UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

AVEXIS, INC.

2275 Half Day Rd, Suite 200

Bannockburn, Illinois 60015

(847) 572-8280

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

Securities registered pursuant to Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ☒    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐    No ☒ 

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions 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 the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐    No ☒ 

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant based on the closing price of the registrant’s common stock for the last business day of the registrant’s most recently completed second fiscal quarter: $2,265,553,538

As of February 26, 2018, 36,725,399 shares of common stock, $0.0001 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Annual Report on Form 10-K incorporates by reference information (to the extent specific sections are referred to herein) from the registrant’s Proxy Statement for its 2018 Annual Meeting of Stockholders.

SPECIAL NOTE REGARDING FORWARD‑LOOKING STATEMENTS

This Annual Report on Form 10‑K (this “Annual Report”) contains forward‑looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve substantial risks and uncertainties. The forward‑looking statements are contained principally in Part I, Item 1: “Business,” Part I, Item 1A: “Risk Factors,” and Part 2, Item 7: “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but are also contained elsewhere in this Annual Report. In some cases, you can identify forward‑looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions intended to identify statements about the future. These statements speak only as of the date of this Annual Report and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward‑looking statements. We have based these forward‑looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward‑looking statements include, without limitation, statements about the following:

You should refer to “Item 1A. Risk Factors” in this Annual Report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward‑looking statements. As a result of these factors, we cannot assure you that the forward‑looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward‑looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward‑looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. The forward‑looking statements in this Annual Report represent our views as of the date of this Annual Report. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward‑looking statements at some point in the future, we undertake no obligation to publicly update any forward‑looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should, therefore, not rely on these forward‑looking statements as representing our views as of any date subsequent to the date of this Annual Report.

You should read this Annual Report on Form 10‑K and the documents that we reference in this Annual Report on Form 10‑K and have filed as exhibits to this Annual Report on Form 10‑K completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward‑looking statements by these cautionary statements.

TABLE OF CONTENTS 

PART I

Item 1.  Business

Overview

We are a clinical‑stage gene therapy company dedicated to developing and commercializing novel treatments for patients suffering from rare and life‑threatening neurological genetic diseases. Our initial product candidate, AVXS‑101, is our proprietary gene therapy product candidate for the treatment of spinal muscular atrophy, or SMA. SMA is a severe neuromuscular disease characterized by the loss of motor neurons, leading to progressive muscle weakness and paralysis. The incidence of SMA is approximately one in 10,000 live births. SMA is generally divided into sub‑categories termed SMA Type 1, 2, 3 and 4. We are conducting a pivotal clinical trial for AVXS‑101 for the treatment of SMA Type 1, the leading genetic cause of infant mortality. SMA Type 1 is a lethal genetic disorder characterized by motor neuron loss and associated muscle deterioration, resulting in mortality or the need for permanent ventilation support before the age of two for greater than 90% of patients. In the incident population, approximately 60% of SMA patients have Type 1. In our recently completed Phase 1 clinical trial of AVXS‑101 in patients with SMA Type 1, we observed a favorable safety profile, and that AVXS-101 was generally well-tolerated. As of August 7, 2017, all patients in the trial survived event-free at 20 months of age, in contrast to the 8% event-free rate at 20 months demonstrated in an independent, peer-reviewed natural history study of patients with SMA Type 1. Additionally, we observed improved motor function and the attainment of motor milestones such as the ability to sit unassisted in the majority of patients, and in some patients, the ability to crawl, stand and walk — motor milestone achievements that are essentially never seen among untreated patients suffering from SMA Type 1.

The survival motor neuron protein, or SMN, is a critical protein for normal motor neuron signaling and function.  SMA, and the SMA sub‑types, are diagnosed by identifying the existence of a genetic defect in the SMN1 gene, by determining the number of copies of the SMN2 backup gene, which correlates with disease onset and severity and clinical signs and symptoms of the disease. Patients with SMA Type 1 either have experienced a deletion of their SMN1 genes, which prevents them from producing adequate levels of functional SMN protein, or carry a mutation in their SMN1 gene. AVXS‑101 is designed to deliver a fully functional human SMN gene into the nuclei of target cells, including motor neurons that then generates an increase in SMN protein levels, and we believe this will result in improved motor neuron function and patient outcomes. We believe gene therapy is a therapeutic approach that is well‑suited for the treatment of SMA due to the monogenic nature of the disease, meaning it is caused by mutations in or deletions of a single gene. AVXS‑101 is designed to possess the key elements of an optimal gene therapy approach to SMA, potentially enabling a one‑time dose regimen: delivery of a fully functional human SMN gene into target motor neuron cells; production of sufficient levels of SMN protein required to improve motor neuron function; and rapid onset of effect in addition to sustained SMN gene expression. AVXS‑101 utilizes a non‑integrating adeno‑associated virus, or AAV, capsid to deliver a functional copy of a human SMN gene to the patient’s own cells without modifying the existing DNA of the patient. Unlike many other capsids, the AAV9 capsid utilized in AVXS‑101 crosses the blood‑brain barrier, a tight protective barrier which regulates the passage of substances between the bloodstream and the brain, thus allowing for intravenous administration. In addition, AAV9 has been observed in preclinical studies to efficiently target motor neuron cells when delivered via either intrathecal or intravenous administration. AVXS‑101 has a self‑complementary DNA sequence that enables rapid onset of effect and a continuous promoter that is intended to allow for continuous and sustained SMN gene expression. Although the U.S. Food and Drug Administration, or FDA, approved an alternative-splicing drug for the treatment of SMA in December 2016, we believe that there remains significant unmet medical need and interest in a gene replacement therapy for SMA that can act on the underlying defect in the SMN1 gene and that can provide enhanced survival and motor function benefit via a one‑time dose.

The FDA and the European Medicines Agency, or EMA, have each granted AVXS-101 orphan drug designation for the treatment of SMA, and the FDA has granted AVXS-101 fast track designation for the treatment of SMA Type 1. The FDA granted breakthrough therapy designation for AVXS-101 for the treatment of SMA Type 1 in pediatric patients. The FDA established breakthrough therapy designation to facilitate dialogue between the FDA and the sponsor to provide advice on generating evidence needed to support approval of the therapy in an efficient manner with more intensive and interactive guidance on an efficient drug development program, an organizational commitment involving the FDA’s senior managers, and eligibility for rolling review and priority review. We intend to request a pre-

Biologics License Application, or BLA, meeting for AVXS-101 in SMA with the FDA in the second quarter of 2018. The EMA granted access into its PRIority MEdicines, or PRIME, program for AVXS-101 for the treatment of SMA Type 1. PRIME is intended to enhance support for the development of medicines—specifically those that may offer a major therapeutic advantage over existing treatments or benefit patients without treatment options—through early and proactive support by EMA to optimize the generation of robust data and development plans, and potentially expedite the assessment of the marketing authorization application so these medicines may reach patients sooner. In addition, we intend to seek EMA Pre-Submission Scientific Advice in the first half of 2018 to determine if the data from our Phase 1 study of AVXS‑101 may meet the evidentiary requirements for the conditional approval pathway in the European Union.

We are also currently conducting a Phase 1 clinical trial of AVXS-101 for the treatment of SMA Type 2. SMA Type 2 typically presents between six and 18 months of age, and those affected will never walk without support and most will never stand without support. SMA Type 2 results in mortality in more than 30% of patients by the age of 25. In addition to our ongoing clinical trials, we intend to expand our clinical development program of AVXS-101 for the treatment of SMA by initiating three additional clinical trials to further evaluate AVXS-101, including in new patient populations.  First, we intend to initiate a pivotal trial of AVXS-101 for the treatment of SMA Type 1 in Europe during the first half of 2018.  Second, we intend to initiate a trial for pre-symptomatic SMA patients with two, three and four copies of the SMN2 backup gene, who are less than six weeks of age at the time of gene therapy, to evaluate appropriate clinical endpoints of a one-time intravenous, or IV, dose of AVXS-101 in the first half of 2018. Finally, we intend to initiate a pediatric "all comers" trial for approximately 50 patients between approximately six months and 18 years of age who do not qualify for other AVXS-101 trials at the time of gene therapy, to evaluate a one-time intrathecal, or IT, dose of AVXS-101 in the late fourth quarter of 2018 or early 2019.

We have an exclusive, worldwide license with Nationwide Children’s Hospital, or NCH, under certain patent applications related to both the intravenous and intrathecal delivery of AVXS‑101 for the treatment of all types of SMA, and an exclusive, worldwide license, with rights to sublicense, from REGENXBIO Inc., or REGENXBIO, to any recombinant AAV vector in REGENXBIO’s intellectual property portfolio for the in vivo gene therapy treatment of SMA in humans. In addition, we have a non‑exclusive, worldwide license agreement with Asklepios BioPharmaceutical Inc., or AskBio, under certain patents and patent applications owned by the University of North Carolina and licensed to AskBio for the use of its self‑complementary DNA technology for the treatment of SMA.

In 2013, in connection with the exclusive license agreement with NCH, we formed a collaboration with NCH to explore the use of gene therapy for the treatment of SMA and secured our first institutional investors and expanded our leadership team. Our current operations are a result of this collaboration with NCH and research conducted by our Chief Scientific Officer, Brian Kaspar, Ph.D. Dr. Kaspar has over 20 years of gene therapy experience, and until September 2016 served as a principal investigator in the Center for Gene Therapy at The Research Institute at NCH. NCH is a leading pediatric gene therapy research institute.

In addition to developing AVXS-101 to treat SMA, we plan to develop other novel treatments for two additional rare neurological monogenetic diseases, Rett syndrome and a genetic form of amyotrophic lateral sclerosis caused by mutations in the superoxide dismutase 1 gene, or genetic ALS.

To execute on our mission, we have assembled a management team that includes individuals with expertise in gene therapy, regulatory development, product and clinical development, manufacturing, medical affairs and commercialization, with a history of success in building and operating innovative biotechnology and healthcare companies focused on rare and life‑threatening diseases. This team is led by our President and Chief Executive Officer, Sean P. Nolan, who brings over 26 years of broad leadership and management experience in the biopharmaceutical industry to AveXis. Prior to AveXis, Mr. Nolan was the chief business officer of InterMune, Inc. where he led multiple functions across the organization, including North American commercial operations, global marketing, corporate and business development, and global manufacturing and supply chain. Our other management team members also have successful track records developing and commercializing drugs through previous experiences at companies such as Abbott Laboratories, Amgen, Centocor, InterMune, Hospira, MedImmune, Novartis, Pfizer, Daiichi Sankyo and Quest Diagnostics.

Our Strategy

We are building a patient‑centric business with the goal of developing innovative gene therapy treatments that transform the lives of patients and their families suffering from rare and life‑threatening neurological genetic diseases. In order to accomplish this goal, we plan to execute on the following key strategies:

Background on Gene Therapy

Many diseases are driven by genetic mutations in which the mutated genes can affect the production of proteins. Gene therapy attempts to address disease biology by introducing recombinant DNA into a patient’s own cells, commonly in the form of a functional copy of the patient’s defective gene, to address the genetic defect and modulate protein production and cellular function, which provides therapeutic benefit.

Using gene therapy, physicians can introduce or re‑introduce genes that encode for a therapeutic protein. Instead of providing proteins or other therapies externally and dosing them over a long period, we believe gene therapy offers the possibility of dosing a patient once to achieve a long‑term, durable benefit. Gene therapies are typically comprised of three elements: a transgene, a promoter and a delivery mechanism such as our AAV9 capsid. Once the therapeutic gene is transferred to a patient’s cells, we believe the cells may be able to continue to produce the therapeutic protein for years or, potentially, the rest of the patient’s life. As a result, gene therapy has the potential to transform the way these patients are treated by addressing the underlying genetic defect.

Background on Spinal Muscular Atrophy

SMA is a severe neuromuscular disease characterized by the loss of motor neurons leading to progressive muscle weakness and paralysis. The incidence of SMA is approximately one in 10,000 live births, and one in 50 people are carriers of the SMA gene (approximately six million Americans). SMA is generally divided into sub‑categories termed SMA Type 1, 2, 3 and 4. SMA, and the SMA sub‑types, the genetic diagnosis is made by first identifying the existence of a genetic defect in the SMN1 gene and then determining the number of copies of the SMN2 backup gene, which correlates with disease onset and severity. If insufficient protein is expressed, muscles do not develop properly.

Patients that have SMA Type 1, the most severe type of SMA, have an onset of symptoms within six months of birth, have difficulty breathing and swallowing and will never develop the strength or muscle control to sit up independently or the ability to crawl or walk. SMA Type 1 patients frequently die in early childhood due to complications related to respiratory failure resulting from motor neuron degeneration. Although SMA Types 2, 3 and 4 are generally less severe than SMA Type 1, they still present patients with significant medical challenges. The standard of care for patients with SMA Type 1 has traditionally been limited to palliative therapies, including life‑long respiratory care, ventilator support, nutritional care, orthopedic care and physical therapy. In December 2016, the FDA approved SPINRAZATM (nusinersen), developed by Biogen and Ionis Pharmaceuticals, Inc., for the treatment of SMA. Nusinersen employs an approach for the treatment of SMA called alternative splicing, which seeks to achieve more efficient production of full‑length SMN protein from the SMN2 gene. However, we believe that there is significant interest in a gene replacement therapy for SMA that can act on the underlying defect in the primary gene (SMN1) and can provide enhanced survival and motor function benefit via a one‑time dose.

SMA is caused by a genetic defect in the SMN1 gene that codes SMN, a protein necessary for survival of motor neurons. Although individuals typically receive one copy of the SMN1 gene from each parent, only one properly functioning SMN1 gene is required to generate adequate levels of full‑length SMN protein. SMA results from the patient’s lack of a properly functioning SMN1 gene, either due to mutation or loss of the gene. SMA is a recessive trait, meaning that while both parents of an SMA patient may be healthy, they each carry and pass along to their child DNA that contains either a mutated or missing SMN1 gene which results in the disease manifesting itself in the child.

Human DNA contains a backup to the SMN1 gene, the SMN2 gene. Individuals may carry multiple copies of the SMN2 backup gene within their DNA. However, approximately 90% of SMN protein produced by the SMN2 backup gene is non‑functional, truncated SMN protein missing a polypeptide segment (coded for by exon 7) that is essential to form a functional SMN molecule. The level of functional full‑length SMN protein produced by an SMA patient’s SMN2 genes is generally insufficient to prevent loss of proper motor neuron function. As the SMN2 genes are capable of producing minimal levels of full‑length SMN protein, the number of copies of the SMN2 backup gene serves as a disease modifier, such that the more copies of the SMN2 backup gene there are, the less severe the disease. The following diagram presents the difference between a healthy person and someone afflicted by SMA.

SMA is typically diagnosed based on the onset of clinical symptoms along with a genetic assessment of the absence of SMN1 and the number of copies of SMN2. However, a genetic diagnosis can also be made prenatally either through amniocentesis or chorionic villus sampling.

The following table describes the general disease onset, incidence rates, survival and general characteristics for each of the different types of SMA.

SMA Type 1

SMA Type 1 is a lethal genetic disorder characterized by motor neuron loss and associated muscle deterioration, resulting in mortality or the need for permanent ventilation support before the age of two for greater than 90% of patients. SMA Type 1 is the leading genetic cause of infant mortality. SMA Type 1 accounts for approximately 60% of all new SMA cases. Symptoms of SMA Type 1 include:

In an independent, peer‑reviewed natural history study published by the American Academy of Neurology on SMA Type 1 in 2014, or the Finkel 2014 Study, the authors observed that the life expectancy of a child with SMA Type 1 is, for a majority of patients, less than two years. The following chart presents the percentage of children with SMA Type 1 that die or require at least 16 hours per day of ventilation support for breathing at varying ages for 14 consecutive days in the absence of acute reversible illness or perioperatively, as observed in the Finkel 2014 Study, along with major developmental milestones for a healthy baby. Another published multi‑center government funded study, or the NeuroNEXT Study, which examined the longitudinal, natural history of SMA Type 1, reconfirmed the findings from the Finkel 2014 Study on the life expectancy and developmental milestones for a child with SMA Type 1.

Existing Treatments for SMA

The standard of care for patients with SMA Type 1 has traditionally been limited to palliative therapies, including life‑long respiratory care, ventilator support, nutritional care, orthopedic care and physical therapy. In December 2016, the FDA approved SPINRAZATM (nusinersen), developed by Biogen and Ionis Pharmaceuticals, Inc., for the treatment of SMA. Nusinersen employs an approach for the treatment of SMA called alternative splicing, which seeks to achieve more efficient production of full‑length SMN protein from the SMN2 gene. However, we believe that there is significant interest in a gene replacement therapy that can act on the underlying defect in the primary gene (SMN1) and can provide enhanced survival and motor function benefit via a one‑time dose.

Our Product Candidate: AVXS‑101 for the Treatment of SMA

AVXS‑101 is our proprietary gene therapy product candidate for the treatment of SMA. Because SMA is a neurodegenerative disease, reduced levels of SMN protein lead to continued degeneration. The goal of AVXS‑101 is to give patients a one‑time treatment to restore the body’s production of SMN protein to prevent further degeneration. Based on observations of our Phase 1 clinical trial, we believe that AVXS‑101 also enables increased motor function and enhances survival. AVXS‑101 contains the four elements that we believe are necessary for optimal delivery and function.

Components of AVXS‑101

Clinical Development of AVXS‑101

We are currently developing AVXS‑101 for the treatment of SMA Type 1 through intravenous administration and SMA Type 2 for intrathecal administration. We intend to initiate three additional studies to further evaluate AVXS-101, including in new SMA patient populations.

Pivotal Clinical Trial for SMA Type 1

In September 2017, based on the FDA's review of our clinical, non-clinical and chemistry, manufacturing and controls, or CMC, data, including a potency assay of AVXS-101, we initiated our pivotal trial of AVXS-101 for patients with SMA Type 1 using the IV formulation produced using our current good manufacturing practice, or cGMP, commercial manufacturing process. Five patients have been dosed in this clinical trial to date.

          The open-label, single-arm, single-dose, multi-center trial, which we call STR1VE, is designed to evaluate the efficacy and safety of a one-time IV infusion of AVXS-101 of 1.1 × 1014 vg/kg, which is intended to be equivalent to the proposed therapeutic dose received by the second dosing cohort in our Phase 1 clinical trial of AVXS-101 in patients with SMA Type 1.

