Our management's discussion and analysis of our financial condition and results
of operations are based upon our consolidated financial statements included in
this Annual Report on Form 10-K, which have been prepared by us in accordance
with United States generally accepted accounting principles, or GAAP, and with
Regulation S-X promulgated under the Securities Exchange Act of 1934, as
amended. This discussion and analysis should be read in conjunction with the
consolidated financial statements and the notes thereto included elsewhere in
this Annual Report on Form 10-K. Some of the information contained in this
discussion and analysis or set forth elsewhere in this Annual Report on Form
10-K, including information with respect to our plans and strategy for our
business, includes forward-looking statements that involve risks and
uncertainties. As a result of many factors, including those factors set forth in
Part I, Item 1A. Risk Factors of this Annual Report on Form 10-K, our actual
results could differ materially from the results described in or implied by the
forward-looking statements contained in the following discussion and analysis.

Overview



We are a clinical-stage gene therapy company with a purpose to free people from
a lifetime of genetic disease. Our company is focused on developing potentially
curative HSC gene therapies to treat patients with rare diseases following a
single dose treatment regimen. Our gene therapies employ HSCs that are harvested
from the patient and then modified with a lentiviral vector to insert the
equivalent of a functional copy of the gene that is mutated in the target
disease. We believe that our approach, which is designed to transform stem cells
from patients into therapeutic products, has the potential to provide curative
benefit for a range of diseases. Our initial focus is on a group of rare genetic
diseases referred to as lysosomal disorders, some of which today are primarily
managed with enzyme replacement therapies, or ERTs. These lysosomal disorders
have well-understood biologies, identified patient populations, established
standards of care yet with significant unmet needs, and represent large market
opportunities with approximately $3.5 billion in worldwide net sales in 2022.

Our pipeline is comprised of four HSC gene therapy programs: AVR-RD-02 for the
treatment of Gaucher disease type 1 and type 3; AVR-RD-04 for the treatment of
cystinosis; AVR-RD-05 for the treatment of neuronopathic mucopolysaccharidosis
type II, or MPS-II or Hunter syndrome; and AVR-RD-03 for the treatment of Pompe
disease.

AVR-RD-02 is currently being studied for the treatment of Gaucher disease type 1
in a Company-sponsored Phase 1/2 clinical trial, which we refer to as the Guard1
clinical trial. As of March 20, 2023, four patients have been dosed in the
Guard1 clinical trial, and six patients have been enrolled. We are actively
recruiting additional potential patients for our currently active Guard1 trial
sites. We are also planning for a registrational global Phase 2/3 clinical trial
of AVR-RD-02 for the treatment of Gaucher disease type 3, which we refer to as
the Guard3 clinical trial. We currently are planning for the Guard3 clinical
trial to be initiated in the second half of 2023, subject to regulatory
alignment.

AVR-RD-04 is currently being studied for the treatment of cystinosis by our
collaborators at UCSD in a Phase 1/2 collaborator-sponsored clinical trial.
Enrollment of this clinical trial is complete with a total of six patients
dosed. In addition, based on recent regulatory interactions and feedback and
subject to regulatory clearance, we are planning to initiate activities for a
Company-sponsored Phase 1/2 clinical trial of AVR-RD-04 for the treatment of
cystinosis in the second half of 2023, which is designed to be
registration-enabling.

AVR-RD-05 is being studied for the treatment of Hunter syndrome by our collaborators at The University of Manchester, and we currently expect the Phase 1/2 collaborator-sponsored clinical trial will be initiated in 2023.



AVR-RD-03 is our preclinical program for Pompe disease. While we continue to
advance AVR-RD-03, we are prioritizing our Gaucher disease and cystinosis
clinical programs. As a result, we no longer expect to initiate a clinical trial
for AVR-RD-03 in 2023.

In January 2022, we announced the deprioritization of AVR-RD-01, our
investigational gene therapy program for Fabry disease. This decision was made
due to several factors, including new clinical data showing variable engraftment
patterns from the five most recently dosed patients in the Company's Phase 2
clinical trial of AVR-RD-01 for the treatment of Fabry disease, which we refer
to as the FAB-GT clinical trial. As a result of the deprioritization, the
Company stopped enrollment of its Phase 2 FAB-GT clinical trial and continues to
focus on its other pipeline programs.

