
	2020			2019			Change			2021			2020			Change
Revenue:
Collaboration revenue	$	157		$	328		$	(171	)	$	202		$	157		$	45
Grant revenue											337			—			337
Total revenue											539			157			382
Operating expenses:
Research and development		54,193		$	33,822			20,371			90,565			54,193			36,372
General and administrative		19,550		$	14,929			4,621			24,517			19,550			4,967
Total operating expenses		73,743			48,751			24,992			115,082			73,743			41,339
Loss from operations		(73,586	)		(48,423	)		(25,163	)		(114,543	)		(73,586	)		(40,957	)
Other income, net		4,232		$	100			4,132			1,955			4,232			(2,277	)
Net loss before income taxes		(69,354	)		(48,323	)		(21,031	)		(112,588	)		(69,354	)		(43,234	)
Provision for income taxes		(377	)	$	(85	)		(292	)		(575	)		(377	)		(198	)
Net loss	$	(69,731	)	$	(48,408	)	$	(21,323	)	$	(113,163	)	$	(69,731	)	$	(43,432	)

Collaboration revenue for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively, was not material.Please refer to Note 57 of the notes to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further information.

Research and development expenses were $90.6 million for the three months ended March 31, 2021, compared to $54.2 million for the three months ended March 31, ~~2020, compared to $33.8 million for the three months ended March 31, 2019.~~2020. The increase of approximately ~~$20.4~~$36.4 million was primarily attributable to the following:

General and administrative expenses were $24.5 million for the three months ended March 31, 2021, compared to $19.5 million for the three months ended March 31, ~~2020, compared to $14.9 million for the three months ended March 31, 2019.~~2020. The increase of approximately ~~$4.6~~$5.0 million was primarily attributable to the following:

Other income was ~~$4.2~~$2.0 million for the three months ended March 31, ~~2020,~~2021, compared to ~~$0.1~~$4.2 million of income for the three months ended March 31, ~~2019.~~2020. The change was primarily due to interest income earned on cash, ~~and~~ cash equivalents and marketable securities for the three months ended March 31, ~~2020.~~2021.

As of March 31, ~~2020,~~2021, we had cash, ~~and~~ cash equivalents and marketable securities of approximately ~~$889.7~~$1,806.2 million, of which approximately ~~$840.8~~$800.2 million was held outside of the United States.

In ~~April~~August 2019, we entered into a Open Market Sale Agreement^SM with Jefferies LLC, or Jefferies, under which we are able to offer and sell, from time to time at our sole discretion through Jefferies, as our sales agent, our common shares, par value of CHF 0.03 per share, or the August 2019 Sales Agreement. In December 2020, we~~received a payment of $25.0 million~~ in connection with the August 2019 ~~collaboration agreement~~Sales Agreement, we filed a prospectus supplement with ~~Vertex. Refer~~the SEC to ~~Note 5, “Significant Contracts”~~offer and sell from time to time common shares having aggregate gross proceeds of up to $350.0 million, or the 2020 ATM. In January 2021, we issued and sold under the 2020 ATM an aggregate of 0.3 million common shares at an average price of $162.46 per share with aggregate proceeds of $46.7 million, which were net of equity issuance costs of $0.7 million. An additional $0.5 million of stamp taxes on this amount was payable at March 31, 2021.

In January 2021, in ~~our unaudited condensed consolidated financial statements included in~~connection with the August 2019 Sales Agreement, we filed a prospectus supplement with the SEC to offer and sell from time to time common shares having aggregate gross proceeds of up to $600.0 million. As of March 31, 2021, we have issued and sold an aggregate of 1.1 million common shares under the 2021 ATM at an average price of $169.82 per share for aggregate proceeds of $177.8 million, which were net of equity issuance costs of $2.4 million. An additional $1.8 million of stamp taxes on this ~~Quarterly Report on Form 10-Q for a discussion.~~amount was payable at March 31, 2021.

We have predominantly incurred losses and cumulative negative cash flows from operations since our inception, and as of March 31, ~~2020,~~2021, we had an accumulated deficit of ~~$294.4~~$686.7 million. We anticipate that we will continue to incur losses for at least the next several years. We expect that our research and development and general and administrative expenses will continue to increase and, as a result, we will need additional capital to fund our operations, which we may raise through public or private equity or debt financings, strategic collaborations, or other sources.