          The trial will enroll a minimum of 15 patients with SMA Type 1 who are less than six months of age at the time of gene therapy, and who have one or two copies of the SMN2 backup gene as determined by genetic testing and bi-allelic SMN1 gene deletion or point mutations. Following dosing of the first three patients in the trial, we conducted a review of the safety data of AVXS-101 from six time points (days one, two, seven, 14, 21 and 30), as well as early signals of efficacy.  Based on our review and discussion with the FDA, we have initiated screening for, and begun enrolling, the remaining patients in the trial in accordance with the trial protocol.

          The intent-to-treat, or ITT, population is defined as patients who are less than six months of age and symptomatic at the time of gene therapy, with two copies of the SMN2 gene as determined by genetic testing, bi-allelic SMN1 gene deletion and no c.859G>C mutation in SMN2. The intended enrollment will include at least 15 patients that meet the ITT criteria. The first three patients will be ITT patients per the trial protocol definition and will be dosed four weeks apart to assess safety and efficacy using the Children's Hospital of Philadelphia Infant Test of Neuromuscular Disorders, or CHOP INTEND.

          The co-primary efficacy outcome measures of the trial will include:

          Co-secondary outcome measures will include:

The trial is projected to be conducted at 16 sites in the United States, including: Ann and Robert H. Lurie Children's Hospital of Chicago, Boston Children's Hospital, Children's Hospital Colorado, Children's Hospital of Philadelphia, Columbia University, David Geffen School of Medicine at UCLA, Duke University, Johns Hopkins Pediatric Neurology, Nationwide Children's Hospital, Oregon Health and Science University, Stanford University Medical Center, University of Central Florida College of Medicine, University of Texas Southwestern Medical Center, University of Utah, University of Wisconsin, and Washington University School of Medicine.

Phase 1 Clinical Trial for SMA Type 2

The open-label, dose-comparison, multi-center Phase 1 trial, which we call STRONG, is designed to evaluate the safety, optimal dosing and proof of concept for efficacy of AVXS-101 in two distinct age groups of patients with SMA Type 2, utilizing a one-time IT route of administration. The trial will enroll 27 infants and children who are symptomatic with a genetic diagnosis consistent with SMA, including the bi-allelic deletion of SMN1 and three copies of SMN2 without the SMN2 genetic modifier, who are able to sit but have no historical or current ability to stand or walk. Two patients in this clinical trial have been dosed to date.

          Two dosage strengths will be evaluated and patients will be stratified into two age groups: patients less than 24 months and patients at least 24 months but less than 60 months. There will be at least a four-week interval between the dosing of the first three patients for each dose being studied and, based on the available safety data, a decision will be made whether to proceed.

• Patients in Cohort 1 will receive a dose of 6.0 × 1013 vg of AVXS-101, or Dose A. Cohort 1 will consist of three patients who are less than 24 months of age. 
• If safety is established according to the Data Safety Monitoring Board, or the DSMB, the trial will proceed to Cohort 2. 

• Patients in Cohort 2 will receive a dose of 1.2 X 1014 vg of AVXS-101, or Dose B. Cohort 2 will consist of three patients who are less than 60 months of age. 
• If safety is established according to the DSMB, an additional 21 patients will be enrolled until the trial includes a total of (i) 12 patients less than 24 months of age and (ii) 12 patients at least 24 months, but less than 60 months, of age who have received Dose B.

          According to the well-characterized natural history of the disease by the Pediatric Neuromuscular Clinical Research Network, 100 percent of children with SMA Type 2 will never walk without support, 95 percent of children will never stand without assistance and more than 30 percent will die by 25 years of age. Additionally, children with SMA Type 2, who are between 24 and 60 months of age with 3 copies of the SMN2 gene, experienced a mean decrease of 0.33 points on the Hammersmith Function Motor Scale Expanded over a 12-month period at first evaluation.

Outcome Measures for Patients Less than 24 Months of Age

• The primary outcome measure for patients less than 24 months of age at the time of dosing is the achievement of the ability to stand without support for at least three seconds. 

• The secondary outcome measure is the proportion of patients who achieve the ability to walk without assistance, defined as taking at least five steps independently while displaying coordination and balance. 

• Developmental abilities, including motor function, will be evaluated as exploratory objectives.

Outcome Measures for Patients Between 24 and 60 Months of Age

• The primary outcome measure for patients between 24 months and 60 months of age at the time of dosing is the achievement of change in Hammersmith Functional Motor Scale Expanded from baseline. 

• The secondary outcome measure is the proportion of patients who achieve the ability to walk without assistance, defined as taking at least five steps independently displaying coordination and balance. 

• Developmental abilities, including motor function, will be evaluated as exploratory objectives.

          The trial is projected to be conducted at 11 sites in the United States, including Ann and Robert H. Lurie Children's Hospital of Chicago, Boston Children's Hospital, Children's Hospital of Philadelphia, David Geffen School of Medicine at UCLA, Johns Hopkins Pediatric Neurology, Nationwide Children's Hospital, Stanford University Medical Center, University of Central Florida College of Medicine, University of Texas Southwestern Medical Center, University of Utah and Washington University School of Medicine.

Planned Pivotal Trial of AVXS-101 in SMA Type 1 in Europe

We intend to initiate a pivotal trial of AVXS-101 for the treatment of SMA Type 1 in Europe in the first half of 2018.  The planned trial design, which incorporates scientific advice from the EMA, is expected to reflect a single-arm design, using natural history of the disease as a comparator, and is expected to enroll approximately 30 patients with SMA Type 1 who are less than six months of age at the time of gene therapy. The trial is designed to evaluate safety and efficacy of a one-time IV dose of AVXS-101, including achievement of motor milestones, specifically patients’ ability to sit unassisted, as well as an efficacy measure defined by the time from birth to an “event,” defined as death or requiring at least 16 hours per day of ventilation support for breathing for greater than two weeks in the absence of an acute reversible illness, or perioperatively.    

Completed Phase 1 Clinical Trial for SMA Type 1

In April 2014, an open‑label, dose‑escalation Phase 1 clinical trial of AVXS‑101 in patients with SMA Type 1 was initiated as an investigator‑sponsored trial at NCH under an IND, held by Dr. Jerry Mendell, the principal investigator at NCH. We completed the transfer of the IND to AveXis in November 2015. The trial design allowed for the enrollment of up to 15 patients across a maximum of three dosing cohorts. Key inclusion criteria included the presence of typical clinical symptoms before 6 months of age, SMA Type 1 patients with bi‑allelic SMN1 gene deletions or mutations (all patients in the trial had bi‑allelic deletions) and with two copies of the SMN2 backup gene as confirmed by genetic testing in an independent laboratory. Confirmed absence of the Exon 7 genetic modifier (c.859G>C) was made through the laboratory of Dr. Tom Prior, the scientist who described the impact of this mutation on clinical phenotype. Furthermore, all patients were re‑tested at an independent laboratory to re‑confirm all genetic results. Additionally, patients must have been no older than nine months of age (for the first nine patients) and six months of age (for the last six patients) at the time of vector infusion.

The primary outcome measure of our Phase 1 clinical trial was safety and tolerability. The key efficacy measures were defined as the time from birth to an “event,” which was defined as either death or at least 16 hours per day of required ventilation support for breathing for 14 consecutive days in the absence of acute reversible illness or perioperatively, and video confirmed achievement of ability to sit unassisted. We also assessed several exploratory objective measures in the clinical trial. These exploratory measures were included to assess additional testing protocols on patients in an effort to identify objective testing criteria for measuring the results of the therapy. These exploratory tests included administering a standard motor milestone development survey and CHOP INTEND, the need for pulmonary and feeding support, evaluation of swallowing function, compound motor action potentials testing (CMAP), motor unit number estimation testing (MUNE), non‑invasive electrical impedance myography testing (EIM) and “ability captured through interactive video evaluation‑mini” testing (ACTIVE‑mini).

Once a patient met the screening criteria for the clinical trial, the patient received a one‑time dose of AVXS‑101, by intravenous injection over a one‑hour period. The patient remained at NCH for 48 hours after dosing for monitoring, and then was discharged. For one month after dosing, weekly follow‑up evaluations were conducted. After

the first month, additional monthly evaluations were conducted for the first 12 months followed by quarterly evaluations for the remaining 12 months.

Clinical Results

We fully enrolled our Phase 1 trial, having dosed a total of 15 patients in the trial. The first cohort, which completed dosing in September 2014, consisted of three infants who received a dose of AVXS‑101 administered at the low dose, based on the patient’s weight, or the low-dose cohort. The second cohort, which completed dosing in December 2015, consisted of 12 infants who received the proposed therapeutic dose of AVXS‑101, or the proposed therapeutic dose-cohort.

As of August 7, 2017, all 15 patients (100%) in the trial reached 20 months of age without experiencing an “event,” described as death or at least 16 hours per day of required ventilation support for breathing for 14 consecutive days in the absence of acute reversible illness or perioperatively, in contrast to the 8% event free rate at this time point demonstrated in an independent, peer-reviewed natural history study for patients with SMA Type 1. All 15 patients experienced improvement from baseline in motor skills measured by their CHOP INTEND scores and such improvement appeared to be dose‑dependent. As of August 7, 2017, we have observed AVXS‑101 to be generally well‑tolerated.

As of August 7, 2017, all patients in the proposed therapeutic dose‑cohort were event‑free. The median age at last follow-up was 25.7 months and 30.7 months for patients in the proposed therapeutic-dose cohort and low-dose cohort, respectively.  As previously reported, one patient in the low‑dose cohort, had a pulmonary event in the third quarter of 2016 at the age of 28.8 months. The patient had increased use of bi‑level positive airway pressure, or BiPAP, in advance of surgery related to hypersalivation, a condition experienced by some SMA patients; the event was determined upon independent review to represent progression of disease and not to be related to the use of AVXS‑101. This patient completed the final trial visit in September 2016 and as of that time point, BiPAP use was below the 16 hours per day usage that defines the threshold for the survival endpoint. Although the results of the Finkel 2014 Study were not pre‑specified as a comparator for our trial, we believe that this compilation of data from patients with SMA Type 1 provides a useful context to consider the results of our trial to date. This peer‑reviewed publication reported that 8% of patients with SMA Type 1 were event‑free at 20.0 months of age. The lethality of the disease is further supported by the recent NeuroNEXT Study, which indicated a median time to death or tracheostomy for ventilation support for breathing SMA Type 1 patients from birth of eight months. The following figure shows survival data of all 15 patients enrolled in the clinical trial through August 7, 2017.

The CHOP INTEND test is designed to evaluate the motor skills of patients with SMA Type 1 by testing 16 items, which measure the movement of various body segments. As of August 7, 2017, 11 of 12 patients (92%) in the proposed therapeutic dose-cohort have achieved and maintained CHOP INTEND scores of ≥40 points. Two patients who have achieved CHOP INTEND scores of at least 60 points, which is considered to be normal, achieved the

maximum CHOP INTEND score of 64. The Finkel 2014 Study reported that patients with SMA Type 1 have an average annual decrease of 1.27 points in their CHOP INTEND score. The NeuroNEXT Study indicated a mean decline of 10.5 points in CHOP INTEND scores over a one-year period in untreated SMA Type 1 patients, highlighting the rapid loss of motor function occurring early in the disease course. All 15 patients enrolled in our Phase 1 trial experienced improvement from baseline in motor skills measured by their CHOP INTEND scores and such improvement appeared to be dose‑dependent. As of August 7, 2017, the patients in cohorts 1 and 2 had increased scores from baseline on the CHOP INTEND scale and maintained these changes during the study. Patients in cohort 2 had mean increases of 9.8 points at 1 month and 15.4 points at 3 months. At the study cutoff on August 7, 2017, patients in cohort 1 had a mean increase of 7.7 points from a mean baseline of 16.3 points, and those in cohort 2 had a mean increase of 24.6 points from a mean baseline of 28.2 points. As of August 7, 2017, 10 out of 15 patients treated had completed their 2-year follow-up after receipt of their AVXS-101 gene therapy. Based on our observations to date, we believe that increases in CHOP INTEND motor assessments appear to be age, baseline CHOP INTEND score and dose‑dependent. We believe that there may be a dose response, based on our observation of CHOP INTEND scores of patients receiving the proposed therapeutic dose as compared to patients receiving the low dose because, as a group, the patients receiving the proposed therapeutic dose appear to be demonstrating a larger average CHOP INTEND score increase.

Patients with SMA Type 1 entered the trial at different ages, stages of disease progression and levels of motor function that can result in significant variability in baseline CHOP INTEND scores from patient to patient. Additionally, month‑to‑month variability in CHOP INTEND scores can be influenced by factors that are not related to study treatment. Examples of these factors include upper respiratory tract infections and fractured limbs, which may preclude the testing of some elements of the CHOP INTEND assessment. Our observations are consistent with the Finkel 2014 Study in which baseline CHOP INTEND scores also demonstrated significant variability. While the improvements seen with AVXS‑101 in the proposed therapeutic dose cohort have never been observed in the natural history population, we believe observing change in CHOP INTEND scores over time is beneficial.

The natural history of SMA Type 1 is marked by the inability to achieve or maintain developmental motor milestones. An independent, peer‑reviewed natural history study of developmental milestones in SMA Type 1 published in Neuromuscular Disorders in 2016, or the De Sanctis 2016 Study, reported that prolongation of survival with supportive care does not impact achievement of motor milestones. As observed in the De Sanctis 2016 Study, a child with SMA Type 1 with symptom onset prior to six months of age will not reach any major milestones such as sitting, crawling, standing and walking, and the highest milestone achieved is seen in the infant’s first visit followed by a rapid decline. In contrast, patients in the proposed therapeutic‑dose cohort consistently achieved and maintained key developmental motor milestones. As of August 7, 2017, 11 of 12 patients (92%) in the proposed therapeutic‑dose cohort achieved head control, nine of 12 patients (75%) could rollover and 11 of 12 patients (92%) could sit with assistance. For the end‑of‑study assessment at January 20, 2017 and subsequent assessments, including the August 7, 2017 assessment, we evaluated three validated and well‑established measures of sitting unassisted for periods of increasing duration. At August 7, 2017, 11 of 12 patients (92%) could sit unassisted for at least five seconds, 10 of 12 patients (83%) could sit unassisted for at least 10 seconds and nine of 12 patients (75%) could sit unassisted for 30 seconds or more. Two patients could walk independently and each had achieved earlier and important developmental milestones such as standing with support, standing alone and walking with support. These milestone achievements were assessed and adjudicated by an independent, third‑party reviewer using video evidence. The results of this process are included in the chart below.

* At baseline, none of the patients in cohort 2 had achieved any of the listed motor milestones except for bringing a hand to the mouth. As of August 7, 2017, the majority of these patients had reached at least one major motor milestone. No patients in cohort 1 are listed, since none attained any motor milestones. NA denotes not available, and NIV noninvasive ventilation. Plus signs indicate achievement of milestone.
† Event‑free survival (the primary efficacy outcome) was defined as the age at the last follow‑up at which patients were free of ventilatory support, which was defined as the need for ventilation for at least 16 hours per day for at least 14 consecutive days.
‡ According to item 20 on the Bayley Scales of Infant and Toddler Development, rolling over is defined as movement of at least 180 degrees both left and right from a position of lying on the back.
§ Sitting unassisted for at least 5 seconds is in accordance with the criteria of item 22 on the Bayley Scales of Infant and Toddler Development gross motor subtest and surpasses the 3‑second count that is used as a basis for sitting (test item 1) on the Hammersmith Functional Motor Scale–Expanded for Spinal Muscular Atrophy (SMA). Sitting unassisted for at least 10 seconds is in accordance with the criteria used in the World Health Organization Multicentre Growth Reference Study. Sitting unassisted for at least 30 seconds defines functional independent sitting and is in accordance with the criteria of item 26 on the Bayley Scales of Infant and Toddler Development gross motor subtest.
¶ Nutritional support refers to the placement of either a gastrostomy tube or a nasogastric tube, as determined by the preference of the parents or the primary physician. Once enrolled in the study, all the patients who required nutritional support underwent gastrostomy‑tube placement, and none were removed during the study.
‖ Data are from Finkel et al.
** Data are from De Sanctis et al.

The primary outcome measure for our Phase 1 trial of AVXS‑101 was safety. As of August 7, 2017, a total of 56 serious adverse events, or SAEs, were observed in 13 patients. Of these 56 SAEs, there were two treatment‑related SAEs in two patients. There were also three treatment‑related non‑serious adverse events reported in two patients. All five treatment‑related SAEs and AEs were clinically asymptomatic liver function enzyme, or LFE, elevations.

The treatment‑related SAEs consisted of two patients that experienced elevated LFEs, which were each assessed as a Grade 4 event under the Common Terminology Criteria for Adverse Events on the basis of laboratory values. We observed the first of these treatment‑related SAEs in the first patient dosed with AVXS‑101 in our Phase 1 clinical trial. After the onset of elevated LFEs, this patient was given a prednisolone regimen starting at 2 mg/kg daily and tapering off over time as LFEs returned to normal. After the first patient, we revised our clinical protocol to include pre‑treatment with prednisolone at 1 mg/kg/day starting one day prior to the gene transfer in order to mitigate the T‑cell immune response against AAV9 and the corresponding increase in LFEs. As of August 7, 2017, following this protocol change, out of the remaining 14 patients in our Phase 1 clinical trial, 11 patients had no reported adverse events related to elevations in LFEs, two patients had Grade 1 or 2 elevations in LFEs, and one patient experienced a Grade 4 elevation in LFE on the basis of laboratory values. We observed that this Grade 4 LFE patient had a concomitant viral infection and required additional prednisolone therapy until the LFEs returned to the normal range. We believe that the pretreatment with prednisolone has generally been effective in reducing the incidence and degree of elevated LFEs. As of August 7, 2017, all AEs and SAEs related to elevated LFEs were isolated elevations in serum transaminases, clinically asymptomatic and resolved with prednisolone treatment. There were no elevations in total bilirubin, gamma‑glutamyl transferase or alkaline phosphatase and the conditions that constitute Hy’s law were not met.