Since our inception in 2015, we have devoted substantially all of our resources
to organizing and staffing our company, business planning, raising capital,
acquiring or discovering product candidates and securing related intellectual
property rights, conducting discovery, research and development activities for
our programs and planning for potential commercialization. To date, we have not
generated any product revenue and have financed our operations primarily through

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the private placement of our securities and through public offerings of our
common stock. Through December 31, 2022, we had received gross cash proceeds of
$87.5 million from sales of our preferred stock; gross cash proceeds, before
deducting underwriting discounts and commissions and expenses, of $428.1 million
from sales of our common stock through our initial public offering and follow-on
offerings; and gross cash proceeds, before deducting commissions and expenses,
of $23.5 million from sales of our common stock through our 2019 "at-the-market"
facility, or 2019 ATM Facility.

Additionally, we have incurred significant operating losses. Our ability to
generate product revenue sufficient to achieve profitability will depend heavily
on the successful development and eventual commercialization of one or more of
our current or future product candidates and programs. Our net losses were
$105.9 million and $119.1 million for the years ended December 31, 2022 and
2021, respectively. As of December 31, 2022, we had an accumulated deficit of
$489.4 million. We expect to continue to incur significant expenses for at least
the next several years as we advance our current and future product candidates
from discovery through preclinical development and clinical trials and seek
regulatory approval of our product candidates. Our pipeline consists of four
investigational gene therapies, two of which are currently in clinical
development. As a result, further development of these programs will require us
to expend significant resources to advance these candidates. In addition, if we
obtain marketing approval for any of our product candidates, we expect to incur
significant commercialization expenses related to product manufacturing,
marketing, sales and distribution. We may also incur expenses in connection with
the in-licensing or acquisition of additional product candidates.

We will need substantial additional funding to support our continuing operations
and pursue our growth strategy. Until such time as we can generate significant
revenue from product sales, if ever, we expect to finance our operations with
proceeds from outside sources, with a majority of such proceeds to be derived
from sales of equity, including the net proceeds from our follow-on offerings
and sales of common stock under our 2019 ATM Facility as well as proceeds under
our Term Loan Agreement. We may also pursue additional funding from outside
sources, including our expansion of, or our entry into, new borrowing
arrangements; research and development incentive payments from the Australian
government; and our entry into potential future collaboration agreements for one
or more of our programs. We may be unable to raise additional funds or enter
into such other agreements or arrangements when needed on favorable terms, or at
all. If we fail to raise capital or enter into such agreements as, and when,
needed, we may have to significantly delay, scale back or discontinue the
development and commercialization of one or more of our product candidates or
delay our pursuit of potential in-licenses or acquisitions.

Because of the numerous risks and uncertainties associated with product
development, we are unable to predict the timing or amount of increased expenses
or when or if we will be able to achieve or maintain profitability. Even if we
are able to generate product sales, we may not become profitable. If we fail to
become profitable or are unable to sustain profitability on a continuing basis,
we may be unable to continue our operations at planned levels and be forced to
reduce or terminate our operations.

As of December 31, 2022, we had cash and cash equivalents of $92.6 million. We
believe that our existing cash and cash equivalents as of December 31, 2022 will
enable us to fund our operating expenses and capital expenditure requirements
into the first quarter of 2024. We have based this estimate on assumptions that
may prove to be wrong, and we could exhaust our available capital resources
sooner than we expect. See "Liquidity and Capital Resources." To finance our
operations beyond that point, we will need to raise additional capital, which
cannot be assured.

Components of Our Consolidated Results of Operations

Operating Expenses

Research and Development Expenses



Research and development expenses consist primarily of costs incurred in
connection with the discovery and development of our product candidates. We
expense research and development costs as incurred. These expenses consist of
costs incurred in connection with the development of our product candidates,
including:

•

license maintenance fees and milestone fees incurred in connection with various license agreements;

•


expenses incurred under agreements with contract research organizations, or
CROs, contract manufacturing organizations, or CMOs, as well as investigative
sites and consultants that conduct our clinical trials, preclinical studies and
other scientific development services;

•

manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial materials and commercial materials, including manufacturing validation batches;


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•

costs of purchasing lab supplies and non­capital equipment used in our preclinical activities;

•

employee-related expenses, including salaries, related benefits, travel and stock-based compensation expense for employees engaged in research and development functions;

•

costs related to compliance with regulatory requirements; and

•

allocated facilities costs, depreciation and other expenses, which include rent and utilities.