Our primary uses of capital are, and we expect will continue to be, research and development activities, compensation and related expenses, laboratory and related supplies, legal and other regulatory expenses, patent prosecution filing and maintenance costs for our licensed intellectual property and general overhead ~~costs.~~costs, including costs associated with operating as a public company. We expect our expenses to increase compared to prior periods in connection with our ongoing activities, particularly as we continue research and development and preclinical and clinical activities and initiate preclinical studies to support initial drug applications. ~~In addition,~~We also anticipate that we ~~expect to~~will incur ~~additional costs associated with operating~~significant capital expenditures as ~~a public company.~~we develop our manufacturing infrastructure and facilities.

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

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

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

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

	Three Months Ended March 31,						Period to Period			Three Months Ended March 31,						Period to Period
	2020			2019			Change			2021			2020			Change
Net cash used in operating activities	$	(52,175	)	$	(43,737	)	$	(8,438	)	$	(100,663	)	$	(52,175	)	$	(48,488	)
Net cash used in investing activities		(2,991	)		(1,097	)		(1,894	)		(167,898	)		(2,991	)		(164,907	)
Net cash provided by financing activities		1,132			25,726			(24,594	)		225,991			1,132			224,859
Effect of exchange rate changes on cash		(25	)		8			(33	)		5			(25	)		30
Net decrease in cash	$	(54,059	)	$	(19,100	)	$	(34,959	)
Net increase decrease in cash										$	(42,565	)	$	(54,059	)	$	11,494

Net cash used in operating activities was $100.7 million for the three months ended March 31, 2021, compared to cash used in operating activities of $52.2 million for the three months ended March 31, ~~2020, compared to cash used of $43.7 million for the three months ended March 31, 2019.~~2020. The ~~$8.4~~$48.5 million increase in cash used in operating activities was primarily driven by the increase in net loss of ~~$21.3~~$43.4 million, which was driven by increased spending onin our clinical and pre-clinical stage programs and increased payroll and payroll-related expenses to support overall ~~growth. The increase was offset by an increase of $5.6~~growth, as well as a $14.8 million ~~of non-cash expense and an increase of $7.3~~decrease in net changes of operating assets and liabilities. The increase was offset by $9.7 million increase of non-cash expense related primarily to stock compensation and depreciation.

Net cash used in investing activities for the three months ended March 31, ~~2020~~2021 was ~~$3.0~~$167.9 million, compared to ~~$1.1~~$3.0 million for the three months ended March 31, ~~2019.~~2020. The increase in net cash used in investing activities consisted primarily of purchases of marketable securities and property and equipment.

Net cash provided by financing activities for the three months ended March 31, ~~2020~~2021 was ~~$1.1~~$226.0 million, compared with ~~$25.7~~$1.1 million for the three months ended March 31, ~~2019.~~2020. The net cash provided by financing activities for the three months ended March 31, ~~2020~~2021 consisted of option exercise proceeds, net of issuance costs. ~~The net cash provided by financing activities for the three months ended March 31, 2019 consisted of proceeds from the issuance of~~Additionally, 1.4 million common shares were issued in connection with ~~an at-the-market sales agreement with Jefferies LLC,~~our Open Market Sale Agreement^SM, which resulted in ~~$23.9~~$222.1 million of net cash proceeds, after deducting ~~$0.7~~$3.1 million in ~~commissions,~~equity issuance costs, excluding $2.2 million of stamp taxes which were accrued as ~~well as exercises~~ of ~~stock options.~~March 31, 2021.

The disclosure of our contractual obligations and commitments was reported in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on February ~~12, 2020.~~16, 2021. There have been no material changes from the contractual commitments and obligations previously disclosed in our Annual Report on Form 10-K.

As of March 31, ~~2020,~~2021, we did not have any off-balance sheet arrangements as defined under applicable SEC rules.

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

We believe that our most critical accounting policies are those relating to revenue recognition, variable interest entities and equity-based compensation, and there have been no changes to our accounting policies discussed in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on February ~~12, 2020.~~16, 2021.

Refer to Note 1 of the notes to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.

~~Cash and~~We are exposed to market risk related to changes in interest rates. As of March 31, 2021, we had cash, cash equivalents ~~were held~~and marketable securities of $1,806.2 million, primarily invested in ~~cash deposits~~U.S. treasury securities and government agency securities, corporate bonds, commercial paper and money market ~~funds. The~~accounts invested in U.S. government agency securities. Due to the conservative nature of these instruments, we do not believe that we have a material exposure to interest rate risk. If interest rates were to increase or decrease by 1%, the fair value of our ~~cash and cash equivalents~~investment portfolio would ~~not be significantly affected by either an~~ increase or decrease ~~in interest rates due mainly to the short-term nature of these instruments.~~by an immaterial amount.