Based on the 15 patients dosed as of August 7, 2017, we observed AVXS‑101 to be generally well‑tolerated. As previously reported, a total of five adverse events, or AEs, in four patients were deemed treatment‑related. Of these, two were SAEs experienced by two patients, and three were non‑serious AEs experienced by two patients. All consisted of clinically asymptomatic liver enzyme elevations and were resolved with prednisolone treatment. There were no clinically significant elevations of gamma‑glutamyl transferase, alkaline phosphatase or bilirubin and, as such, the conditions that constitute Hy’s Law were not met. Other non‑treatment related AEs were expected and were associated with SMA. A cumulative total of 297 AEs (5 treatment‑related AEs and 292 non‑treatment related AEs) were reported as of August 7, 2017, following monitoring and source verification. Of these, 56 were determined to be SAEs and 241 were non‑serious AEs.

Preclinical Studies

Preliminary preclinical proof of concept and safety and tolerability studies of the intravenous delivery method were conducted at NCH and in conjunction with the Mannheimer Foundation for non‑human primate studies. In a mouse model of SMA Type 1, it was observed that a single intravenous injection of AVXS‑101 in mice improved body weight and motor functions, while also extending the median lifespan of the treated mice from 14 days to greater than 250 days with 30% of mice surviving over 400 days, compared to untreated mice, in a dose‑responsive manner. In these studies, a minimally effective dosage was determined to be 6.7 × 1013 vg/kg which increased median lifespan to 28 days. Escalating the dosage to 2.0 × 1014 vg/kg increased the median lifespan of the SMA mouse model greater than 250 days. Further increasing the dosage to 3.3 × 1014 vg/kg also resulted in the SMA mouse model to have a median lifespan greater than 250 days. The 2.0 × 1014 vg/kg and 3.3 × 1014 vg/kg dosages appeared to be indistinguishable, with animals showing normal motor function. In a preclinical study of non‑human primates, it was observed that a single intravenous injection of AVXS‑101 led to sustained human SMN transgene expression in the spinal cord as well as in multiple organs and muscles, when evaluated 24 weeks after injection of AVXS‑101. AVXS‑101 has also been studied in multiple safety and tolerability studies in mice and non‑human primates and no evidence of toxicity was observed for up to 24 weeks after injection of AVXS‑101.

In addition, preliminary preclinical proof of concept (efficacy and safety) studies of the intrathecal delivery method were conducted at NCH. It was observed that in mice with SMA Type 1, a single intrathecal injection of AVXS‑101 at a maximum dosage level of 3.3 × 1013 vg/kg, improved body weight and motor functions, and most notably extended the median lifespan from 18 days to 282 days, with one‑third of the mice surviving past 400 days. In the SMA mouse model, it was observed that a single intrathecal injection of scAAV9 containing a green fluorescent protein targeted between 21% to 41% and 46% to 72% of motor neurons in the spinal cord at the lowest dosage level and the highest dosage level, respectively. In non‑human primates, it was observed that a single intrathecal injection of scAAV9 containing green fluorescent protein at a dose of 1.0 × 1013 vg/kg targeted 29%, 53% and 73% of cervical, thoracic and lumbar motor neurons, respectively. With tilting for ten minutes in the Trendelenburg position, such targeting increased to 55%, 62% and 80% of cervical, thoracic and lumbar motor neurons, respectively. In swine, NCH and collaborators at Ohio State University designed a small hairpin RNA that targeted porcine SMN and left human SMN intact, which reduced expression of porcine SMN. It was observed that the administration of AVXS‑101 resulted in robust production of human SMN protein and significant increases in motor function. When delivered prior to the onset of motor function decline, AVXS‑101 prevented the majority of SMA symptoms, demonstrated by motor function testing as well as electrophysiological evaluation. When delivered at the onset of SMA symptoms, AVXS‑101 halted further progression and there were improvements in motor function as well as electrophysiological evaluation of motor units.

Future Applications and Opportunities

Based on preclinical data and the clinical data from our Phase 1 clinical trial for SMA Type 1, we believe AVXS‑101 may also have utility in other types of SMA, which result from the same genetic defect as SMA Type 1 as it addresses the root cause of the disease. In addition to our ongoing Phase 1 clinical trial for SMA Type 2, we intend to conduct the following additional clinical trials to further evaluate AVXS-101, including in new SMA patient populations:

In addition to our programs in SMA, we also intend to identify, acquire, develop and commercialize novel product candidates for the treatment of other rare and life‑threatening neurological genetic diseases that we believe can be treated with gene therapy. In June 2017, we announced that we had entered into an exclusive, worldwide license agreement with REGENXBIO for the development and commercialization of gene therapy using AAV9 to treat two rare neurological monogenic disorders: Rett syndrome and genetic ALS. We also licensed from NCH preclinical data suggesting promising safety and efficacy of gene therapy treatments for these disorders using AAV9, generated by our Chief Scientific Officer, Dr. Brian Kaspar.  See “—Our Collaboration and License Agreements—Strategic Collaborators and Relationships—Preclinical Programs for Rett Syndrome and Genetic ALS.” We expect to move forward with initiating IND-enabling studies in both Rett syndrome and genetic ALS and submit IND applications for both indications in late 2018 or early 2019. Current treatments for Rett syndrome and genetic ALS do not target the genetic cause of either disease, leaving what we believe to be a significant unmet need.

Rett Syndrome

Rett syndrome is a devastating, rare neurodevelopmental disorder characterized by slowed growth, loss of normal movement and coordination and loss of communication skills. Rett syndrome is an X-linked dominant genetic disorder caused by mutations in the gene for methyl-CpG-binding protein 2, or MECP2, which results in problems with the MECP2 protein, which is critical for normal brain development. Rett syndrome is very rare in males, but occurs in approximately one of every 10,000 female births in the United States with an estimated U.S. prevalence of approximately 8,500 based on applying natural history survival rates to historical births. Affected infants usually begin to show signs and symptoms between six and 18 months of age.  Current treatments for patients with Rett syndrome offer only symptomatic relief and do not target the genetic cause of the disease. 

Our Product Candidate: AVXS-201 for the Treatment of Rett Syndrome

We are conducting preclinical studies of AVXS-201, our proprietary gene therapy product candidate for the treatment of Rett syndrome. In completed preclinical studies using rodent models, it was observed that gene therapy to introduce re-expression of the MECP2 gene improved survival and improved the behavioral abnormalities associated with the disease model, including motor function.  AVXS-201, like AVXS-101, is composed of a recombinant AAV9 capsid shell, with a human transgene and a continuous promoter specifically designed for optimal MECP2 expression.

In a preclinical mouse model, we observed that certain doses of AVXS-201, delivered once into the CSF, increased the median lifespan of a Rett syndrome mouse model to over 200 days, compared to 66 days for untreated mice.  In a preclinical study of non-human primates, we observed that weight, blood parameters, and liver enzymes remained normal up to 18 months after a single lumbar intrathecal injection of AVXS-201.  We have observed no evidence of toxicity in wild-type mice treated with AVXS-201, and we observed no indications of tissue damage or disease in non-human primates post-injection. In both the preclinical mouse studies and preclinical non-human primate studies, we observed widespread targeting of AVXS-201 throughout the whole central nervous system after a single injection, as assessed by immunohistochemistry, immunocytochemistry, in situ hybridization and western blotting throughout various brain regions. 

We have generated AVXS-201 by leveraging our manufacturing platform and are utilizing a process very similar to AVXS-101.  We have successfully completed engineering lots, along with a cGMP manufacturing run intended for clinical use, and we have also developed key analytical assays suited for AVXS-201. 

Genetic ALS

ALS is a progressive, fatal, neurodegenerative disease that affects motor neurons in the brain and the spinal cord. Symptoms of ALS include progressive weakness and atrophy of muscles controlling voluntary movement, swallowing, speech and breathing, and most commonly develops between 40 and 70 years of age. Genetic forms of ALS comprise five to ten percent of all ALS cases, and approximately twenty percent of genetic ALS cases are caused by mutations in the SOD1 gene, which are toxic to motor neurons.  In 2013, there were 15,908 patients with “definite ALS” in the United States, a prevalence rate of approximately five of every 100,000 persons. Approximately 800 to 1,600 of these cases were due to genetic causes of ALS.  

Our Product Candidate: AVXS-301 for the Treatment of Genetic ALS

We are conducting preclinical studies of AVXS-301, our proprietary gene therapy product candidate for the treatment of genetic ALS.  In previous studies in the laboratory of Dr. Kaspar at NCH, we utilized AAV9 carrying a green fluorescent protein reporter to deliver a short hairpin RNA, or shRNA, targeting the mutant human SOD1 transgene. We observed improved disease outcome in two different mouse models of ALS following a one-time administration, even when delivered at the time of disease onset. We also observed that this treatment was safe and well-tolerated in wild-type mice.  Based on these preclinical studies, we developed AVXS-301, which, like AVXS-101, is composed of an AAV9 capsid shell.  In preclinical studies of an AAV9 vector with a SOD1 shRNA expression cassette and a non-coding stuffer sequence instead of GFP, we observed efficient SOD1 downregulation in vitro, and in vivo efficacy in delaying disease onset and progression. 

We have studied the administration of AVXS-301 both intravenously and directly into the cerebral spinal fluid, or CSF, in mice that overexpress human mutant SOD1.  We observed that both administrations improved rotarod motor performance and hindlimb grip strength.  In our preclinical mouse studies, we observed that a single administration of AVXS-301 directly into the CSF resulted in a greater than 51% increase in survival in the most severe ALS mouse model.  We also conducted preclinical studies in non-human primates, where we observed that a single lumbar intrathecal infusion of AVXS-301 resulted in approximately 90% SOD1 reduction throughout the monkey spinal cord.  Results from other studies in the field suggest that SOD1 may be involved in more than SOD1-linked disease mutations, which we believe may increase the scope of patients that may be treatable with AVXS-301.

We have developed a manufacturing process for both AVXS-201 and AVXS-301 by leveraging our AVXS-101 manufacturing platform. As such, we are utilizing a manufacturing process very similar to AVXS-101. We have successfully completed engineering lots for both AVXS-201 and AVXS-301. We intend to complete cGMP clinical manufacturing runs for both products in the near future.    

Manufacturing

We have established our own commercial scale cGMP‑compliant manufacturing facility to enhance supply chain control, increase supply capacity for clinical trials and ensure commercial demand is met in the event that AVXS‑101 receives marketing approval. We intend to use our cGMP manufacturing process for all clinical and commercial production of AVXS-101. We manufacture AVXS‑101 using adherent human embryonic kidney, or HEK, 293 cells. HEK293 cells have been used successfully to manufacture numerous other gene therapy candidates that have been tested or are currently being tested in other clinical trials to date. We use a novel and scalable adherent cell culture approach for AAV9 vector production that can more reliably produce product and has greater surface area to potentially increase productivity relative to traditional flat stock approaches.

Although we anticipate that our manufacturing facility will be the primary production site to meet projected clinical and commercial demand, we will continue to evaluate, and will pursue as needed, potential third parties and/or additional internal sources of redundant manufacturing capacity to provide multiple long‑term supply alternatives to

meet commercial demand in the event that AVXS‑101 receives marketing approval and for our other programs. We continue to utilize our internal process science group and work with third parties in order to evaluate and develop manufacturing process improvements that may increase the productivity and efficiency of our manufacturing process.

Competition

The biotechnology and pharmaceutical industries are highly competitive. In particular, the field of gene therapy is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We face substantial competition from many different sources, such as large and specialty pharmaceutical and biotechnology companies, academic research institutions, government agencies and public and private research institutions.

At this time, there is one FDA‑approved, and one EMA‑approved, treatment for SMA. There are currently no treatments approved by the FDA for SMA that specifically address the underlying cause of the disease, the genetic defect in the SMN1 gene. The standard of care for patients with SMA Type 1 has been generally limited to palliative therapies, including life‑long respiratory care, ventilator support, nutritional care, orthopedic care and physical therapy; however, in December 2016, an alternative approach for the treatment of SMA called alternative splicing, which seeks to achieve more efficient production of full‑length SMN protein from the SMN2 gene, SPINRAZATM (nusinersen) received FDA approval and was subsequently launched in the United States. In addition, a number of companies are developing drug candidates for SMA. We are aware of other companies exploring gene therapy treatments in preclinical development, including Biogen, Voyager Therapeutics, Inc. and Généthon. In addition to a gene therapy‑based solution, alternative approaches in clinical development for the treatment of SMA include alternative splicing, neuroprotection and muscle enhancer technologies:

Intellectual Property

We strive to protect and enhance the proprietary technology, inventions, and improvements that are commercially important to the development of our business. We intend to seek, maintain and defend our patent rights, whether developed internally or licensed from third parties. We also rely on trade secrets relating to our proprietary technology and on know‑how, continuing technological innovation and in‑licensing opportunities to develop, strengthen and maintain our proprietary position in the field of gene therapy. Additionally, we intend to rely on regulatory protection afforded through orphan drug designations, data exclusivity and market exclusivity as well as patent term extensions, where available.

Our future commercial success depends, in part, on our ability to: obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know‑how related to our business; defend

and enforce licensed patent rights, and, if sought and obtained in the future, any patent rights we may own; preserve the confidentiality of our trade secrets; and operate without infringing the valid enforceable patents and proprietary rights of third parties. Our ability to stop third parties from making, using, selling, offering to sell or importing our current product candidate and any future product candidates may depend on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities. With respect to our licensed intellectual property, we cannot be sure that patents will issue with respect to any of the pending patent applications to which we license rights. With respect to any patent applications that we or our licensors may file in the future, if any, we cannot be sure that any such applications will issue or, if issued, that such applications will be commercially useful in protecting our product candidate and methods of manufacturing the same, or otherwise provide any competitive advantage. Even with respect to issued patents that we currently license, we cannot be certain that any such patents will provide any competitive advantage. See “Risk factors—Risks related to our intellectual property” for a more comprehensive description of risks related to our intellectual property.

We have licensed certain patents and patent applications and we have licensed or otherwise possess substantial know‑how and trade secrets relating to AVXS‑101, our product candidate that uses the AAV9 capsid. We believe that the patents and patent applications we have in‑licensed include claims that, if issued, would cover AVXS‑101 and that the latest to expire of such currently in‑licensed patent rights is a patent application owned by NCH and pending only in the United States that, if issued, would expire in 2029. Our proprietary, in‑licensed intellectual property, including patent and non‑patent intellectual property, generally is directed to AAV9 vectors, methods of treatment of clinical indications important for our development programs and processes to manufacture and purify AVXS‑101. We have also licensed certain patents and patent applications relating to our planned new programs in Rett syndrome and genetic ALS. We are heavily dependent on the patented or proprietary technologies that we license from third parties. We anticipate that we will require additional licenses to third party intellectual property rights relating to our development programs in the future, which may not be available on commercially reasonable terms, if at all.

Licensed Patents and Patent Applications

We license patents and patent applications from NCH, REGENXBIO and AskBio as described below relating to AVXS-101 and NCH and REGENXBIO relating to our planned new programs in Rett syndrome and ALS. We also anticipate that additional patent or other intellectual property licenses, which we do not hold today, will likely be required for our commercial use of AVXS‑101, including use by intravenous and/or intrathecal injection, and our manufacturing processes. Moreover, additional licenses which we do not hold today will be required to the extent we seek to develop additional product candidates in the future.

Trade Secrets

In addition to patents and licenses, we rely on trade secrets and know‑how to develop and maintain our competitive position. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, and obtain and maintain ownership of certain technologies, in part, through confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and commercial partners. We also seek to preserve the integrity and confidentiality of our data, trade secrets and know‑how, as well as that of our licensees, including by implementing measures intended to maintain the physical security of research facilities and the physical and electronic security of our information technology systems.

Our Collaboration and License Agreements

Strategic Collaborators and Relationships

An important factor to our success is our strategic partnerships and relationships. Our key research collaborator is NCH.

AVXS-101

To date, we have entered into three license agreements relating to the development of AVXS-101.

Nationwide Children’s Hospital

In October 2013, we entered into an exclusive license agreement with NCH, which we amended and restated in its entirety in January 2016, or the NCH SMA License. Pursuant to the NCH SMA License, NCH granted us an exclusive, worldwide license under certain patent rights to make, have made, use, sell, offer for sale and import any products covered by the NCH SMA License, or NCH SMA licensed products, and a non‑exclusive, worldwide license under certain technical information to develop and manufacture the NCH SMA licensed products, in the field of therapies and treatments of SMA. The patent rights exclusively in‑licensed from NCH and relevant to our contemplated SMA product are a currently pending patent application being pursued only in the United States. The patent application claims AVXS‑101 as a composition of matter and its use in treating SMA. If a patent issues from this patent application, it will expire in 2029. We have the right to subcontract the manufacturing of products using the licensed rights, such as AVXS‑101. We also have the right to sublicense the licensed technology to third parties through multiple tiers.

Pursuant to the NCH SMA License, NCH filed an investigational new drug application, or IND, for AVXS‑101 for the treatment of SMA Type 1. Under the NCH SMA License, we received an option to elect to become the sponsor of the IND. Such option could be exercised on or after October 14, 2015. On October 14, 2015, we exercised the option and, as of November 6, 2015, we became the sponsor of the IND. However, NCH has reversionary rights in the case of an act or omission constituting negligence or willful misconduct with respect to our control of the IND that has or could reasonably be expected to have a material adverse effect on the clinical trials conducted under the IND and such act or omission has not been cured within a certain period of time following receipt of written notice and demand from NCH.

The NCH SMA License sets forth a development plan for our development of the licensed technology to make and sell NCH SMA licensed products, including AVXS‑101 for the treatment of SMA Type 1, throughout the world. We are required to achieve certain development milestones, including a specified minimum funding obligation of $9.4 million for the development of NCH SMA licensed products by 2021, which requirement NCH acknowledged we had fulfilled in whole as of the date of the amendment and restatement of the NCH SMA License. We are also required, if commercially reasonable, to market NCH SMA licensed products after regulatory approval, satisfy the market demand for such products in those countries in which we have obtained regulatory approval where it is commercially reasonable to do so and continue to develop additional NCH SMA licensed products within the field. In the event we fail to comply with such obligations, subject to certain conditions, NCH has the right to either terminate the NCH SMA License or convert our license into a non‑exclusive license with respect to the applicable NCH SMA licensed product in the applicable country. In addition, we are responsible for all clinical trial costs that are not covered by grants or certain other sources.