We recognize external development costs based on an evaluation of the progress
to completion of specific tasks using information provided to us by our service
providers.

Our direct research and development expenses are tracked on a program-by-program
basis for our product candidates and consist primarily of external costs, such
as fees paid to outside consultants, CROs, CMOs, and central laboratories in
connection with our preclinical development, process development, manufacturing
and clinical development activities. Our direct research and development
expenses by program also include fees incurred under license agreements. We do
not allocate employee costs or facility expenses, including depreciation or
other indirect costs, to specific programs because these costs are deployed
across multiple programs and, as such, are not separately classified. We use
internal resources primarily to oversee the research and discovery as well as
for managing our preclinical development, process development, manufacturing and
clinical development activities. These employees work across multiple programs
and, therefore, we do not track their costs by program.

The table below summarizes our research and development expenses related to our product candidates (in thousands):



                                                     Year Ended
                                                    December 31,
                                                  2022         2021
Fabry                                           $  9,644     $ 12,402
Gaucher                                            8,662        6,748
Pompe                                                830        3,073
Cystinosis                                         4,615        5,104
Hunter                                             4,968        2,294
Other research activities                            105          199

Unallocated research and development expenses 43,362 53,294 Total research and development expenses $ 72,186 $ 83,114





Research and development activities are central to our business model. Product
candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
As a result, we expect that our research and development expenses will increase
substantially over the next several years, particularly as we increase personnel
costs, including stock-based compensation, contractor costs and facilities
costs, as we continue to advance the development of our product candidates. We
also expect to incur additional expenses related to milestone and royalty
payments payable to third parties with whom we have entered into license
agreements to acquire the rights to our product candidates.

The successful development and commercialization of our product candidates is
highly uncertain. At this time, we cannot reasonably estimate or know the
nature, timing and costs of the efforts that will be necessary to complete the
preclinical and clinical development of any of our product candidates or when,
if ever, material net cash inflows may commence from any of our product
candidates. This uncertainty is due to the numerous risks and uncertainties
associated with product development and commercialization, including the
uncertainty of:

•

the scope, progress, outcome and costs of our preclinical development activities, clinical trials and other research and development activities;

•

establishing an appropriate safety profile with IND-enabling studies;

•

successful patient enrollment in, and the design, initiation and completion of, clinical trials;

•

the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;

•

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


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•

development and timely delivery of commercial-grade drug formulations that can be used in our clinical trials and for commercial launch;

•

obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;

•

significant and changing government regulation;

•

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

•

maintaining a continued acceptable safety profile of the product candidates following approval; and

•

the risks disclosed in the section entitled "Risk Factors" of this Annual Report on Form 10-K.



We may never succeed in achieving regulatory approval for any of our product
candidates. We may obtain unexpected results from our clinical trials. We may
elect to discontinue, delay or modify clinical trials of some product candidates
or focus on others. Any changes in the outcome of any of these variables with
respect to the development of our product candidates in preclinical and clinical
development could mean a significant change in the costs and timing associated
with the development of these product candidates. For example, if the FDA, or
another regulatory authority were to delay our planned start of clinical trials
or require us to conduct clinical trials or other testing beyond those that we
currently expect, or if we experience significant delays in enrollment in any of
our planned clinical trials, we could be required to expend significant
additional financial resources and time on the completion of clinical
development of that product candidate. Identifying potential product candidates
and conducting preclinical testing and clinical trials is a time-consuming,
expensive and uncertain process that takes years to complete, and we may never
generate the necessary data or results required to obtain marketing approval and
achieve product sales. In addition, our product candidates, if approved, may not
achieve commercial success.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, related benefits, travel and stock-based compensation expense for personnel in executive, finance and administrative functions. General and administrative expenses also include professional fees for legal, consulting, accounting and audit services.