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

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934 is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

As of March 31, ~~2020,~~2021, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive officer and principal financial officer have concluded based upon the evaluation described above that, as of March 31, ~~2020,~~2021, our disclosure controls and procedures were effective at the reasonable assurance level.

During the quarter ended March 31, ~~2020,~~2021, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~From time to time, we may become involved in litigation or other legal proceedings relating to claims arising from~~In the ordinary course of ~~business.~~business, we are from time to time involved in lawsuits, investigations, proceedings and threats of litigation related to, among other things, our intellectual property estate (including certain in-licensed intellectual property), commercial arrangements and other matters. Such proceedings may include quasi-litigation, inter partes administrative proceedings in the U.S. Patent and Trademark Office and the European Patent Office involving our intellectual property estate including certain in-licensed intellectual property. There are currently no claims or actions pending against us that, in the opinion of our management, are likely to have a material adverse effect on our business.

There have been no material developments with respect to the legal proceedings previously disclosed in “Item 3. Legal Proceedings” of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 filed with the SEC on February ~~12, 2020.~~16, 2021.

In ~~light of the rapid spread of SARS-CoV-2, which causes coronavirus disease 2019, or COVID-19, in the United States and globally, we~~We are updating and supplementing our risk factors previously disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on February ~~12, 2020~~16, 2021 to add the following new risk factor:

~~Our~~We may not complete the pending transaction with Vertex within the time frame we anticipate, or at all, which could have an adverse effect on our business, ~~may be adversely affected~~financial condition and operations.

In December 2017, we entered into a Joint Development and Commercialization Agreement with Vertex, or the JDA, to, among other things, co-develop and co-commercialize CTX001 and other product candidates specified in the JDA. On April 16, 2021, we and Vertex agreed to amend and restate the JDA and entered into an Amended and Restated Joint Development and Commercialization Agreement, or the A&R JDCA. In connection with the closing of the transaction contemplated by the ~~ongoing coronavirus pandemic.~~

~~Our business could~~A&R JDCA, we will receive a $900 million up-front payment from Vertex and will also be ~~adversely affected by health epidemics in regions where we have concentrations of clinical trial sites or other business activities and could cause significant disruption in~~entitled to receive a one-time $200 million milestone payment upon the ~~operations of third party manufacturers and CROs upon whom we rely. For example, beginning in late 2019, the outbreak~~achievement of a novel strain of virus named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes coronavirus disease 2019, or COVID-19, has evolved into a global pandemic. As of late March 2020, the coronavirus had spread to most regionsregulatory milestone.

transaction contemplated by the A&R JDCA is subject to certain conditions including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and any other required antitrust clearance. As a result, ofwe cannot assure you that the ~~coronavirus pandemic,~~transaction with Vertex will be completed, or that, if completed, it will be within the expected time frame.

If the transaction does not close within the expected time frame or at all, we ~~have experienced and may further experience disruptions that have and could further impact our business, preclinical studies and clinical trials, including:~~

~~The coronavirus pandemic continues to rapidly evolve. The ultimate impact of the coronavirus pandemic on our business operations is highly uncertain and~~ subject to ~~change~~a number of material risks. The price of our common shares may decline to the extent that current market prices reflect a market assumption that the transaction will be completed. The failure to complete the transaction also may result in negative publicity and ~~will depend on future developments, which cannot~~negatively affect our relationship with Vertex. In addition, if the transaction does not close or closing is delayed, we may incur additional costs and be ~~accurately predicted, including~~required to devote additional resources to the ~~duration~~development of the pandemic, additional or modified government actions, new information that will emerge concerning the severity and impact of COVID-19 and the actions taken to contain coronavirus or address its impact in the short and long term, among others. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, our research programs, healthcare systems or the global economy. We will continue to monitor the situation closely.CTX001.

There have been no other material changes from the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on February ~~12, 2020.~~16, 2021. Please refer to the complete Part I, Item 1A of our Annual Report for additional risks and uncertainties we are facing that may have a material adverse effect on our business prospects, financial condition and results of operations.

~~On February 25, 2020, we entered into a License Agreement and Share Purchase Agreement with a private company pursuant to which we in-licensed certain technology and, on March 11, 2020,~~ ~~issued~~ to such company 17,830 common shares as consideration for such in-license. The offer, sale, and issuance of the shares is exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, as a transaction by an issuer not involving a public offering.