In consideration for license rights granted to us, we initially issued NCH and The Ohio State University, or OSU, 331,053 shares of our common stock. Until May 2015, when we had reached a certain stipulated market capitalization, we were obligated to issue additional shares to NCH and OSU from time to time so that their aggregate ownership represented 3% (which percentage will be prorated downward if either NCH or OSU transfer any of such shares) of our issued and outstanding capital stock on a fully‑diluted basis.

Following the first commercial sale of a NCH SMA licensed product, we must begin paying NCH an aggregate low‑single digit royalty on net sales of NCH SMA licensed products by us, our affiliates and sublicensees during the term of the NCH SMA License, with annual minimum royalties, in dollar amounts ranging from low five digits to low six digits, that increase over time. If we unsuccessfully challenge any of the licensed patents, the royalty rate increases from low single digits to mid‑single digits. These royalty rates are further subject to reduction in the event we have to license third‑party patents to exploit the licensed technology.

With certain exceptions, we are required to make certain development milestone based payments to NCH. In addition, we must also pay NCH a portion of sublicensing revenue received from our sublicense of the rights to licensed technology at percentages between low‑double digits and low‑teens.

We do not have the right to control prosecution of the in‑licensed patent rights, however NCH shall consult with us on material matters regarding the prosecution of such patent rights, and NCH has the first right to enforce any patents issuing from the in‑licensed patent rights and if NCH does not enforce the rights within a certain time frame, then

we have the right to enforce. In addition, our rights under the NCH SMA License are not assignable without the prior written consent of NCH, except to our affiliates, subsidiaries or any successor in interest in connection with a merger, acquisition, consolidation or sale, provided that our assignee assumes our obligations under the NCH SMA License in writing.

Unless terminated earlier, the agreement will expire on a NCH SMA licensed product‑by‑NCH SMA licensed product and country‑by‑country basis upon the expiration of the royalty term for such NCH SMA licensed product in such country. The royalty term will expire on the later of (i) the date on which the last relevant patent underlying the relevant NCH SMA licensed product expires or (ii) ten years from the first commercial sale of NCH SMA licensed product in such country. Upon expiration of the agreement with respect to a particular NCH SMA licensed product in a particular country, the license to us will survive and as a fully‑paid up license. The NCH SMA License may be terminated prior to its expiration:

Certain accrued payments that we are required to make to NCH will become due in the event of termination as specified in the agreement. As of December 31, 2017, we have reimbursed NCH $0.5 million and incurred $161.7 million in aggregate development costs.

The Research Institute at Nationwide Children’s Hospital

In October 2013, we entered into a clinical trials research agreement with the Research Institute at Nationwide Children’s Hospital, or the Research Institute. This agreement governs our preclinical and clinical trials conducted at NCH by Dr. Mendell.

Under the NCH license agreement, we had the right to elect to become the sponsor of the IND subject to certain reversionary rights of the Research Institute. On October 14, 2015, we entered into an amendment to the NCH License with NCH permitting us to submit to the FDA for the transfer of the IND and associated regulatory filing to us and for us to become the sponsor of such IND. Contemporaneous with the execution of this amendment, we submitted the requisite documents to the FDA to initiate the transfer process. On November 6, 2015, the FDA approved our sponsorship of the IND. We are responsible for all budgeted clinical trial costs that are not covered by grants or certain other sources. All data and information generated under the agreement is subject to our agreements with NCH.

Unless terminated earlier, the agreement expires upon the completion of the study. The agreement may be terminated prior to its expiration:

Our clinical trial research agreement with the Research Institute also contains obligations for us to indemnify the Research Institute and its affiliates against certain losses and for us to maintain certain insurance, as well as mutual confidentiality obligations.

REGENXBIO, Inc.

In March 2014, we entered into an exclusive license agreement or the REGENXBIO SMA License, with ReGenX Biosciences, LLC, or ReGenX, predecessor to REGENXBIO, under certain patents and patent applications owned by the Trustees of the University of Pennsylvania and licensed to ReGenX, for the development and commercialization of products to treat SMA using AAV9. In January 2018, we entered into an amendment to the REGENXBIO SMA License, pursuant to which REGENXBIO granted us an exclusive, worldwide commercial license, with rights to sublicense, to any recombinant AAV vector in REGENXBIO’s intellectual property portfolio during the term of the license agreement for the treatment of SMA in humans by in vivo gene therapy. Under the REGENXBIO SMA License, REGENXBIO granted us an exclusive, worldwide license under the licensed patent rights to make, have made, use, import, sell and offer for sale any products covered by the REGENXBIO SMA License, or REGENXBIO SMA licensed products, in the field of the treatment of spinal muscular atrophy in humans by in vivo gene therapy using such AAV vectors subject to certain rights reserved by REGENXBIO and its licensors. The patent rights exclusively in‑licensed include an issued United States patent, which expires September 2024, not including 473 days of patent term adjustment (as well as issued patents in Europe, Japan, Australia, Canada, New Zealand and China, which expire in 2024). These issued patents claim AAV9 vectors and viruses having an AAV9 capsid, as well as methods of use. In addition, the in‑licensed patent rights include pending patent applications in the United States, Canada, China, Europe and Japan, that if issued as patents, will expire in 2024. These pending applications claim AAV9 vectors and viruses having an AAV9 capsid, as well as its use in treatment. We have the right to sublicense the licensed technology to third parties subject to certain conditions as specified in the REGENXBIO SMA License. Under the REGENXBIO SMA License we grant a non‑exclusive, worldwide, royalty‑free, transferable, sublicenseable, irrevocable, perpetual license back to REGENXBIO to (a) use any patentable modifications and improvements to the licensed technology that we or our affiliates or sublicensees develop, or licensed back improvements, and (b) to practice the licensed back improvements in connection with AAV9 outside of our field of use.

Under the terms of the REGENXBIO SMA License, we paid or are required to pay:

As of December 31, 2017, we have paid $3.4 million under the REGENXBIO SMA License, which includes $1.3 million in aggregate milestone payments.

The REGENXBIO SMA License requires us to use commercially reasonable efforts to develop, commercialize, market, promote and sell products utilizing the licensed patent rights in our field of use. We are obligated to achieve certain development milestones with respect to the licensed disease indication. We do not have the right to control

prosecution of the in‑licensed patent applications, and our rights to enforce the in‑licensed patents are subject to certain limitations.

Under the amendment to the REGENXBIO SMA License, we are permitted to transfer the REGENXBIO SMA License without REGENXBIO’s consent in connection with a change of control of us, subject to the transferee or successor agreeing in writing to be bound by the terms of the REGENXBIO SMA License and the payment to REGENXBIO of the first and second anniversary fees of $30.0 million and $30.0 million, as well as the first $40.0 million in milestone fees, to the extent not already paid. Under the original REGENXBIO SMA License, any assignment by us without REGENXBIO’s prior written consent had been prohibited.

Our license agreement with REGENXBIO will expire upon the expiration, lapse, abandonment or invalidation of the last claim of the licensed intellectual property in all the countries of the world. We have the right to terminate the REGENXBIO SMA License upon a specified period of prior written notice. REGENXBIO may terminate the REGENXBIO SMA License if we or our affiliates become insolvent, if we are greater than a specified number of days late in paying money due under the REGENXBIO SMA License, or, effective immediately, if we or our affiliates, or sublicensees commence any action against REGENXBIO or its licensors to declare or render any claim of the licensed patent rights invalid or unenforceable. Either party may terminate the REGENXBIO SMA License for material breach if such breach is not cured within a specified number of days. Upon termination of the agreement, other than for REGENXBIO’s material breach, we grant to REGENXBIO a non‑exclusive, perpetual, irrevocable, worldwide, royalty‑free, transferable, sublicenseable license under patentable modifications and improvements to any vector claimed by the licensed patents for use by REGENXBIO for the research, development and commercialization of products in any therapeutic indication.

Asklepios Biopharmaceutical, Inc.

In May 2015, we entered into a non‑exclusive license agreement with Asklepios Biopharmaceutical, Inc., or the AskBio License. Pursuant to the license agreement, AskBio granted us a non‑exclusive, worldwide license under certain patent rights and know‑how owned or controlled by AskBio, including certain patent rights owned by the University of North Carolina and licensed to AskBio, and relating to its self‑complementary DNA technology to develop, make, have made, use, sell, offer to sell, import, export and distribute any products covered by the AskBio License, or AskBio licensed products, for the treatment of SMA in humans. The in‑licensed patent rights are issued patents in the United States, and in Canada and Europe. There are two in‑licensed patent families. The first patent family expires in November 2019 worldwide. The second patent family includes three issued United States patents with expiry dates between May 2021 and August 2023. The foreign counterparts expire in 2021. The patents relate to self‑complementary technology and include claims to viral particles based on such technology, methods of manufacturing such viral particles, and methods of use in treatment. We have the right to sublicense the licensed technology to third parties with AskBio’s prior approval. We assign to AskBio all right, title and interest in and to defined improvements to the licensed technology that we make and all patent rights covering those improvements. In return, we receive a non‑exclusive, worldwide, royalty‑free, transferable, sublicenseable, irrevocable, perpetual license to practice such improvements.

The AskBio License required us to pay AskBio a one‑time upfront license fee of $1.0 million and an ongoing annual maintenance fee of $0.1 million each year during the term of the license agreement. We are also required to pay up to a total of $0.6 million in clinical development milestone payments and $9.0 million in sales based milestone payments.

Under the terms of the AskBio License, we are required to pay AskBio annual tiered royalties based on the aggregate net sales of AskBio licensed products on a field‑by‑field basis starting at percentages in the low‑single digits and increasing to mid‑single digits. The royalties are payable on a country‑by‑country basis until the last to expire of the valid claims within the licensed patents that cover the AskBio licensed product in such country. These royalty rates are subject to reductions in specified circumstances, including, in the event we exercise our option to make a specified one‑time royalty option fee payment of $3.0 million to AskBio as further detailed in the AskBio License. We must also pay AskBio a low‑double digit percentage of all consideration we receive from our sublicense of the licensed technology.

We are required to use commercially reasonable efforts to research, develop, commercialize and sell AskBio licensed products for the treatment of SMA in humans throughout the term of the AskBio License. We do not have the right to control prosecution of the in‑licensed patent applications, and AskBio has the sole right, but not the obligation, to enforce the in‑licensed patents. In addition, our rights under the AskBio License are not assignable without the prior written consent of AskBio.

Unless terminated earlier, the AskBio License automatically expires on the date on which we no longer have any payment obligation under the AskBio License. The AskBio License may be terminated prior to its expiration:

As of December 31, 2017, we have paid AskBio the $1.0 million upfront license fee and $0.6 million for a clinical development milestone payment.

Preclinical Programs for Rett Syndrome and Genetic ALS

We have also entered into three license agreements relating to our planned new programs for Rett syndrome and genetic ALS.

REGENXBIO Inc.

Effective June 7, 2017, we entered into an exclusive license agreement with REGENXBIO under certain patents and patent applications owned by the Trustees of the University of Pennsylvania and licensed to REGENXBIO, for the development and commercialization of products to treat Rett syndrome and genetic ALS using the AAV9 vector, or the REGENXBIO Rett and ALS License. Under the REGENXBIO Rett and ALS License, REGENXBIO granted us an exclusive, worldwide license under the licensed patent rights to make, have made, use, import, sell and offer for sale any products covered by the REGENXBIO Rett and ALS License, or the REGENXBIO Rett and ALS licensed products, in the field of the treatment of (i) Rett syndrome in humans by in vivo gene therapy using AAV9 delivering the gene encoding for methyl CpG binding protein 2, and (ii) ALS caused by SOD1 mutation in humans by in vivo gene therapy using AAV9 delivering the gene encoding for SOD1, subject to certain rights reserved by REGENXBIO and its licensors. The patent rights exclusively in-licensed include an issued United States patent, which expires in 2026. We have the right to sublicense the licensed technology to third parties subject to certain conditions as specified in the REGENXBIO Rett and ALS License. Under the REGENXBIO Rett and ALS License we grant a non-exclusive, worldwide, royalty-free, transferable, sublicenseable, irrevocable, perpetual license back to REGENXBIO to (a) use any patentable modifications and improvements to the licensed technology that we or our affiliates or sublicensees develop, or licensed back improvements, and (b) practice the licensed back improvements in connection with AAV9 outside of our fields of use.

 Under the terms of the REGENXBIO Rett and ALS License, we have paid or are required to pay:

 We are obligated to achieve certain development milestones with respect to the licensed disease indications. We do not have the right to control prosecution of the in-licensed patent applications nor the right to enforce the in-licensed patents. In addition, our rights under the REGENXBIO Rett and ALS License are generally not assignable without the prior written consent of REGENXBIO. 

The REGENXBIO Rett and ALS License will expire upon the later of (i) the expiration, lapse, abandonment or invalidation of the last valid claim of the licensed intellectual property to expire, lapse or become abandoned or unenforceable in all the countries of the world or (ii) seven years from the first commercial sale of each REGENXBIO Rett and ALS licensed product. Upon expiration of the REGENXBIO Rett and ALS License, the license granted to us becomes irrevocable, perpetual, royalty-free and fully paid-up. We have the right to terminate the REGENXBIO Rett and ALS License upon a specified period of prior written notice. REGENXBIO may terminate the REGENXBIO Rett and ALS License if we or our affiliates become insolvent, if we are greater than a specified number of days late in paying money due under the REGENXBIO Rett and ALS License, or, effective immediately, if we or our affiliates, or sublicensees commence any action against REGENXBIO or its licensors to declare or render any claim of the licensed patent rights invalid or unenforceable. Either party may terminate the REGENXBIO Rett and ALS License for material breach if such breach is not cured within a specified number of days. Upon termination of the REGENXBIO Rett and ALS License, other than for REGENXBIO’s material breach, we grant to REGENXBIO a non-exclusive, perpetual, irrevocable, worldwide, royalty-free, transferable, sublicenseable license under patentable modifications and improvements to any vector claimed by the licensed patents for use by REGENXBIO for the research, development and commercialization of products in any therapeutic indication. 

As of December 31, 2017, we have paid REGENXBIO the initial $6.0 million fee. 

Nationwide Children’s Hospital

In September 2016, we entered into exclusive license agreements with NCH, pursuant to which NCH granted us exclusive, worldwide licenses under certain patent rights to make, have made, use, sell, offer for sale and import any products covered by each license, or NCH licensed products, and a non-exclusive, worldwide license under certain technical information to develop and manufacture the NCH licensed products, in the field of therapies and treatments of Rett syndrome and ALS in human use, respectively. We refer to each of the Rett syndrome and ALS in human use licenses individually as an NCH License. The patent rights exclusively in-licensed from NCH and relevant to our contemplated Rett syndrome product are a currently pending patent application being pursued only in the United States. The patent application covers the use of the AAV9 vector delivered intrathecally for the treatment of Rett syndrome. If a patent issues from this patent application, it is expected to expire in 2029. The patent rights exclusively in-licensed from NCH and relevant to our contemplated ALS product are a currently pending patent application being pursued in the United States, Canada and Europe. The patent application claims the use of the AAV9 vector as a composition of matter and its use for the treatment of ALS. If a patent issues from this patent application, it is expected to expire in 2035. We have the right to subcontract the manufacturing of products using the licensed rights under each NCH License. We also have the right to sublicense the licensed technology under each NCH License to third parties through multiple tiers.

Each NCH License sets forth a development plan for our development of the licensed technology to make and sell NCH licensed products, including for the treatment of Rett syndrome and ALS in humans, as applicable, throughout the world. We are required, if commercially reasonable, to market NCH licensed products after regulatory approval, satisfy the market demand for such products in those countries in which we have obtained regulatory approval and where

it is commercially reasonable to do so and continue to develop additional NCH licensed products within the applicable field. In the event we fail to comply with such obligations, subject to certain conditions, NCH has the right to either terminate the applicable NCH License or convert our license into a non-exclusive license with respect to the applicable NCH licensed product in the applicable country. We are responsible for all clinical trial costs under each NCH License.

We paid an initial fee of $0.2 million to NCH in connection with the NCH License for Rett syndrome and $0.1 million in connection with the NCH License for ALS in human use. We also must pay NCH an annual maintenance fee under each NCH License. Following the first commercial sale of an NCH licensed product under an applicable NCH License, we must begin paying NCH an aggregate low-single digit royalty on net sales of NCH licensed products by us, our affiliates and sublicensees during the term of such license. If we unsuccessfully challenge any of the licensed patents, the royalty rate increases from low single digits to high-single digits, in the case of the NCH License for Rett syndrome, and to mid-single digits, in the case of the NCH License for ALS in human use.

With certain exceptions, we are required to make certain development milestone-based payments to NCH under each NCH License. In addition, we must also pay NCH a portion of sublicensing revenue received from our sublicense of the rights to licensed technology at a mid-single digit percentage.

We do not have the right to control prosecution of the in-licensed patent rights under either NCH License, however NCH is required to consult with us on material matters regarding the prosecution of such patent rights, and NCH has the first right to enforce any patents issuing from the in-licensed patent rights and if NCH does not enforce the rights within a certain time frame, then we have the right to enforce. In addition, our rights under each NCH License are not assignable without the prior written consent of NCH, except to our affiliates, subsidiaries or any successor in interest in connection with a merger, acquisition, consolidation or sale, provided that our assignee assumes our obligations under the applicable NCH License in writing.

Unless terminated earlier, each agreement will expire on a NCH licensed product-by-NCH licensed product and country-by-country basis upon the expiration of the royalty term for such NCH licensed product in such country. The royalty term will expire on the later of (i) the date on which the last relevant patent underlying the relevant NCH licensed product expires or (ii) the expiration of any orphan drug-based exclusive marketing rights conferred by any regulatory authority with respect to a NCH licensed product in a licensed territory. Upon expiration of the agreement with respect to a particular NCH licensed product in a particular country, the license to us will survive and as a fully-paid up license. Each NCH License may be terminated prior to its expiration:

Certain accrued payments that we are required to make to NCH will become due in the event of termination as specified in the applicable agreement.