We anticipate that our general and administrative expenses will increase in the
future as we increase our headcount to support our continued research activities
and development of our product candidates. We also anticipate that we will
continue to incur increased accounting, audit, legal, compliance, director and
officer insurance costs as well as investor and public relations expenses
associated with being a public company. We anticipate the additional costs for
these services will substantially increase our general and administrative
expenses. Additionally, if and when we believe a regulatory approval of a
product candidate appears likely, we anticipate an increase in payroll and other
commercialization-related expenses as a result of our preparation for commercial
operations, especially as it relates to the sales and marketing of our product
candidate.

Other (Expense) Income, net

Other (expense) income, net primarily consists of interest income earned on our
cash and cash equivalents, changes in foreign currency, and interest expense
related to our Term Loan Agreement.

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Consolidated Results of Operations

Comparison of the Years Ended December 31, 2022 and 2021



The following table summarizes our consolidated results of operations (in
thousands):

                                           Year Ended
                                          December 31,
                                       2022           2021         Change
Operating expenses:
Research and development            $   72,186     $   83,114     $ (10,928 )
General and administrative              33,248         35,727        (2,479 )
Total operating expenses               105,434        118,841       (13,407 )
Loss from operations                  (105,434 )     (118,841 )      13,407
Other (expense) income:
Interest (expense) income, net            (299 )         (224 )         (75 )
Other expense                             (157 )          (61 )         (96 )

Total other (expense) income, net (456 ) (285 ) (171 ) Net loss

$ (105,890 )   $ (119,126 )   $  13,236

Research and Development Expenses



Research and development expenses decreased by $10.9 million to $72.2 million
for the year ended December 31, 2022, from approximately $83.1 million for the
year ended December 31, 2021. This decrease was driven by a $9.7 million
decrease in personnel-related costs which was impacted by our reduction in
workforce implemented in January 2022, a $2.6 million decrease in our
preclinical costs, and a $1.6 million decrease in manufacturing costs. These
decreases were partially offset by a $2.1 million increase in development costs
and a $0.8 million increase in consulting costs.

General and Administrative Expenses



General and administrative expenses decreased by $2.5 million to $33.2 million
for the year ended December 31, 2022, from $35.7 million for the year ended
December 31, 2021. This decrease was attributable to $1.8 million decrease in
personnel-related costs which was impacted by our reduction in workforce
implemented in January 2022 and a $0.7 million decrease in professional fees.

Other (Expense) Income, net



Other (expense) income, net was $(0.5) million for the year ended December 31,
2022, compared to $(0.3) million of other income, net for the year ended
December 31, 2021. The increase in expense was driven by a $1.6 million increase
in interest expense related to our Term Loan Agreement, which we entered into in
the fourth quarter of 2021 and partially offset by a $1.5 million increase in
interest income earned on short-term money market funds.

Liquidity and Capital Resources



Since our inception, we have not generated any revenue and have incurred
significant operating losses and negative cash flows from our operations. We
have funded our operations to date primarily with proceeds from the sale of
preferred stock and our common stock through our initial public offering, or
IPO, and we have raised additional capital through subsequent follow-on
offerings and our 2019 ATM Facility, as well as through our Term Loan Agreement.
Through December 31, 2022, we had received gross cash proceeds of $87.5 million
from sales of our preferred stock; gross cash proceeds, before deducting
underwriting discounts and commissions and expenses, of $428.1 million from
sales of our common stock through our IPO and follow-on public offerings; $23.5
million in gross proceeds from the sale of our common stock under our 2019 ATM
Facility; and we had drawn $15.0 million in term loans under our Term Loan
Agreement.

On July 1, 2019, we filed a shelf registration statement on Form S-3 with the
SEC, or the July 2019 Shelf, which covers the offering, issuance and sale by us
of up to an aggregate of $200.0 million of our common stock, preferred stock,
debt securities, warrants and/or units. We simultaneously entered into a Sales
Agreement with Cowen and Company, LLC, as sales agent, to provide for the
offering, issuance and sale by us of up to $50.0 million of our common stock
from time to time in "at-the-market" offerings under the July 2019 Shelf. The
July 2019 Shelf was declared effective by the SEC on July 10, 2019.

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On December 20, 2019, we filed a shelf registration statement on Form S-3 with
the SEC, or the December 2019 Shelf, which covers the offering, issuance and
sale by us of up to an aggregate of $250.0 million of our common stock,
preferred stock, debt securities, warrants and/or units. The December 2019 Shelf
was declared effective by the SEC on January 14, 2020.