As disclosed in our Current Report on Form 8-K filed with the SEC on April 20, 2021 and described in Note 512 of the notes to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, on April 16, 2021, we entered into an Amended and ~~Part I, Item 2, Management’s Discussion~~Restated Joint Development and ~~Analysis~~Commercialization Agreement, or the A&R JDCA, pursuant to which we and Vertex agreed to amend and restate our current joint development and collaboration agreement to, among other things, (a) adjust the governance structure for the collaboration and adjust the responsibilities of ~~Financial Condition~~each party thereunder; (b) adjust the allocation of net profits and ~~Results~~net losses between the parties with respect to CTX001 only; and (c) exclusively license (subject to our reserved rights to conduct certain activities) certain intellectual property rights to Vertex relating to the specified product candidates and products (including CTX001) that may be researched, developed, manufactured and commercialized under such agreement. The closing of ~~Operations, we received $25.0 million from Vertex in April 2020 in connection with achieving~~ the ~~first milestone~~transaction contemplated by the A&R JDCA is subject to certain conditions including the expiration of the waiting period under the ~~2019 collaboration agreement in the first quarter of 2020.~~Hart-Scott-Rodino Antitrust Improvements Act and any other required antitrust clearance.

The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth in the Exhibit Index below.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Switzerland	Not Applicable
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Baarerstrasse 14 6300 Zug, Switzerland	Not Applicable
(Address of principal executive offices)	(zip code)

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Shares, nominal value CHF 0.03 ~~par value~~	CRSP	The Nasdaq Global Market


	Page Number
PART I: FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020	2

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020	3

Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020	4

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020	5

Notes to Condensed Consolidated Financial Statements	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1921

Item 3. Quantitative and Qualitative Disclosures about Market Risk	2528

Item 4. Controls and Procedures	2529

PART II: OTHER INFORMATION

Item 1. Legal Proceedings	2730

Item 1A. Risk Factors	27

~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds~~	2830

Item 5. Other Information	2930

Item 6. Exhibits	2931

SIGNATURES	3032

Exhibit Number		Description of Document

10.1*#		Lease, dated May 5, 2020, by and between CRISPR Therapeutics, Inc. and CRP/KING 33 NY AVE. OWNER, L.L.C.

10.2*#		First Amendment to Lease dated December 2, 2020, by and between CRISPR Therapeutics, Inc. and CRP/KING 33 NY AVE. OWNER, L.L.C.

10.3*†		First Amendment to the Strategic Collaboration and License Agreement dated March 17, 2021, between CRISPR Therapeutics AG and Vertex Pharmaceuticals Incorporated.

10.4*†#		Amended and Restated Joint Development and Commercialization Agreement between, on the one hand, Vertex Pharmaceuticals Incorporated and Vertex Pharmaceuticals (Europe) Limited, and on the other hand, CRISPR Therapeutics AG, CRISPR Therapeutics Limited, CRISPR Therapeutics, Inc., and TRACR Hematology Ltd., dated as of April 16, 2021.

31.1*		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

~~32.1+~~32.1*+		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*		Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)

	CRISPR Therapeutics AG

Dated: April ~~28, 2020~~27, 2021	By:	/s/ Samarth Kulkarni
		Samarth Kulkarni
		Chief Executive Officer
		(Principal Executive Officer)

Dated: April ~~28, 2020~~27, 2021	By:	/s/ Michael Tomsicek
		Michael Tomsicek
		Chief Financial Officer
		(Principal Financial Officer)

Large Accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

	As of March 31,
Reconciliation to amounts within the condensed consolidated balance sheets	2020		2019
Cash and cash equivalents	$	889,712	$	437,549
Restricted cash		5,041		3,163
Cash, cash equivalents and restricted cash at end of period		894,753		440,712

Fair value	Amount
Cash and cash equivalents	$	6,784
Prepaid expenses and other current assets		2,565
Property, plant and equipment, net		9,340
Operating lease assets		11,003
Restricted cash		1,226
Accrued expenses and other current liabilities		(3,915	)
Operating lease liabilities		(11,003	)
Net assets	$	16,000

	Shares (in thousands)			Weighted- average exercise price per share
Outstanding at December 31, 2019		7,782,437		$	31.30
Granted		887,458		$	45.73
Exercised		(88,466	)	$	19.37
Cancelled or forfeited		(86,114	)	$	42.20
Outstanding at March 31, 2020		8,495,315		$	32.82
Exercisable at March 31, 2020		3,697,079		$	25.25
Vested and expected to vest at March 31, 2020		8,495,315		$	32.82