As of December 31, 2017, with respect to the NCH License for Rett syndrome, we have paid NCH the initial $0.2 million fee and $25,000 in annual maintenance fees, and, with respect to the NCH License for ALS, we have paid NCH the initial $0.1 million fee and $25,000 in annual maintenance fees.

Government Regulation and Product Approval

In the United States, the FDA regulates biologic products including gene therapy products under the Federal Food, Drug, and Cosmetic Act, or the FDCA, the Public Health Service Act, or the PHSA, and regulations and guidance implementing these laws. The FDCA, PHSA and their corresponding regulations govern, among other things, the testing, manufacturing, safety, efficacy, labeling, packaging, storage, record keeping, distribution, reporting, advertising and other promotional practices involving biologic products. Applications to the FDA are required before conducting human clinical testing of biologic products. Additionally, each clinical trial protocol for a gene therapy product candidate is reviewed by the FDA and, in limited instances the National Institutes of Health, or the NIH, through its Recombinant DNA Advisory Committee, or RAC. FDA approval also must be obtained before marketing of biologic products. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources and we may not be able to obtain the required regulatory approvals.

Within the FDA, the Center for Biologics Evaluation and Research, or CBER, regulates gene therapy products. Within CBER, the review of gene therapy and related products is consolidated in the Office of Tissue and Advanced Therapies, or OTAT, and the FDA has established the Cellular, Tissue and Gene Therapies Advisory Committee, or the CTGTAC, to advise CBER on its reviews. CBER works closely with the NIH and the RAC, which makes recommendations to the NIH on gene therapy issues and engages in a public discussion of scientific, safety, ethical and societal issues related to proposed and ongoing gene therapy protocols. FDA guidance documents on CMC, clinical investigations and other areas of gene therapy development are intended to facilitate the development of gene therapy products.

Ethical, social and legal concerns about gene therapy, genetic testing and genetic research could result in additional regulations restricting or prohibiting the processes we may use. Federal and state agencies, congressional committees and foreign governments have expressed interest in further regulating biotechnology. More restrictive regulations or claims that our products are unsafe or pose a hazard could prevent us from commercializing any products. New government requirements may be established that could delay or prevent regulatory approval of our product candidates under development. It is impossible to predict whether legislative changes will be enacted, regulations, policies or guidance changed, or interpretations by agencies or courts changed, or what the impact of such changes, if any, may be.

U.S. Biologic Products Development Process

Our product candidate must be approved by the FDA before it may be legally marketed in the United States. The process required by the FDA before a biologic product candidate may be marketed in the United States generally involves the following:

Before testing any biologic product candidate in humans, including a gene therapy product candidate, the product candidate must undergo preclinical testing. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as in vivo studies to assess the potential safety and activity of the product candidate and to establish a rationale for therapeutic use. The conduct of the preclinical tests must comply with federal regulations and requirements including GLPs.

Concurrent with clinical trials, companies usually must complete some long‑term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the drug in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.

If a gene therapy trial is conducted at, or sponsored by, institutions receiving NIH funding for recombinant DNA research, prior to the submission of an IND to the FDA, a protocol and related documents must be submitted to, and the study registered with, the NIH Office of Biotechnology Activities, or the OBA, pursuant to the NIH Guidelines for Research Involving Recombinant DNA Molecules, or the NIH Guidelines. Compliance with the NIH Guidelines is mandatory for investigators at institutions receiving NIH funds for research involving recombinant DNA. However, many companies and other institutions, not otherwise subject to the NIH Guidelines, voluntarily follow them. The NIH is responsible for convening the RAC that discusses protocols that raise novel or particularly important scientific, safety or ethical considerations at one of its quarterly public meetings. The OBA will notify the FDA of the RAC’s decision regarding the necessity for full public review of a gene therapy protocol. RAC proceedings and reports are posted to the OBA website and may be accessed by the public.

The clinical trial sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. With gene therapy protocols, if the FDA allows the IND to proceed, but the RAC decides that full public review of the protocol is warranted, the FDA will request at the completion of its IND review that sponsors delay initiation of the protocol until after completion of the RAC review process. The FDA also may impose clinical holds on a biologic product candidate at any time before or during clinical trials due to safety concerns or non‑compliance. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under terms authorized by the FDA. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical studies to begin, or that, once begun, issues will not arise that suspend or terminate such studies.

Human Clinical Trials Under an IND

Clinical trials involve the administration of the biologic product candidate to healthy volunteers or patients under the supervision of qualified investigators which generally are physicians not employed by, or under, the control of the trial sponsor. Clinical trials are conducted under written study protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria and the parameters to be used to monitor subject safety, including stopping rules that assure a clinical trial will be stopped if certain adverse events should occur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to a proposed clinical trial and places the trial on clinical hold, including concerns that human research subjects will be exposed to unreasonable health risks. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Accordingly, submission of an IND may or may not result in the FDA allowing clinical trials to commence. Clinical trials must be conducted and monitored in accordance with the FDA’s regulations comprising the GCP requirements, including the requirement that all research subjects provide informed consent.

Further, each clinical trial must be reviewed and approved by an IRB at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers items such as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject, or their legal representative, reviews and approves the study protocol, and must monitor the clinical trial until completed. Clinical trials involving recombinant DNA also must be reviewed by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees basic and clinical research that utilizes recombinant DNA at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment.

Human clinical trials typically are conducted in three sequential phases that may overlap or be combined:

Post‑approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial approval. These clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long‑term safety follow‑up.

During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data and clinical trial investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA.

Written IND safety reports must be promptly submitted to the FDA, the NIH and the investigators for: serious and unexpected adverse events; any findings from other trials, in vivo laboratory tests or in vitro testing that suggest a significant risk for human subjects; or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life‑threatening suspected adverse reaction within seven calendar days after the sponsor’s initial receipt of the information.

The FDA or the sponsor or its data safety monitoring board may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the biologic product candidate has been associated with unexpected serious harm to patients.

Additional Regulation for Gene Therapy Clinical Trials

In addition to the regulations discussed above, there are a number of additional standards that apply to clinical trials involving the use of gene therapy. The FDA has issued various guidance documents regarding gene therapies, which outline additional factors that the FDA will consider at each of the above stages of development and relate to, among other things: the proper preclinical assessment of gene therapies; the CMC information that should be included in an IND application; the proper design of tests to measure product potency in support of an IND or BLA application; and measures to observe delayed adverse effects in subjects who have been exposed to investigational gene therapies when the risk of such effects is high. Further, the FDA usually recommends that sponsors observe subjects for potential gene therapy‑related delayed adverse events for a 15‑year period, including a minimum of five years of annual examinations followed by 10 years of annual queries, either in person or by questionnaire.

The NIH and the FDA have a publicly accessible database, the Genetic Modification Clinical Research Information System, which includes information on gene therapy trials and serves as an electronic tool to facilitate the reporting and analysis of adverse events on these trials.

Compliance with cGMP Requirements

Manufacturers of biologics must comply with applicable cGMP regulations, including quality control and quality assurance and maintenance of records and documentation. Manufacturers and others involved in the manufacture and distribution of such products also must register their establishments with the FDA and certain state agencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in the manufacturing process. Establishments may be subject to periodic, unannounced inspections by government authorities to ensure compliance with cGMP requirements and other laws. Discovery of problems may result in a government entity placing restrictions on a product, manufacturer or holder of an approved BLA, and may extend to requiring withdrawal of the product from the market. The FDA will not approve a BLA unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specification.

Concurrent with clinical trials, companies usually complete additional preclinical studies and must also develop additional information about the physical characteristics of the biologic product candidate as well as finalize a process for manufacturing the product candidate in commercial quantities in accordance with cGMP requirements. To help reduce the risk of the introduction of adventitious agents or of causing other adverse events with the use of biologic products, the Public Health Service Act, or the PHSA, emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other requirements, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final biologic product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the biologic product candidate does not undergo unacceptable deterioration over its shelf life.

U.S. Review and Approval Processes

The results of the preclinical tests and clinical trials, together with detailed information relating to the product’s CMC and proposed labeling, among other things, are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications.

For gene therapies, selecting patients with applicable genetic defects is a necessary condition to effective treatment. For the therapy we are currently developing, we believe that diagnoses based on existing genetic tests developed and administered by laboratories certified under the Clinical Laboratory Improvement Amendments, or CLIA, are sufficient to select appropriate patients and will be permitted by the FDA.

Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a significant user fee. The FDA adjusts the PDUFA user fees on an annual basis The PDUFA also imposes an annual program fee for approved biologics. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business. Additionally, no user fees are assessed on BLAs for product candidates designated as orphan drugs, unless the product candidate also includes a non‑orphan indication.

The FDA reviews a BLA within 60 days of submission to determine if it is substantially complete before the agency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In that event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in‑depth, substantive review of the BLA.

The FDA reviews the BLA to determine, among other things, whether the proposed product candidate is safe and potent, or effective, for its intended use, has an acceptable purity profile and whether the product candidate is being manufactured in accordance with cGMP to assure and preserve the product candidate’s identity, safety, strength, quality, potency and purity. The FDA may refer applications for novel biologic products or biologic products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the product approval process, the FDA also will determine whether a risk evaluation and mitigation strategy, or REMS, is necessary to assure the safe use of the product candidate. REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events, and whether the product is a new molecular entity. A REMS could include medication guides, physician communication plans and elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS; the FDA will not approve the BLA without a REMS, if required.

Before approving a BLA, the FDA will inspect the facilities at which the product candidate is manufactured. The FDA will not approve the product candidate unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product candidate within required specifications. Additionally, before approving a BLA, the FDA typically will inspect one or more clinical sites to assure that the clinical trials were conducted in compliance with IND trial requirements and GCP requirements.

On the basis of the BLA and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the biologic product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the BLA, the FDA will issue an approval letter.

If a product candidate receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing or dispensing in the form of a REMS, or otherwise limit the scope of any approval. In addition, the FDA may require post‑marketing clinical trials, sometimes referred to as Phase 4 clinical trials, designed to further assess a biologic product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized.

The FDA has agreed to specified performance goals in the review of BLAs under the PDUFA. One such goal is to review standard BLAs in ten months after the FDA accepts the BLA for filing, and priority BLAs in six months, whereupon a review decision is to be made. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs and its review goals are subject to change from time to time. The review process and the PDUFA goal date may be extended by three months if the FDA requests or the BLA sponsor otherwise provides additional information or clarification regarding information already provided in the submission within the last three months before the PDUFA goal date.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may designate a biologic product as an “orphan drug” if it is intended to treat a rare disease or condition (generally meaning that it affects fewer than 200,000 individuals in the United States, or more in cases in which there is no reasonable expectation that the cost of developing and making a biologic product available in the United States for treatment of the disease or condition will be recovered from sales of the product). Orphan product designation must be requested before submitting a BLA. After the FDA grants orphan product designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan product designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

If a product with orphan status receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan product exclusivity, meaning that the FDA may not approve any other applications to market the same drug or biologic product for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity or if the party holding the exclusivity fails to assure the availability of sufficient quantities of the drug to meet the needs of patients with the disease or condition for which the drug was designated. Competitors, however, may receive approval of different products for the same indication for which the orphan product has exclusivity or obtain approval for the same product but for a different indication for which the orphan product has exclusivity. Orphan medicinal product status in the European Union has similar, but not identical, benefits. For example, the European Union grants 10 years of product exclusivity for orphan medicinal products.

Expedited Development and Review Programs

The FDA is authorized to expedite the review of BLAs in several ways. Under the Fast Track program, the sponsor of a biologic product candidate may request the FDA to designate the product for a specific indication as a Fast Track product concurrent with or after the filing of the IND. Biologic products are eligible for Fast Track designation if they are intended to treat a serious or life‑threatening condition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the product candidate and the specific indication for which it is being studied. In addition to other benefits, such as the ability to have greater interactions with the FDA, the FDA may initiate review of sections of a Fast Track BLA before the application is complete, a process known as rolling review.

Any product submitted to the FDA for marketing, including under a Fast Track program, may be eligible for other types of FDA programs intended to expedite development and review, such as breakthrough therapy designation, priority review and accelerated approval.

Fast Track designation, breakthrough therapy designation and accelerated approval do not change the standards for approval but may expedite the development or approval process.

Post‑approval Requirements

Rigorous and extensive FDA regulation of biologic products continues after approval, particularly with respect to cGMP requirements. Manufacturers are required to comply with applicable requirements in the cGMP regulations, including quality control and quality assurance and maintenance of records and documentation. Other post‑approval requirements applicable to biologic products include reporting of cGMP deviations that may affect the identity, potency, purity and overall safety of a distributed product, record‑keeping requirements, reporting of adverse effects, reporting updated safety and efficacy information and complying with electronic record and signature requirements. After a BLA is approved, the product also may be subject to official lot release. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA, together with a release protocol, showing a summary of the history of manufacture of the lot and the results of all tests performed on the lot. The FDA also may perform certain confirmatory tests on lots of some products before releasing the lots for distribution. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency and effectiveness of biologic products.

A sponsor also must comply with the FDA’s advertising and promotion requirements, such as the prohibition on promoting products for uses or in patient populations that are not described in the product’s approved labeling (known as “off‑label use”). Discovery of previously unknown problems or the failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions. In addition, changes to the manufacturing process or facility generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.

Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant or manufacturer to administrative or judicial civil or criminal actions and adverse publicity. These actions could include refusal to approve pending applications or supplemental applications, withdrawal of an approval, clinical hold, suspension or termination of a clinical trial by an IRB, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines or other monetary penalties, refusals of government contracts, mandated corrective advertising or communications with healthcare providers, debarment, restitution, disgorgement of profits or other civil or criminal penalties.

U.S. Patent Term Restoration and Marketing Exclusivity

Depending upon the timing, duration and specifics of FDA approval of product candidates, some of a sponsor’s U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984. The Hatch‑Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period generally is one‑half the time between the effective date of an IND and the submission date of a BLA plus the time between the submission date of a BLA and the approval of that application. Only one patent applicable to an approved biologic product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. Moreover, a given patent may only be extended once based on a single product. The United States Patent and Trademark Office, or USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.

Government Regulation Outside of the United States

In addition to regulations in the United States, sponsors are subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and any commercial sales and distribution of biologic products. Because biologically sourced raw materials are subject to unique contamination risks, their use may be restricted in some countries.

Whether or not a sponsor obtains FDA approval for a product, a sponsor must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the United States have a similar process that requires the submission of a clinical trial application, much like the IND, prior to the commencement of human clinical trials. In the European Union, for example, a request for a Clinical Trial Authorization, or CTA, must be submitted to the competent regulatory authorities and the competent Ethics Committees in the European Union Member States in which the clinical trial takes place, much like the FDA and the IRB, respectively. Once the CTA request is approved in accordance with the European Union and the European Union Member State’s requirements, clinical trial development may proceed. Access to the Priority Medicines, or PRIME, initiative is granted by the European Medicines Agency, to support the development and accelerate the review of new therapies to treat patients with unmet medical need.

The requirements and processes governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, the clinical trials are conducted in accordance with GCPs and the applicable regulatory requirements of the country or countries in which the clinical trial is performed, as well as the ethical principles that have their origin in the Declaration of Helsinki (whichever provides the greater protection to the clinical trial participants).

Failure to comply with applicable foreign regulatory requirements may result in, among other things, fines, suspension, variation or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

Other Healthcare Laws and Regulations

Healthcare providers, physicians and third‑party payors play a primary role in the recommendation and use of pharmaceutical products that are granted marketing approval. Arrangements with third‑party payors, existing or potential customers and referral sources, including healthcare providers, are subject to broadly applicable fraud and abuse and other healthcare laws and regulations, and these laws and regulations may constrain the business or financial arrangements and relationships through which manufacturers conduct clinical research, market, sell and distribute the products for which they obtain marketing approval. Such restrictions under applicable federal and state healthcare laws and regulations include the following:

Violation of the laws described above or any other governmental laws and regulations may result in penalties, including civil and criminal penalties, damages, fines, the curtailment or restructuring of operations, the exclusion from participation in federal and state healthcare programs, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, individual imprisonment, and additional reporting requirements and oversight if a person becomes subject to a corporate integrity agreement or similar agreement to resolve allegations of non‑compliance with

these laws. Furthermore, efforts to ensure that business activities and business arrangements comply with applicable healthcare laws and regulations can be costly for manufacturers of branded prescription products.

Coverage and Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any products for which we may obtain regulatory approval. In the United States, sales of any product candidates for which regulatory approval for commercial sale is obtained will depend in part on the availability of coverage and adequate reimbursement from third‑party payors. Third‑party payors include government authorities and health programs in the United States such as Medicare and Medicaid, managed care providers, private health insurers and other organizations. These third‑party payors are increasingly reducing reimbursements for medical products and services. The process for determining whether a payor will provide coverage for a drug product may be separate from the process for setting the reimbursement rate that the payor will pay for the drug product. Third‑party payors may limit coverage to specific drug products on an approved list, or formulary, which might not include all of FDA‑approved drugs for a particular indication. Additionally, the containment of healthcare costs has become a priority of federal and state governments, and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost‑containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost‑containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results.

A payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Further, coverage and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often a time‑consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

Third‑party payors are increasingly challenging the price and examining the medical necessity and cost‑effectiveness of medical products and services, in addition to their safety and efficacy. New metrics frequently are used as the basis for reimbursement rates, such as average sales price, average manufacturer price and actual acquisition cost. In order to obtain coverage and reimbursement for any product that might be approved for sale, it may be necessary to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost‑effectiveness of the products, in addition to the costs required to obtain regulatory approvals. If third‑party payors do not consider a product to be cost‑effective compared to other available therapies, they may not cover the product after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company to sell its products at a profit.

The marketability of any product candidates for which we or our collaborators receive regulatory approval for commercial sale may suffer if the government and third‑party payors fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and we expect will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third‑party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we or our collaborators receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost‑effectiveness of a particular product candidate to currently available therapies. European Union member states may approve a specific price for a product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the product on the market. Other member states allow companies to fix their own prices for products, but monitor and control company profits. The downward pressure on healthcare costs has become intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross‑border imports from low‑priced markets exert

competitive pressure that may reduce pricing within a country. Any country that has price controls or reimbursement limitations may not allow favorable reimbursement and pricing arrangements.