In July 2019, we closed an underwritten public offering, or the July 2019
Follow-On Offering, under the July 2019 Shelf of 7,475,000 shares of our common
stock at a public offering price of $18.50 per share, which included 975,000
shares of our common stock resulting from the full exercise of the underwriters'
option to purchase additional shares at the public offering price, less
underwriting discounts and commissions. The net proceeds to us from this
offering, after deducting underwriting discounts and commissions and other
offering expenses payable by us, were $129.5 million.

In February 2020, we closed an underwritten public offering, or the February
2020 Follow-On Offering, under the December 2019 Shelf of 4,350,000 shares of
our common stock at a public offering price of $23.00 per share, less
underwriting discounts and commissions. The net proceeds to us from this
offering, after deducting underwriting discounts and commissions and other
offering expenses payable by us, were $93.6 million.

In June 2020, we sold an aggregate of 384,140 shares of common stock under the 2019 ATM Facility for net proceeds, after deducting commissions and other offering expenses payable by us, of $8.1 million.



In November 2020, we closed an underwritten public offering, or the November
2020 Follow-On Offering, of 5,000,000 shares of our common stock at a public
offering price of $15.00 per share, less underwriting discounts and commissions.
The net proceeds to us from the November 2020 Follow-On Offering, after
deducting underwriting discounts and commissions and other offering expenses
payable by us, were $70.2 million.

In May 2021, we sold an aggregate of 1,829,268 shares of common stock under the 2019 ATM Facility for net proceeds, after deducting commissions and other offering expenses payable by us, of $14.5 million. As of December 31, 2022, approximately $26.5 million of common stock remained available for future issuance under the 2019 ATM Facility.



On November 2, 2021, or the Closing Date, we entered into the Term Loan
Agreement. The Term Loan Agreement provided for (i) on the Closing Date, $30.0
million aggregate principal amount of term loans available through October 31,
2023; (ii) an additional $20.0 million in term loan facilities available through
October 31, 2023 upon the achievement of certain regulatory or clinical
milestones prior to the time of draw, or the Milestone Funding; and (iii) an
additional discretionary $15.0 million term loan facility available upon our
request and approval by the Agent and the Lenders, or, collectively, the Term
Loans. We drew $15.0 million in term loans on the Closing Date. As a result of
the deprioritization of our Fabry disease program, we are no longer able to draw
the $20.0 million of Milestone Funding per the terms of the Term Loan Agreement.
The loan repayment schedule provides for interest only payments until November
1, 2024, followed by consecutive monthly payments of principal and interest. All
unpaid principal and accrued and unpaid interest with respect to each term loan
is due and payable in full on October 1, 2026.

In July 2022, the July 2019 Shelf expired, and on November 8, 2022, we filed a
shelf registration statement on Form S-3 with the SEC, or the November 2022
Shelf, which covers the offering, issuance and sale by us of up to an aggregate
of $250.0 million of our common stock, preferred stock, debt securities,
warrants and/or units. The December 2019 Shelf expired in December 2022, and the
November 2022 Shelf carried forward unsold securities previously covered by the
December 2019 Shelf, thus registering an aggregate total of $250.0 million of
our common stock, preferred stock, debt securities, warrants and/or units.
Because the 2019 ATM Facility was established under the July 2019 Shelf that has
expired, in connection with the November 2022 Shelf, we simultaneously entered
into a new Sales Agreement with Cowen and Company, LLC, as sales agent, to
provide for the offering, issuance and sale by us of up to $50.0 million of our
common stock from time to time in "at-the-market" offerings under the November
2022 Shelf (the "2022 ATM Facility"). As of the date of this report, we have not
made any sales under the 2022 ATM Facility, and intend to file one or more
prospectuses or prospectus supplements related to this new facility before
making any such sales.

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As of December 31, 2022, we had cash and cash equivalents of $92.6 million. Cash
in excess of immediate requirements is invested primarily with a view to
liquidity and capital preservation. We believe that our existing cash and cash
equivalents as of December 31, 2022 will enable us to fund our operating
expenses and capital expenditure requirements into the first quarter of 2024.
See "Risk Factors" for risks related to our business, financial position and
need for

additional capital.