Health Reform

The United States and some foreign jurisdictions are considering or have enacted a number of reform proposals to change the healthcare system. There is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by federal and state legislative initiatives, including those designed to limit the pricing, coverage, and reimbursement of pharmaceutical and biopharmaceutical products, especially under government‑funded healthcare programs, and increased governmental control of drug pricing.

By way of example, in March 2010, the PPACA was signed into law, intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose taxes and fees on the healthcare industry and impose additional health policy reforms. Among the provisions of the PPACA of importance to our business are:

Some provisions of the PPACA have yet to be implemented, and there have been judicial and Congressional challenges to certain aspects of the PPACA, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the PPACA. As a result, there have been delays in the implementation of, and action taken to repeal or replace, certain aspects of the PPACA. Since January 2017, President Trump has signed two Executive Orders designed to delay the implementation of certain provisions of the PPACA or otherwise circumvent some of the requirements for

health insurance mandated by the PPACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the PPACA. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the PPACA have been signed into law. The Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain PPACA-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amends the PPACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” Congress also could consider subsequent legislation to repeal or repeal and replace other elements of the PPACA.

Other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. For example, in August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2012 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2025 unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to certain providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

Additionally, there have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration’s budget proposal for fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid and to eliminate cost sharing for generic drugs for low-income patients. While any proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.  At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We expect that these initiatives, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government‑funded programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs.

Additional Regulation

In addition to the foregoing, state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety and Health Act, the Resource Conservation and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern the use, handling and disposal of various biologic, chemical and radioactive substances used in, and wastes generated by, operations. If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. Equivalent laws have been adopted in other countries that impose similar obligations.

U.S. Foreign Corrupt Practices Act

The U.S. Foreign Corrupt Practices Act, or FCPA, prohibits U.S. corporations and individuals from engaging in certain activities to obtain or retain business abroad or to influence a person working in an official capacity. It is illegal to pay, offer to pay or authorize the payment of anything of value to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity. The scope of the FCPA includes interactions with certain healthcare professionals in many countries. Equivalent laws have been adopted in other foreign countries that impose similar obligations.

Employees

As of December 31, 2017, we had 219 full‑time employees, 21 of whom hold Ph.D. or M.D. degrees, 173 of whom are engaged in research and development activities (with 133 of these employees engaged in manufacturing activities) and 46 of whom are engaged in business development, finance, information systems, facilities, human resources or administrative support. None of our employees is party to a collective bargaining agreement. We consider our relationship with our employees to be good.

Information about Segments

We currently operate in a single business segment: developing and commercializing gene therapy treatments for patients suffering from rare and life‑threatening neurological genetic diseases. See “Note 2—Summary of Significant Accounting Policies—Segment Information” to our consolidated financial statements contained in Part II, Item 8 of this Annual Report on Form 10-K.

Corporate Information

We were originally formed under the laws of the state of Delaware in March 2010 under the name Biolife Cell Bank, LLC. In January 2012, we converted from a limited liability company to a Delaware corporation, Biolife Cell Bank, Inc. In January 2014, we amended and restated our certification of incorporation to change our name to AveXis, Inc. Our principal executive offices are located at 2275 Half Day Road, Suite 200, Bannockburn, Illinois 60015, and our telephone number is (847) 572‑8280. Our website address is www.avexis.com. We file Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8‑K, and other information with the SEC. Our filings with the SEC are available free of charge on the SEC’s website at www.sec.gov and on our website under the “Investors & Media” tab as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. You may also read and copy, at SEC prescribed rates, any document we file with the SEC at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington D.C. 20549. You can call the SEC at 1‑800‑SEC‑0330 to obtain information on the operation of the Public Reference Room. The contents of our website are not incorporated into this Annual Report and our reference to the URL for our website is intended to be an inactive textual reference only.

Item 1A.  Risk Factors 

Our business is subject to numerous risks. You should carefully consider the following risks and all other information contained in this Annual Report, as well as general economic and business risks, together with any other documents we file with the SEC. If any of the following events actually occur or risks actually materialize, it could have a material adverse effect on our business, operating results and financial condition and cause the trading price of our common stock to decline.

Risks related to our financial position and need for capital

We have incurred net losses since inception and anticipate that we will continue to incur net losses for the foreseeable future and may never achieve or maintain profitability.

Since inception, we have incurred significant net losses. Our net losses were $218.1 million, $83.0 million and $38.5 million for the years ended December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017, we had an

accumulated deficit of $359.6 million. We have devoted substantially all of our efforts to research and development, including clinical development of our gene therapy product candidate, AVXS‑101, investing in our manufacturing facility and manufacturing equipment, as well as to building out our management team and infrastructure. We expect that it could be several years, if ever, before we have a commercialized product candidate. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to quarter. We anticipate that our expenses will increase substantially if, and as, we:

To become and remain profitable, we must develop and eventually commercialize one or more product candidates with significant market potential. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of AVXS‑101 and other future product candidates, developing and validating commercial scale manufacturing processes, obtaining marketing approval for our product candidates, manufacturing, marketing and selling any future product candidates for which we may obtain marketing approval and satisfying any post‑marketing requirements. We currently only have one product candidate, AVXS‑101, and we may never acquire, in‑license or develop additional product candidates. We may never succeed in any or all of these activities and, even if we do, we may never generate revenues that are significant or large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value of our company also could cause you to lose all or part of your investment.

Because of the numerous risks and uncertainties associated with pharmaceutical product and biological product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. If we are required by the U.S. Food and Drug Administration, or FDA, or the European Medicines Agency, or EMA, or other regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of AVXS‑101, our expenses could increase and revenue could be further delayed.

We have never generated revenue from product sales and may never be profitable.

Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or with collaborative partners, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize, AVXS‑101 and any additional product candidates that we may pursue in the future. We do not anticipate generating revenues from product sales for the next few years, if ever. Our ability to generate future revenues from product sales depends heavily on our, or our future collaborators’, success in:

Even if any product candidate that we develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate. Our expenses could increase beyond expectations if the FDA, the EMA or other regulatory authorities require us to perform clinical and other studies in addition to those that we currently anticipate. Even if we are able to generate revenues from the sale of any approved product candidates, we may not become profitable and may need to obtain additional funding to continue operations.

Many of these factors are beyond our control. If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business.

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

We are a development‑stage company founded in 2010, and we did not begin research and development activities for the treatment of SMA with AVXS‑101 until 2013. Our efforts to date, with respect to the development of AVXS‑101, have been limited to organizing and staffing our company, business planning, raising capital, acquiring our technology, identifying AVXS‑101 as a potential gene therapy product candidate, undertaking clinical trials of that product candidate, investing in our manufacturing facility and manufacturing equipment and establishing collaborations. We have not yet demonstrated the ability to complete late stage clinical trials of AVXS‑101 or any other product candidate, obtain marketing approvals, manufacture a commercial‑scale product or conduct sales and marketing activities necessary for successful commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had more experience developing gene therapy products.

We do not currently have the ability to perform the sales, marketing and manufacturing functions necessary for the production and sale of AVXS‑101 on a commercial scale. Our only product candidate is AVXS‑101, which may be required to undergo significant additional clinical trials before it can be commercialized, if at all. The successful commercialization of AVXS‑101 will require us to perform a variety of functions, including:

We expect our financial condition and operating results to continue to fluctuate from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. We will need to transition at some point from a company with a research and development focus to a company capable of undertaking commercial activities. We may encounter unforeseen expenses, difficulties, complications and delays and may not be successful in such a transition.

We may need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this capital when needed may force us to delay, limit or terminate certain of our product development efforts or other operations.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, initiate further clinical trials of, and seek marketing approval for, AVXS‑101. In addition, if we obtain marketing approval for our product candidate, we expect to incur significant expenses related to product sales, medical affairs, marketing, manufacturing and distribution. Furthermore, we expect to incur additional costs associated with operating as a public company. While we believe that our existing cash, cash equivalents and short‑term investments will be sufficient to fund our current operating plans into 2020, we anticipate that we may need additional funding to complete the development of AVXS‑101 and any future product candidates and commercialize any such products.

Our future capital requirements will depend on many factors, including:

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. Our product revenues, if any, will be derived from or based on sales of product candidates that may not be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. To the extent that additional capital is raised through the sale of equity or equity‑linked securities, the issuance of those securities could result in substantial dilution for our current stockholders and the terms may include liquidation or other preferences that adversely affect the rights of our current stockholders. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or additional equity financing that we raise may contain terms that are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our product candidates, or grant licenses on terms that are not favorable to us. Furthermore, the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. Adequate additional financing may not be available to us on acceptable terms, or at all.

Risks related to the development of AVXS-101 and any future product candidates

The development and commercialization of AVXS‑101, or any other product candidates we may develop, is subject to many risks. If we do not successfully develop and commercialize any product candidate, our business will be adversely affected.

We are currently focusing our development efforts on solely one gene therapy product candidate, AVXS‑101 for the treatment of SMA. We also intend to develop product candidates for the treatment of Rett syndrome and genetic ALS and intend to in‑license or develop additional product candidates for the treatment of other rare and life‑threatening neurological genetic diseases. The development and commercialization of AVXS‑101 or any other product candidate we may develop is subject to many risks, including:

If any of these risks materializes, we could experience significant delays or an inability to successfully commercialize AVXS‑101 or any other product candidate we may develop, which would have a material adverse effect on our business, financial condition and results of operations.

AVXS‑101 is based on a novel technology, which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval. To our knowledge, only a limited number of gene therapies have been approved in the United States and the European Union and commercialization efforts are still preliminary.

We have concentrated our research and development efforts on AVXS‑101 for the treatment of SMA and our future success depends on our successful development of that product candidate. There can be no assurance that we will not experience problems or delays in developing our product candidate and that such problems or delays will not cause unanticipated costs, or that any such development problems can be solved. We may also experience unanticipated problems or delays in expanding our manufacturing capacity through our own internal supply network or potential third party manufacturers, which would prevent us from completing our clinical trials, meeting the obligations of our collaborations, or commercializing our product candidates on a timely or profitable basis, if at all. For example, we may uncover a previously unknown risk associated with AVXS‑101 or risks we are aware of, such as the elevated liver function enzymes we observed in the patients treated in the Phase 1 clinical trial of AVXS‑101, may be more problematic than we currently believe and this may prolong the period of observation required for obtaining regulatory approval or may necessitate additional clinical testing.

In addition, the product specifications and the clinical trial requirements of the FDA, the EMA and other regulatory authorities and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of such product candidate. For example, the FDA and the EMA have different requirements regarding what constitutes an acceptable antibiotic‑resistant genetic marker for plasmid selection needed for the production of AVXS‑101. From an FDA perspective, both ampicillin‑resistant and kanamycin‑resistant genetic markers are acceptable, while from an EMA perspective, only kanamycin‑resistant genetic markers are acceptable. As a result, we have transitioned to kanamycin‑resistant plasmid

selection for all future clinical trials, including clinical trials to be conducted in the European Union. The regulatory approval process for novel product candidates such as ours is unclear and can be more expensive and take longer than for other, better known or more extensively studied product candidates. To our knowledge, only three gene therapy products, Novartis’ Kymriah, Gilead Sciences’ Yescarta and Spark Therapeutics’ Luxturna, have received approval from the FDA and two gene therapy products, uniQure N.V.’s Glybera and GlaxoSmithKline’s Strimvelis, have received marketing authorization from the European Commission; however, uniQure announced that it does not plan to renew the marketing authorization for Glybera in Europe. As a result, it is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for AVXS‑101 in either the United States or the European Union or how long it will take to commercialize our product candidate. Approvals by the FDA may not be indicative of what the European Commission may require for approval and vice versa.

Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future. The FDA has established the Office of Tissue and Advanced Therapies within its Center for Biologics Evaluation and Research, or CBER, to consolidate the review of gene therapy and related products, and has established the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER in its review. Gene therapy clinical trials conducted at institutions that receive funding for recombinant DNA research from the United States National Institutes of Health, or the NIH, also are potentially subject to review by the NIH Office of Biotechnology Activities’ Recombinant DNA Advisory Committee, or the RAC; however, the NIH announced that the RAC will only publicly review clinical trials if the trials cannot be evaluated by standard oversight bodies and pose unusual risks. Although the FDA decides whether individual gene therapy protocols may proceed, the RAC public review process, if undertaken, can delay the initiation of a clinical trial, even if the FDA has reviewed the trial design and details and approved its initiation. Conversely, the FDA can put an IND on a clinical hold even if the RAC has provided a favorable review or an exemption from in‑depth, public review. If we were to engage an NIH‑funded institution to conduct a clinical trial, that institution’s institutional biosafety committee as well as its institutional review board, or IRB, would need to review the proposed clinical trial to assess the safety of the trial. In addition, adverse developments in clinical trials of gene therapy products conducted by others may cause the FDA or other oversight bodies to change the requirements for approval of our product candidate. Similarly, the EMA may issue new guidelines concerning the development and marketing authorization for gene therapy medicinal products and require that we comply with these new guidelines.

These regulatory review committees and advisory groups and the new guidelines they promulgate may lengthen the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of AVXS‑101 or future product candidates or lead to significant post‑approval limitations or restrictions. As we advance AVXS‑101, we will be required to consult with these regulatory and advisory groups, and comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue development of AVXS‑101. These additional processes may result in a review and approval process that is longer than we otherwise would have expected. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generate sufficient product revenue, and our business, financial condition, results of operations and prospects would be materially and adversely affected.

Breakthrough therapy designation by the FDA and access to Priority Medicines, or PRIME, by the EMA may not lead to a faster development, regulatory review or approval process for AVXS-101, and it does not increase the likelihood that any of our product candidates will receive marketing approval in the United States and Europe, respectively.

We have received breakthrough therapy designation for AVXS‑101 for the treatment of SMA Type 1 in pediatric patients, and may, in the future, apply for breakthrough therapy designation for other product candidates in the United States. A breakthrough therapy product candidate is defined as a product candidate that is intended, alone or in combination with one or more other drugs, to treat a serious or life‑threatening disease or condition and preliminary clinical evidence indicates that such product candidate may demonstrate substantial improvement on one or more clinically significant endpoints over existing therapies. The FDA will seek to ensure the sponsor of a breakthrough therapy product candidate receives: (i) intensive guidance on an efficient drug development program; (ii) intensive involvement of senior managers and experienced staff on a proactive, collaborative and cross‑disciplinary review; and

(iii) a rolling review process whereby the FDA may consider reviewing portions of a BLA before the sponsor submits the complete application. Product candidates designated as breakthrough therapies by the FDA may be eligible for priority review if supported by clinical data.

Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree. In any event, the receipt of a breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to products considered for approval under conventional FDA procedures and, in any event, does not assure ultimate approval by the FDA. In addition, even though AVXS‑101 has been designated as a breakthrough therapy product candidate, the FDA may later decide that it no longer meets the conditions for designation or decide that the time period for FDA review or approval will not be shortened.

Access to the PRIME initiative is granted by the European Medicines Agency, to support the development and accelerate the review of new therapies to treat patients with unmet medical need. The receipt of this access for a product candidate may not result in a faster development process, review or approval compared to products considered for approval under conventional EMA procedures and, in any event, does not assure ultimate approval by the EMA. In addition, even though AVXS‑101 has been granted access to PRIME, the EMA may later decide that it no longer meets the conditions for such access.

Success in preclinical studies or early clinical trials, including in our Phase 1 clinical trial of AVXS-101, may not be indicative of results obtained in later trials or provide support for submission of a marketing application.

Results from preclinical studies or early stage clinical trials such as our Phase 1 clinical trial are not necessarily predictive of future clinical trial results, and interim results of a clinical trial are not necessarily indicative of final results. AVXS‑101 may fail to show the desired safety and efficacy in clinical development despite positive results in preclinical studies and our Phase 1 clinical trial. The clinical trial process may fail to demonstrate that AVXS‑101 is safe for humans and effective for indicated uses. This failure would cause us to abandon AVXS‑101. Our Phase 1 clinical trial involved a small patient population and the duration of treatment has been relatively short. In addition, our Phase 1 clinical trial of AVXS‑101 did not include a placebo control. Because of the small sample size and other changes to the design of the clinical trial that we implemented in our pivotal trial based on feedback from the FDA during our September 2016 Type B meeting and the meeting minutes, the results of our Phase 1 clinical trial may not be indicative of results of future clinical trials, including our pivotal trial.

There is a high failure rate for drugs and biologic products proceeding through clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late‑stage clinical trials even after achieving promising results in preclinical testing and earlier‑stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, we may experience regulatory delays or rejections as a result of many factors, including due to changes in regulatory policy during the period of our product candidate development. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will generate the same results or otherwise provide adequate data to demonstrate the efficacy and safety of a product candidate. Frequently, product candidates that have shown promising results in early clinical trials have subsequently suffered significant setbacks in later clinical trials. In addition, the design of a clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. Our company has limited experience in designing clinical trials and we may be unable to design and execute a clinical trial to support regulatory approval. In our Phase 1 clinical trial of AVXS‑101, we used event‑free survival as the efficacy endpoint, with an “event” defined as death or at least 16 hours per day of required ventilation support for breathing for 14 consecutive days in the absence of acute reversible illness or perioperatively. Although none of the patients who received the proposed therapeutic dose of AVXS‑101 experienced an event as of August 7, 2017, one patient in the low‑dose cohort experienced an event as classified by an independent Data Safety Monitoring Board, that was determined by independent review to represent progression of disease and not to be related to the use of AVXS‑101. Clinical trials are inherently unpredictable, and there are no assurances that these patients enrolled in the Phase 1 trial will not experience an event in the future. Furthermore, although the FDA indicated its preference for survival, such as time to an event, as a co‑primary endpoint for the pivotal trial, there is no assurance that the FDA will determine event‑free survival to be an acceptable efficacy

endpoint following its review of the final results of the pivotal trial. While the FDA also indicated its preference for the pivotal trial to include the achievement of certain motor milestones, such as sitting unassisted, as a potential co‑primary endpoint, there is no assurance that the FDA will determine that the achievement of these milestones will be an acceptable efficacy endpoint following its review of the final results of the pivotal trial. The FDA may not accept either or both of these endpoints as a measure of efficacy, which could result in a delay in approval of AVXS‑101. Any such delays could materially and adversely affect our business, financial condition, results of operations and prospects.