Cash Flows

The following table summarizes our cash flows for each of the periods presented
(in thousands):

                                                                 Year Ended
                                                                December 31,
                                                            2022             2021
Net cash used in operating activities                   $    (97,208 )   $    (98,025 )
Net cash used in investing activities                           (267 )         (2,461 )
Net cash provided by financing activities                        262

30,371


Net (decrease) increase in cash, cash equivalents and
restricted
  cash                                                  $    (97,213 )   $    (70,115 )




Operating Activities

During the year ended December 31, 2022, operating activities used $97.2 million
of cash and cash equivalents, resulting from our net loss of $105.9 million and
cash used by changes in our operating assets and liabilities of $7.4 million
which was offset by non-cash charges of $16.1 million. Net cash used by changes
in our operating assets and liabilities for the year ended December 31, 2022
consists primarily of a $2.5 million decrease in prepaid expenses and other
current assets, a $3.9 million decrease in accrued expenses and other current
liabilities, a $3.1 million decrease in accounts payable, and a $2.9 million
decrease in current and non-current operating lease liabilities. The increase in
accrued expenses and other current liabilities was primarily due to an increase
in accrued compensation and benefit costs.

During the year ended December 31, 2021, operating activities used $98.0 million
of cash and cash equivalents, resulting from our net loss of $119.1 million,
partially off-set by net cash provided by changes in our operating assets and
liabilities of $1.3 million and non-cash charges of $19.8 million. Net cash
provided by changes in our operating assets and liabilities for the year ended
December 31, 2021 consists primarily of a $2.1 million increase in accrued
expenses and other current liabilities, a $0.4 million decrease in other assets,
and a $0.8 million increase in accounts payable, partially offset by a $2.0
million increase in prepaid expenses and other current assets. The increase in
accrued expenses and other current liabilities was primarily due to an increase
in accrued compensation and benefit costs.

Investing Activities

Net cash used in investing activities was $0.3 million for the year ended December 31, 2022 compared to $2.5 million for the year ended December 31, 2021. The decrease in cash used in investing activities was primarily due to a decrease in purchases of property and equipment.

Financing Activities



Net cash provided by financing activities was $0.3 million for the year ended
December 31, 2022 compared to $30.4 million for the year ended December 31,
2021. The decrease in cash provided by financing activities was primarily due to
the proceeds of $15.0 million from long-term debt, proceeds of $14.6 million
from issuance of common shares under our 2019 ATM facility, net of offering
costs paid, and $0.9 million from proceeds from the exercise of stock options
during the year ended December 31, 2021 which was partially offset by $0.2
million in proceeds from the issuance of shares under our 2018 Employee Stock
Purchase Plan and $0.1 million in proceeds from the exercise of stock options
during the year ended December 31, 2022.

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Funding Requirements



We expect our expenses to increase substantially in connection with our ongoing
activities, particularly as we advance the preclinical activities and clinical
trials of our product candidates. Our expenses will also increase as we:

•

continue our development of our product candidates, including enrollment and dosing of patients in our ongoing clinical trials;

•

initiate additional clinical trials and preclinical studies for our other current and future product candidates;

•

seek to identify and develop or in-license or acquire additional product candidates and technologies;

•

seek to industrialize our HSC gene therapy approach into a robust, scalable and, if approved, commercially viable process;

•

seek marketing approvals for our product candidates that successfully complete clinical trials, if any;

•

establish a sales, marketing and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval;

•

hire and retain additional personnel, such as clinical, quality control, and scientific personnel;

•

expand our infrastructure, office space and facilities to accommodate our employee base, including adding equipment and physical infrastructure to support our research and development; and

•

continue to incur additional public company-related costs.



We believe that our $92.6 million of existing cash and cash equivalents as of
December 31, 2022, will enable us to fund our operating expenses and capital
expenditure requirements into the first quarter of 2024. We have based these
estimates on assumptions that may prove to be wrong, and we could utilize our
available capital resources sooner than we expect. If we receive regulatory
approval for any of our product candidates, we expect to incur significant
commercialization expenses related to product manufacturing, sales, marketing
and distribution, depending on where we choose to commercialize.

Until such time, if ever, that we can generate product revenue sufficient to
achieve profitability, we expect to finance our cash needs through a combination
of equity offerings, debt financings, collaboration agreements, government and
other third-party funding, strategic alliances, licensing arrangements or
marketing and distribution arrangements. Debt financing and preferred equity
financing, if available, may involve agreements that include covenants limiting
or restricting our ability to take specific actions, such as incurring
additional debt, making capital expenditures or declaring dividends. If we raise
additional funds through government and other third-party funding, collaboration
agreements, strategic alliances, licensing arrangements or marketing and
distribution arrangements, we may have to relinquish valuable rights to our
technologies, future revenue streams, research programs 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 products or
product candidates that we would otherwise prefer to develop and market
ourselves.

Contractual Obligations and Commitments



The following table summarizes our contractual obligations as of December 31,
2022 and the effects that such obligations are expected to have on our liquidity
and cash flows in future periods (in thousands):

                                                           Payments Due by Period
                                                 Less than       1 to 3         4 to 5         More than
                                    Total         1 Year          Years         Years           5 Years

Operating lease commitments (1) $ 1,214 $ 1,007 $ 207

  $        -     $           -
Total                              $  1,214     $     1,007     $     207     $        -     $           -



(1) Represents future minimum lease payments under our non-cancelable operating
leases for office and laboratory space, which are located in Cambridge,
Massachusetts and Toronto, Canada. Those leases will expire from April 2024 to
June 2025. The minimum lease payments above do not include any related common
area maintenance charges or real estate taxes.

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We enter into contracts in the normal course of business with CROs, CMOs and
other third parties for clinical trials, preclinical research studies and
testing and manufacturing services. Payments due upon cancellation consist only
of payments for services provided or expenses incurred, including noncancelable
obligations of our service providers, up to the date of cancellation. These
payments are not included in the preceding table as the amount and timing of
such payments are not known.

In addition, pursuant to our license agreements with UHN, BioMarin, The
University of Manchester, Papillon and the Lund University rights holders, we
are required to make certain milestone and royalty payments to our licensors.
See "Business-License Agreements" for additional details regarding our payment
obligations to these licensors.

Critical Accounting Policies and Significant Judgments and Estimates



Our consolidated financial statements are prepared in accordance with GAAP
principles in the United States. The preparation of our consolidated financial
statements and related disclosures requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenue, costs and
expenses, and the disclosure of contingent assets and liabilities in our
financial statements. We base our estimates on historical experience, known
trends and events and various other factors that we believe are reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. We evaluate our estimates and assumptions on an
ongoing basis. Our actual results may differ from these estimates under
different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 "Summary of Significant Accounting Policies" to our consolidated financial statements appearing elsewhere in this Annual Report, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Accrued Research and Development Expenses



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

•

vendors, including central laboratories, in connection with preclinical development activities;

•

CROs and investigative sites in connection with preclinical and clinical studies; and

•

CMOs in connection with drug substance and drug product formulation of preclinical and clinical trial materials.



We base our expenses related to preclinical studies and clinical trials on our
estimates of the services received and efforts expended pursuant to quotes and
contracts with multiple research institutions and CROs that conduct and manage
preclinical studies and clinical trials on our behalf. The financial terms of
these agreements are subject to negotiation, vary from contract to contract and
may result in uneven payment flows. There may be instances in which payments
made to our vendors will exceed the level of services provided and result in a
prepayment of the expense. Payments under some of these contracts depend on
factors such as the successful enrollment of patients and the completion of
clinical trial milestones. In accruing service fees, we estimate the time period
over which services will be performed and the level of effort to be expended in
each period. If the actual timing of the performance of services or the level of
effort varies from the estimate, we adjust the accrual or the amount of prepaid
expenses accordingly. Although we do not expect our estimates to be materially
different from amounts actually incurred, our understanding of the status and
timing of services performed relative to the actual status and timing of
services performed may vary and may result in reporting amounts that are too
high or too low in

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any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.

Stock-Based Compensation



We measure stock options and other stock-based awards granted to employees and
members of our board of directors for their services as directors based on the
fair value on the date of the grant and recognize the corresponding compensation
expense of those awards over the requisite service period, which is generally
the vesting period of the respective award. We have issued stock options,
restricted stock and restricted stock units with service-based vesting
conditions.