We may find it difficult to enroll patients in our clinical trials, which could delay or prevent us from proceeding with clinical trials of AVXS‑101.

Identifying and qualifying patients to participate in clinical trials of AVXS‑101 is critical to our success. The timing of our clinical trials depends on our ability to recruit patients to participate as well as completion of required follow‑up periods. If patients are unwilling to participate in our gene therapy studies because of negative publicity from adverse events related to the biotechnology or gene therapy fields, competitive clinical trials for similar patient populations, clinical trials in products employing our vector or our platform or for other reasons, the timeline for recruiting patients, conducting studies and obtaining regulatory approval of AVXS‑101 may be delayed. These delays could result in increased costs, delays in advancing AVXS‑101, delays in testing the effectiveness of AVXS‑101 or termination of clinical trials altogether.

We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics, to complete our clinical trials in a timely manner. Patient enrollment and trial completion is affected by factors including:

AVXS‑101 is being developed to treat a rare condition. We plan to seek initial marketing approval in the United States and the European Union. Subject to the results of our Phase 1 clinical trial and further discussions with the FDA, we currently anticipate that any pivotal trial of AVXS‑101 could include using natural history of the disease as a comparator. Patients may opt not to enroll in our pivotal trial because of the commercial availability of another treatment

for the disease. We may not be able to initiate or continue clinical trials if we cannot enroll a sufficient number of eligible patients to participate in the clinical trials required by the FDA or the EMA or other regulatory authorities. Our ability to successfully initiate, enroll and complete a clinical trial in any foreign country is subject to numerous risks unique to conducting business in foreign countries, including:

If we have difficulty enrolling a sufficient number of patients or finding additional clinical sites to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any of which would have an adverse effect on our business, financial condition, results of operations and prospects.

Because the number of subjects in our clinical trial to date is small and have all been treated at one clinical trial site, the results from our Phase 1 clinical trial of AVXS-101 may be less reliable than results achieved in larger clinical trials.

A study design that is considered appropriate includes a sufficiently large sample size with appropriate statistical power, as well as proper control of bias, to allow a meaningful interpretation of the results. In our Phase 1 clinical trial, we analyzed the effect of AVXS‑101 on SMA Type 1 in 15 patients at one clinical site. The preliminary results of studies with smaller sample sizes and at a single site, such as our Phase 1 clinical trial, can be disproportionately influenced by the impact the treatment had on a few individuals, which limits the ability to generalize the results across a broader community, thus making the study results less reliable than studies with a larger number of subjects. As a result, there may be less certainty that AVXS‑101 would achieve a statistically significant effect in any future clinical trials. In any future clinical trials of AVXS‑101, we may not achieve a statistically significant result or the same level of statistical significance, if any, seen in our Phase 1 clinical trial.

We may encounter substantial delays in our clinical trials or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.

Before obtaining marketing approval from regulatory authorities for the sale of AVXS‑101 or other product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of that product candidate for its intended indications. Clinical testing is expensive, time‑consuming and uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage of testing. Events that may prevent successful or timely completion of clinical development include:

Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to generate revenues from product sales, regulatory and commercialization milestones and royalties. In addition, if we make manufacturing or formulation changes to AVXS‑101 or other product candidates, we may need to conduct additional studies to bridge our modified product candidate to earlier versions. Clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize AVXS‑101 or other product candidates or allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize AVXS‑101 or other product candidates and may harm our business, financial condition, results of operations and prospects.

Additionally, if the results of our clinical trials are inconclusive or if there are safety concerns or serious adverse events associated with AVXS‑101 or other product candidates, we may:

Our product development costs will also increase if we experience delays in testing or marketing approvals. We do not know whether any of our preclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates.

As we evaluate and develop manufacturing process improvements to AVXS‑101, we may be required to conduct comparability studies, which may result in delays to the development and approval process for our current or future programs and increased costs resulting from additional nonclinical trials.

We expect to continue to evaluate and develop manufacturing process improvements to AVXS‑101. As a result, the FDA or other regulatory authorities may require a clinical bridging study, or comparability study, showing comparability to prior batches of AVXS‑101, which could delay the development process. For example, the FDA required us to complete a potency assay qualification study of AVXS-101 prior to initiating our pivotal clinical trial. If we make manufacturing or formulation changes to our product candidates in the future, we may need to conduct additional nonclinical studies to bridge our modified product candidates to earlier versions. If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

Our product development costs also will increase if we experience delays in testing or regulatory approvals. We do not know whether any of our nonclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant nonclinical study or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations. Any delays in our nonclinical or future clinical development programs may harm our business, financial condition and prospects significantly.

AVXS‑101 may cause undesirable side effects or have other properties that could delay or prevent its regulatory approval, limit the commercial potential or result in significant negative consequences following any potential marketing approval.

During the conduct of clinical trials, patients report changes in their health, including illnesses, injuries and discomforts, to their study doctor. Often, it is not possible to determine whether or not the product candidate being studied caused these conditions. Various illnesses, injuries, and discomforts have been reported from time‑to‑time during the Phase 1 clinical trial of AVXS‑101. As of August 7, 2017, we observed a total of 56 serious adverse events in 13 patients, two of which were deemed treatment‑related. Regulatory authorities may draw different conclusions or require additional testing to confirm these determinations. In addition, it is possible that as we test AVXS‑101 or any other product candidate in larger, longer and more extensive clinical programs, or as use of these product candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by subjects. Many times, side effects are only detectable after investigational products are tested in large‑scale, Phase 3 or pivotal clinical trials or, in some cases, after they are made available to patients on a commercial scale after approval. If additional clinical experience indicates that AVXS‑101 or any other product candidate has side effects or causes serious or life‑threatening side effects, the development of the product candidate may fail or be delayed, or, if the product candidate has received regulatory approval, such approval may be revoked, which would severely harm our business, prospects, operating results and financial condition.

There have been several significant adverse side effects in gene therapy treatments in the past, including reported cases of leukemia and death seen in other trials using other vectors. While new recombinant vectors have been developed to reduce these side effects, gene therapy is still a relatively new approach to disease treatment and additional adverse side effects could develop. There also is the potential risk of delayed adverse events following exposure to gene therapy products due to persistent biologic activity of the genetic material or other components of products used to carry the genetic material. Possible adverse side effects that could occur with treatment with gene therapy products include an immunologic reaction early after administration which, while not necessarily adverse to the patient’s health, could substantially limit the effectiveness of the treatment. In previous clinical trials involving AAV vectors for gene therapy, some subjects experienced the development of a T‑cell response, whereby after the vector is within the target cell, the cellular immune response system triggers the removal of transduced cells by activated T‑cells. If our vectors demonstrate a similar effect we may decide or be required to halt or delay further clinical development of AVXS‑101.

In addition to side effects caused by the product candidate, the administration process or related procedures also can cause adverse side effects. If any such adverse events occur, our clinical trials could be suspended or terminated.

If in the future we are unable to demonstrate that such adverse events were caused by the administration process or related procedures, the FDA, the European Commission, the EMA or other regulatory authorities could order us to cease further development of, or deny approval of, AVXS‑101 for any or all targeted indications. Even if we are able to demonstrate that any serious adverse events are not product‑related, such occurrences could affect patient recruitment or the ability of enrolled patients to complete the trial. Moreover, if we elect, or are required, to delay, suspend or terminate any clinical trial of AVXS‑101, the commercial prospects of such product candidate may be harmed and our ability to generate product revenues from this product candidate may be delayed or eliminated. Any of these occurrences may harm our ability to develop other product candidates, and may harm our business, financial condition and prospects significantly.

Additionally, if AVXS‑101 receives marketing approval, the FDA could require us to adopt a REMS to ensure that the benefits outweigh its risks, which may include, among other things, a medication guide outlining the risks of the product for distribution to patients and a communication plan to health care practitioners. Furthermore, if we or others later identify undesirable side effects caused by AVXS‑101, several potentially significant negative consequences could result, including:

Any of these events could prevent us from achieving or maintaining market acceptance of AVXS‑101 and could significantly harm our business, prospects, financial condition and results of operations.

As an organization, we have never completed pivotal clinical trials, and may be unable to do so for any product candidates we may develop, including AVXS‑101.

We will need to successfully complete pivotal clinical trials in order to obtain FDA approval to market AVXS‑101. Carrying out later‑stage clinical trials and the submission of a successful BLA is a complicated process. As an organization, we have not previously conducted any later stage or pivotal clinical trials, have limited experience in preparing, submitting and prosecuting regulatory filings, and have not previously submitted a BLA for any product candidate. In addition, we have had limited interactions with the FDA and cannot be certain how many additional clinical trials of AVXS‑101 will be required or how such trials should be designed. Consequently, we may be unable to successfully and efficiently execute and complete necessary clinical trials in a way that leads to BLA submission and approval of AVXS‑101. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of product candidates that we develop. Failure to commence or complete, or delays in, our planned clinical trials, could prevent us from or delay us in commercializing AVXS‑101.

Even if we complete the necessary clinical trials, we cannot predict when, or if, we will obtain regulatory approval to commercialize AVXS‑101 and the approval may be for a narrower indication than we seek.

We cannot commercialize a product candidate until the appropriate regulatory authorities have reviewed and approved the product candidate. Even if AVXS‑101 meets its safety and efficacy endpoints in clinical trials, the regulatory authorities may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non‑approval or restrictions on approval. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory authority policy during the period of product development, clinical trials and the review process.

Regulatory authorities also may approve a product candidate for more limited indications than requested (such as approving AVXS‑101 only for a subset of SMA Type 1 patients) or they may impose significant limitations in the form of narrow indications, warnings or a REMS. These regulatory authorities may require precautions or contra‑indications with respect to conditions of use or they may grant approval subject to the performance of costly post‑marketing clinical trials. In addition, regulatory authorities may not approve the labeling claims that are necessary or desirable for the successful commercialization of AVXS‑101. Any of the foregoing scenarios could materially harm the commercial prospects for AVXS‑101 and materially and adversely affect our business, financial condition, results of operations and prospects.

Even if we obtain regulatory approval for a product candidate, our product candidates will remain subject to regulatory oversight.

Even if we obtain any regulatory approval for AVXS‑101 or any other product candidate, it will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record‑keeping and submission of safety and other post‑market information. Any regulatory approvals that we receive for such product candidate, including AVXS‑101, may also be subject to a REMS, limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post‑marketing testing, including Phase 4 clinical trials, and surveillance to monitor the quality, safety and efficacy of the product. For example, the holder of an approved BLA is obligated to monitor and report adverse events

and any failure of a product to meet the specifications in the BLA. FDA guidance advises that patients treated with some types of gene therapy undergo follow‑up observations for potential adverse events for as long as 15 years, and our current and each of our proposed clinical trials for AVXS‑101 each include a 15 year long‑term follow‑up phase, limited to confirmed data collection from annual visits with standard care physicians. The holder of an approved BLA also must submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws.

In addition, product manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP requirements and adherence to commitments made in the BLA or foreign marketing application. If we, or a regulatory authority, discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured or disagrees with the promotion, marketing or labeling of that product, a regulatory authority may impose restrictions relative to that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.

If we fail to comply with applicable regulatory requirements following approval of AVXS‑101 or other product candidate, a regulatory authority may:

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize AVXS‑101 or other product candidates and adversely affect our business, financial condition, results of operations and prospects.

In addition, the FDA’s policies, and those of equivalent foreign regulatory agencies, may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of AVXS‑101 or other product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would materially and adversely affect our business, financial condition, results of operations and prospects.

We face significant competition in an environment of rapid technological change and the possibility that our competitors may achieve regulatory approval before us or develop therapies that are more advanced or effective than ours, which may adversely affect our financial condition and our ability to successfully market or commercialize AVXS‑101 or other product candidates.

We operate in highly competitive segments of the biopharmaceutical markets. We face competition from many different sources, including larger and better‑funded pharmaceutical, specialty pharmaceutical and biotechnology companies, as well as from academic institutions, government agencies and private and public research institutions. Our product candidates, if successfully developed and approved, will compete with established therapies as well as with new treatments that may be introduced by our competitors. There are a variety of drug candidates in development for the indications that we intend to test. Many of our competitors have significantly greater financial, product candidate development, manufacturing and marketing resources than we do. Large pharmaceutical and biotechnology companies have extensive experience in clinical testing and obtaining regulatory approval for drugs. We also may compete with these organizations to recruit management, scientists and clinical development personnel. We will also face competition from these third parties in establishing clinical trial sites, registering subjects for clinical trials and in identifying and in‑licensing new product candidates. Smaller or early‑stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

New developments, including the development of other pharmaceutical technologies and methods of treating disease, occur in the pharmaceutical and life sciences industries at a rapid pace. Developments by competitors may delay the initiation of future clinical trials, or otherwise change our development plans, for AVXS‑101, or may render our product candidates obsolete or noncompetitive. Competition in drug development is intense. We anticipate that we will face intense and increasing competition as new treatments enter the market and advanced technologies become available.

We are aware of several companies, including Voyager Therapeutics, Inc. and Généthon, focused on developing gene therapies in various indications, as well as several companies addressing other methods for modifying genes and regulating gene expression. Any advances in gene therapy technology made by a competitor may be used to develop therapies that could compete against AVXS‑101. In addition to a gene therapy‑based solution such as AVXS‑101, alternative approaches for the treatment of SMA include alternative splicing, neuroprotection and muscle enhancers. Alternative splicing seeks to achieve more efficient production of full‑length SMN protein from the SMN2 gene. Companies utilizing this approach include Ionis Pharmaceuticals, Inc., which in December 2016, together with its licensee, Biogen, received FDA approval for their product SPINRAZA™ (nusinersen) under Priority Review for the treatment of SMA in pediatric and adult patients and subsequently launched the product, Roche Holding Ltd, which is conducting a Phase 2 clinical trial for SMA Type 1 patients and a Phase 2 trial for SMA Types 2 and 3 patients and Novartis Corporation, which is conducting Phase 2 clinical trials for SMA Type 1 patients in the EU. Neuroprotectants seek to mitigate the loss of motor neurons. Trophos SA, which has been acquired by Roche Holding Ltd, has completed its Phase 3 clinical trial of its lead neuroprotectant product candidate, Olesoxime (TRO19622), in patients between the ages of three and 25 with SMA Types 2 and 3. Cytokinetics, in collaboration with Astellas, is conducting a Phase 2 trial of their muscle enhancer CK-2127107 in SMA Types 2, 3 and 4 patients and Catalyst is conducting a Phase 2 trial of their muscle enhancer Firdapse in SMA Type 3 patients.

Many of our potential competitors, alone or with their strategic partners, have substantially greater financial, technical and other resources, such as larger research and development, clinical, marketing and manufacturing organizations. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smaller number of competitors. Our commercial opportunity could be reduced or eliminated if competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any product candidate that we may develop. Competitors also may obtain FDA or other regulatory approval for their products more rapidly or earlier than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. Additionally, technologies developed by our competitors may render AVXS‑101 uneconomical or obsolete, and we may not be successful in marketing AVXS‑101 against competitors.

In addition, as a result of the expiration or successful challenge of our patent rights, we could face more litigation with respect to the validity and/or scope of patents relating to our competitors’ products. The availability of our

competitors’ products could limit the demand, and the price we are able to charge, for any product candidate that we may develop and commercialize.

Even if we obtain and maintain approval for AVXS‑101 from the FDA, we may never obtain approval for AVXS‑101 outside of the United States, which would limit our market opportunities and adversely affect our business.

Approval of a product candidate in the United States by the FDA does not ensure approval of such product candidate by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. Sales of AVXS‑101 outside of the United States will be subject to foreign regulatory requirements governing clinical trials and marketing approval. Even if the FDA grants marketing approval for a product candidate, comparable regulatory authorities of foreign countries also must approve the manufacturing and marketing of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and more onerous than, those in the United States, including additional preclinical studies or clinical trials. In many countries outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that country. In some cases, the price that we intend to charge for our product candidates, if approved, is also subject to approval. We intend to submit a marketing authorization application to the EMA for approval of AVXS‑101 in the European Union, but obtaining such approval from the European Commission following the opinion of the EMA is a lengthy and expensive process. Even if a product candidate is approved, the FDA or the European Commission, as the case may be, may limit the indications for which the product may be marketed, require extensive warnings on the product labeling or require expensive and time‑consuming additional clinical trials or reporting as conditions of approval. Regulatory authorities in countries outside of the United States and the European Union also have requirements for approval of product candidates with which we must comply prior to marketing in those countries. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of AVXS‑101 in certain countries.

Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries. Also, regulatory approval for AVXS‑101 may be withdrawn. If we fail to comply with the regulatory requirements, our target market will be reduced and our ability to realize the full market potential of AVXS‑101 will be harmed and our business, financial condition, results of operations and prospects will be adversely affected.

Preclinical testing of our gene therapy product candidates for Rett syndrome and genetic ALS may not result in our advancement of these programs into clinical trials.

Although a substantial amount of our efforts to date have focused on the development of AVXS-101 for SMA, a key element of our strategy is to discover, develop and potentially commercialize a portfolio of product candidates to treat other rare and life-threatening neurological genetic diseases. In furtherance of that strategy, we announced that we had entered into a license agreement with REGENXBIO to develop and commercialize gene therapy treatments to treat two rare monogenic disorders: Rett syndrome and genetic ALS. Our development efforts for our Rett syndrome and ALS programs are at an extremely early stage, and we have not yet completed IND-enabling preclinical studies for either of these programs. It is possible that future research and preclinical development of these programs may not establish sufficient indications of clinical benefit or acceptable tolerability to support the submission of an IND for one or both of these programs, in which case we may never initiate clinical trials, and we may be forced to suspend development activities for one or both of these programs. If we are not able to advance these programs into clinical trials, we will not be able to commercialize products for these indications, which would have a material adverse effect on our future business prospects, financial condition and results of operations.

Risks related to our reliance on third parties

A third party conducted the only clinical trial of AVXS‑101 to date and sponsored this trial through November 6, 2015, and our ability to influence the design and conduct of this trial was limited. Any failure by a third party to meet its obligations with respect to the clinical and regulatory development of AVXS‑101 may delay or impair our ability to obtain regulatory approval for AVXS‑101 and result in liability for us.