Modifications to stock-based awards are treated as an exchange of the original
award for a new award with total compensation equal to the grant-date fair value
of the original award plus any incremental value of the modification. The
incremental value is based on the excess of the fair value of the modified award
over the fair value of the original award immediately before the modification.

Prior to the adoption of Accounting Standards Update (ASU) No. 2018-07,
Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting (ASU 2018-07), as discussed in Note 2 "Summary of
Significant Accounting Policies" to our consolidated financial statements
appearing elsewhere in this Annual Report, the measurement date for non-employee
awards was generally the date the services were completed, resulting in
financial reporting period adjustments to stock-based compensation during the
vesting terms for changes in the fair value of the awards. After the adoption of
ASU 2018-07, the measurement date for non-employee awards is the later of the
adoption date of ASU 2018-07, or the date of grant, without change in the fair
value of the award.

We estimate the fair value of each stock option grant using the Black-Scholes
option-pricing model, which uses as inputs the estimated fair value of our
common stock and assumptions we make for the volatility of our common stock, the
expected term of our stock options, the risk-free interest rate for a period
that approximates the expected term of our stock options and our expected
dividend yield.

We determined the assumptions for the Black-Scholes option-pricing model as discussed below. Each of these inputs is subjective and generally requires significant judgment to determine.

•


Determination of the Fair Value of Common Stock. The fair value of our common
stock is determined based on the quoted market price of our common stock. Prior
to our IPO, there was no public market for our common stock, and consequently,
the estimated fair value of our common stock was determined by our board of
directors as of the date of each option grant, with input from management,
considering third-party valuations of our common stock as well as our board of
directors' assessment of additional objective and subjective factors that it
believed were relevant and which may have changed from the date of the most
recent third-party valuation through the date of the grant. These third-party
valuations were performed in accordance with the guidance outlined in the
American Institute of Certified Public Accountants' Accounting and Valuation
Guide, Valuation of Privately-Held-Company Equity Securities Issued as
Compensation. Following the closing of our IPO, it was no longer necessary for
our board of directors to estimate the fair market value of our common stock in
connection with our accounting for granted equity awards.

•

Expected Term. The expected term represents the period that the stock-based awards are expected to be outstanding. The expected term of stock options granted has been determined using the simplified method, which uses the midpoint between the vesting date and the contractual term.

•

Risk-Free Interest Rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant for zero-coupon U.S. Treasury constant maturity notes with terms approximately equal to the stock-based award's expected term.

•


Expected Volatility. Because we do not have long-term trading history of our
common stock, the expected volatility was derived from the average historical
stock volatilities of several public companies within our industry that we
consider to be comparable to our business over a period equivalent to the
expected term of the stock-based awards.

•

Dividend Rate. The expected dividend is zero as we have not paid and do not anticipate paying any dividends in the foreseeable future.



If any of the assumptions used in the Black-Scholes model change significantly,
stock-based compensation for future awards may differ materially compared with
the awards granted previously.

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Emerging Growth Company Status



We are an "emerging growth company," as defined in the JOBS Act, and we may take
advantage of certain exemptions from various reporting requirements that are
applicable to other public companies that are not emerging growth companies. We
may take advantage of these exemptions until we are no longer an emerging growth
company. Section 107 of the JOBS Act provides that an emerging growth company
can take advantage of the extended transition period afforded by the JOBS Act
for the implementation of new or revised accounting standards. We have elected
to use the extended transition period for complying with new or revised
accounting standards and, as a result of this election, our financial statements
may not be comparable to companies that comply with public company effective
dates. We may take advantage of these exemptions up until the last day of the
fiscal year following the fifth anniversary of our IPO or such earlier time that
we are no longer an emerging growth company. We would cease to be an emerging
growth company if we have more than $1.235 billion in annual revenue, we have
more than $700.0 million in market value of our stock held by non-affiliates or
we issue more than $1.0 billion of non-convertible debt securities over a
three-year period.

Off-Balance Sheet Arrangements



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

Recently Issued Accounting Pronouncements



A description of recently issued accounting pronouncements that may potentially
impact our financial position and results of operations is disclosed in Note 2
"Summary of Significant Accounting Policies" to our audited financial statements
appearing elsewhere in this Annual Report.

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