Until November 6, 2015, we had not sponsored any clinical trials relating to AVXS‑101. Prior to that, our third‑party research institution collaborator, Nationwide Children’s Hospital, or NCH, had sponsored our Phase 1 clinical trial for the treatment of SMA Type 1 relating to this product candidate, or the NCH trial, under an investigational new drug application, or IND, held by Dr. Jerry Mendell, the principal investigator at NCH. We have assumed control of the overall clinical and regulatory development of AVXS‑101 for future clinical trials. Although we sponsor the clinical trial, NCH has certain reversionary rights in the case of acts or omissions constituting negligence or willful misconduct or failure to comply with applicable law. Failure to maintain sponsorship of INDs for AVXS‑101 could negatively affect the timing of our potential future clinical trials. Such an impact on timing could increase research and development costs and could delay or prevent us from obtaining regulatory approval for AVXS‑101, either of which could have a material adverse effect on our business.

Further, we did not control the design or conduct of the NCH trial. It is possible that the FDA will not accept the NCH trial as part of a future registration package in support of a license application, for any of one or more reasons, including the safety, purity, and potency of the product candidate, the degree of product characterization, elements of the design or execution of the previous trials or safety concerns, or other trial results. For example, in 2016 the FDA completed an inspection of the NCH trial as conducted at NCH’s facilities and made observations on an FDA Form 483. We do not believe these observations will result in our inability to rely on the data from this trial, but the FDA may disagree, which could impact our development program. We may also be subject to liabilities arising from any treatment‑related injuries or adverse effects in patients enrolled in the NCH trial. As a result, we may be subject to unforeseen third‑party claims and delays in our potential future clinical trials. Any such delay or liability could have a material adverse effect on our business.

Although we have assumed control of the overall clinical and regulatory development of AVXS‑101 going forward, we have been dependent on contractual arrangements with NCH for the clinical implementation of the NCH trial. Such arrangements provide us certain information rights with respect to the NCH trial, including access to and the ability to use and reference the data, including for our own regulatory filings, resulting from the NCH trial. If these obligations are breached by NCH, or if the data prove to be inadequate compared to the first‑hand knowledge we might have gained had the completed trial been a corporate‑sponsored trial, then it may adversely affect or cause a delay in our development program. Additionally, the FDA may disagree with the sufficiency of our right to reference the preclinical, manufacturing, or clinical data generated by the NCH trial, or our interpretation of preclinical, manufacturing, or clinical data from the NCH trial. If so, the FDA may require us to obtain and submit additional preclinical, manufacturing, or clinical data before we may begin our planned trials and/or may not accept such additional data as adequate to begin our planned trials.

We may in the future enter into collaborations with third parties to develop AVXS‑101 or other product candidates. If these collaborations are not successful, our business could be adversely affected.

We may potentially enter into collaborations with third parties in the future. Any collaborations we enter into in the future may pose several risks, including the following:

If any such potential future collaborations do not result in the successful development and commercialization of product candidates, or if one of our future collaborators terminates its agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration. If we do not receive the funding we expect under these agreements, our development of AVXS‑101 or other future product candidates could be delayed and we may need additional resources to develop such product candidate. In addition, if one of our future collaborators terminates its agreement with us, we may find it more difficult to attract new collaborators and the perception of us in the business and

financial communities could be adversely affected. All of the risks relating to product development, regulatory approval and commercialization apply to the activities of our potential future collaborators.

We may in the future determine to collaborate with other pharmaceutical and biotechnology companies for development and potential commercialization of AVXS‑101 or other future product candidates. These relationships, or those like them, may require us to incur non‑recurring and other charges, increase our near‑ and long‑term expenditures, issue securities that dilute our existing stockholders or disrupt our management and business. In addition, we could face significant competition in seeking appropriate collaborators and the negotiation process is time‑consuming and complex. Our ability to reach a definitive collaboration agreement will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of several factors. If we license rights to AVXS‑101 or other future product candidates, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture.

We may not be successful in finding strategic collaborators for continuing development of AVXS‑101 or successfully commercializing or competing in the market for certain indications.

We may seek to develop strategic partnerships for developing AVXS‑101, due to capital costs required to develop the product candidate or manufacturing constraints. We may not be successful in our efforts to establish such a strategic partnership or other alternative arrangements for AVXS‑101 because our research and development pipeline may be insufficient, AVXS‑101 may be deemed to be at too early of a stage of development for collaborative effort or third parties may not view AVXS‑101 as having the requisite potential to demonstrate safety and efficacy. In addition, we may be restricted under existing collaboration agreements from entering into future agreements with potential collaborators. We cannot be certain that, following a strategic transaction or license, we will achieve an economic benefit that justifies such transaction.

If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms or at all, we may have to curtail the development of a product candidate, reduce or delay its development program, delay its potential commercialization, reduce the scope of any sales or marketing activities or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to fund development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop AVXS‑101 and our business, financial condition, results of operations and prospects may be materially and adversely affected.

Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

We previously relied on NCH and other third parties to manufacture AVXS‑101 and to perform quality testing, and because we collaborate with various organizations and academic institutions for the advancement of our gene therapy platform, we must, at times, share our proprietary technology and confidential information, including trade secrets, with them. We seek to protect our proprietary technology, in part, by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know‑how and trade secrets, a competitor’s discovery of our proprietary technology and confidential information or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business, financial condition, results of operations and prospects.

Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of these agreements, independent development or publication of information including our trade secrets by third parties. A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse impact on our business, financial condition, results of operations and prospects.

Although we established our own AVXS‑101 manufacturing facility, we may utilize third parties as needed to conduct our product manufacturing. Therefore, we are subject to the risk that these third parties may not perform satisfactorily. 

Even following the completion and validation of our cGMP manufacturing facility, which we expect will be the primary source of clinical and commercial supply for AVXS-101, we intend to evaluate potential third‑party manufacturing capabilities in order to provide potential multiple sources of clinical and commercial supply. We currently utilize third-party manufacturers for the production of AVXS-201 and AVXS-301. In the event we engage third party manufacturers and they do not successfully carry out their contractual duties, meet expected deadlines or manufacture AVXS‑101 in accordance with regulatory requirements or if there are disagreements between us and these third‑party manufacturers, we may not be able to meet commercial demand for AVXS‑101 or preclinical or clinical demand for other product candidates. In such instances, we may need to locate an appropriate replacement third‑party relationship, which may not be readily available or on acceptable terms, which would cause additional delay or increased expense and would thereby have a material adverse effect on our business, financial condition, results of operations and prospects.

We will need to perform analytical and other animal or cell‑based tests to demonstrate that materials produced by any third‑party manufacturer that we engage are safe, pure, and potent. There is no assurance that any third‑party manufacturer that we engage will be successful in producing AVXS‑101, that any such product will pass the required comparability testing, or that any materials produced by any third‑party manufacturer that we engage will have the same effect in patients that we have observed to date with respect to materials produced by us and NCH. We believe that our own manufacturing facility will have sufficient capacity to meet demand for AVXS‑101 for our future clinical trials. There is a risk that if supplies are interrupted or result in poor yield or quality, it would materially harm our business. In addition, we may change our manufacturing process for AVXS‑101, which could cause delays in production as we and our third‑party manufacturers seek to improve the process.

If the gene therapy industry were to grow, we may encounter increasing competition for the raw materials and consumables necessary for the production of AVXS‑101. Furthermore, demand for third‑party cGMP manufacturing facilities may grow at a faster rate than existing manufacturing capacity, which could disrupt our ability to find and retain third‑party manufacturers capable of producing sufficient quantities of raw materials for AVXS‑101 to meet initial commercial demand in the U.S. We currently rely, and expect to continue to rely, on additional third parties to manufacture ingredients of AVXS‑101 and to perform quality testing. Even following the establishment of our own cGMP‑compliant manufacturing capabilities, we intend to maintain third‑party manufacturers for these raw materials and components, which will expose us to risks including:

Any of these events could lead to clinical trial delays or failure to obtain regulatory approval, or impact our ability to successfully commercialize AVXS‑101. Some of these events could be the basis for FDA action, including injunction, recall, seizure or total or partial suspension of product manufacture.

We are subject to significant regulatory oversight with respect to manufacturing our product candidates. Our manufacturing facility may not meet regulatory requirements.

The preparation of therapeutics for clinical trials or commercial sale is subject to extensive regulation. Components of a finished therapeutic product approved for commercial sale or used in late‑stage clinical trials must be manufactured in accordance with cGMP requirements. These regulations govern manufacturing processes and procedures, including record keeping, and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. Poor control of production processes can lead to the introduction of outside agents or other contaminants, or to inadvertent changes in the properties or stability of a product candidate that may not be detectable in final product testing. We must supply all necessary documentation in support of a BLA or other marketing authorization application on a timely basis and must adhere to the FDA’s and the European Union’s cGMP requirements which are enforced, in the case of the FDA, through its facilities inspection program. Our manufacturing facilities and quality systems and, to the extent that we utilize third‑party facilities for commercial supply, the third party’s facilities and quality systems, must pass an inspection for compliance with the applicable regulations as a condition of regulatory approval. In addition, the regulatory authorities may, at any time, audit or inspect the third‑party manufacturing facility or the associated quality systems for compliance with the regulations applicable to the activities being conducted. If these facilities do not pass a plant inspection, the EMA will not issue a positive opinion concerning the marketing authorization application and FDA approval of the product candidates will not be granted.

If any contract manufacturers that we engage in the future cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or foreign regulatory agencies, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we will have no direct control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. Furthermore, all of our contract manufacturers are engaged with other companies to supply and/or manufacture materials or products for such companies, which exposes our manufacturers to regulatory risks for the production of such materials and products. As a result, failure to meet the regulatory requirements for the production of those materials and products may generally affect the regulatory clearance of our contract manufacturers’ facility. Our failure, or the failure of our third parties, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products and product candidates.

Our potential future dependence upon others for the manufacture of our product candidates may adversely affect our future profit margins and our ability to commercialize any products that receive regulatory approval on a timely and competitive basis.

Risks related to the commercialization of AVXS‑101

Gene therapies are novel, complex and difficult to manufacture. We have limited manufacturing experience and could experience production problems that result in delays in our development or commercialization programs or otherwise adversely affect our business.

We have limited experience manufacturing AVXS‑101. Although we have established our own manufacturing facility to support current and future clinical trials and a commercial launch, if we are unable to receive regulatory approval for our facility, we may be unable to produce clinical or commercial materials or meet demand, for AVXS‑101. Any such failure could delay or prevent our development of AVXS‑101 and would have a material adverse effect on our business, financial condition and results of operations.

The manufacturing process we use to produce AVXS‑101 is complex, novel and has not been validated for commercial use. In order to produce sufficient quantities of AVXS‑101 for future clinical trials and initial U.S. commercial demand, we will need to increase the scale of our manufacturing process at third‑party manufacturers, as well as through continued investment into our own commercial scale manufacturing facility. We may need to change our current manufacturing process, but there are no assurances that we will be able to produce sufficient quantities of AVXS‑101, due to several factors, including equipment malfunctions, facility contamination, technical process

challenges, raw material shortages or contamination, natural disasters, disruption in utility services, human error or disruptions in the operations of our suppliers.

The production of AVXS‑101 requires processing steps that are more complex than those required for most chemical pharmaceuticals. Moreover, unlike chemical pharmaceuticals, the physical and chemical properties of a biologic such as ours generally cannot be fully characterized. As a result, assays of the finished product may not be sufficient to ensure that the product will perform in the intended manner. Accordingly, we employ multiple steps to control our manufacturing process to assure that the process works and that AVXS‑101 is made strictly and consistently in compliance with the process. Problems with the manufacturing process, even minor deviations from the normal process, could result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims or insufficient inventory. We may encounter problems achieving adequate quantities and quality of clinical‑grade materials that meet FDA, EMA or other applicable standards or specifications with consistent and acceptable production yields and costs.

In addition, the FDA, the EMA and other foreign regulatory authorities may require us to submit samples of any lot of any approved product together with the protocols showing the results of applicable tests at any time. Under some circumstances, the FDA, the EMA or other foreign regulatory authorities may require that we not distribute a lot until the agency authorizes its release. Slight deviations in the manufacturing process, including those affecting quality attributes and stability, may result in unacceptable changes in the product that could result in lot failures or product recalls. For example, NCH, which previously manufactured AVXS-101 for us, experienced a lot failure in the past. There is no assurance we will not experience such failures at our own manufacturing facility or that of a third party in the future. Lot failures or product recalls could cause us to delay product launches or clinical trials, which could be costly to us and otherwise harm our business, financial condition, results of operations and prospects.

We also may encounter problems hiring and retaining the experienced specialist scientific, quality control and manufacturing personnel needed to operate our manufacturing process, which could result in delays in our production or difficulties in maintaining compliance with applicable regulatory requirements.

Any problems in our manufacturing process or facilities could make us a less attractive collaborator for potential partners, including larger pharmaceutical companies and academic research institutions, which could limit our access to additional attractive development programs. Problems in our manufacturing process or facilities also could restrict our ability to meet market demand for AVXS‑101 or future product candidates.

If we are unable to establish sales, medical affairs and marketing capabilities or enter into agreements with third parties to market and sell AVXS‑101, we may be unable to generate any product revenue.

To successfully commercialize any product candidate that may result from our development programs, we will need to develop sales and marketing capabilities, either on our own or with others. The continued establishment and development of our own commercial team or the establishment of a contract sales force to market any product candidate we may develop will be expensive and time‑consuming and could delay any product launch. Moreover, we cannot be certain that we will be able to successfully develop this capability. We may enter into collaborations regarding AVXS‑101 with other entities to utilize their established marketing and distribution capabilities, but we may be unable to enter into such agreements on favorable terms, if at all. If any future collaborators do not commit sufficient resources to commercialize our product candidates, or we are unable to develop the necessary capabilities on our own, we will be unable to generate sufficient product revenue to sustain our business. We compete with many companies that currently have extensive, experienced and well‑funded medical affairs, marketing and sales operations to recruit, hire, train and retain marketing and sales personnel. We also face competition in our search for third parties to assist us with the sales and marketing efforts of AVXS‑101. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

Our efforts to educate the medical community and third‑party payors on the benefits of AVXS‑101 may require significant resources and may never be successful. Such efforts may require more resources than are typically required due to the complexity and uniqueness of our potential product candidate. If AVXS‑101 is approved but fails to achieve market acceptance among physicians, patients or third‑party payors, we will not be able to generate significant revenues

from such product, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

If the market opportunities for AVXS‑101 are smaller than we believe they are, our product revenues may be adversely affected and our business may suffer.

We currently focus our research and product development on treatments for SMA, a severe genetic and orphan disease. Our understanding of both the number of people who have this disease, as well as the subset of people with this disease who have the potential to benefit from treatment with AVXS‑101, are based on estimates in published literature and by SMA foundations. These estimates may prove to be incorrect and new studies may reduce the estimated incidence or prevalence of this disease. The number of patients in the United States, the European Union and elsewhere may turn out to be lower than expected, may not be otherwise amenable to treatment with our product candidate or patients may become increasingly difficult to identify and access, all of which would adversely affect our business, financial condition, results of operations and prospects.

Further, there are several factors that could contribute to making the actual number of patients who receive our potential product candidate less than the potentially addressable market. These include the lack of widespread availability of, and limited reimbursement for, new therapies in many underdeveloped markets. Further, the severity of the progression of a disease up to the time of treatment, especially in certain degenerative conditions such as SMA, will likely diminish the therapeutic benefit conferred by a gene therapy due to irreversible cell damage. Lastly, certain patients’ immune systems might prohibit the successful delivery of certain gene therapy products to the target tissue, thereby limiting the treatment outcomes.

The commercial success of AVXS‑101 will depend upon its degree of market acceptance by physicians, patients, third‑party payors and others in the medical community.

Ethical, social and legal concerns about gene therapy could result in additional regulations restricting or prohibiting AVXS‑101. Even with the requisite approvals from the FDA in the United States, the EMA in the European Union and other regulatory authorities internationally, the commercial success of AVXS‑101 will depend, in part, on the acceptance of physicians, patients and health care payors of gene therapy products in general, and AVXS‑101 in particular, as medically necessary, cost‑effective and safe. Any product that we commercialize may not gain acceptance by physicians, patients, health care payors and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable. The degree of market acceptance of gene therapy products and, in particular, AVXS‑101, if approved for commercial sale, will depend on several factors, including:

Even if a potential product displays a favorable efficacy and safety profile in preclinical studies and clinical trials, market acceptance of the product will not be fully known until after it is launched.

Delays in obtaining regulatory approval of our manufacturing process and facility or disruptions in our manufacturing process may delay or disrupt our product development and commercialization efforts. To date, to our knowledge, there are limited cGMP gene therapy manufacturing facilities in the United States that have been licensed by the FDA for the manufacture of an approved gene therapy product.

Before we can begin to commercially manufacture AVXS‑101, whether in our own facility or a third-party facility, we must obtain regulatory approval from FDA for our manufacturing process and facility. A manufacturing authorization must also be obtained from the appropriate European Union regulatory authorities. To date, there are limited cGMP gene therapy manufacturing facilities in the United States that have received approval from the FDA for the manufacture of an approved gene therapy product and, therefore, the timeframe required for us to obtain such approval is uncertain. In addition, we must pass a pre‑approval inspection of our manufacturing facility by the FDA before AVXS‑101 can obtain marketing approval. In order to obtain approval, we will need to ensure that all of our processes, methods and equipment are compliant with cGMP, and perform extensive audits of vendors, contract laboratories and suppliers. If any of our vendors, contract laboratories or suppliers is found to be out of compliance with cGMP, we may experience delays or disruptions in manufacturing while we work with these third parties to remedy the violation or while we work to identify suitable replacement vendors. The cGMP requirements govern quality control of the manufacturing process and documentation policies and procedures. In complying with cGMP, we will be obligated to expend time, money and effort in production, record keeping and quality control to assure that the product meets applicable specifications and other requirements. If we fail to comply with these requirements, we would be subject to possible regulatory action and may not be permitted to sell any product candidate that we may develop.

Our gene therapy approach utilizes a vector derived from viruses, which may be perceived as unsafe or may result in unforeseen adverse events. Negative public opinion and increased regulatory and media scrutiny of gene therapy may damage public perception of the safety of our AVXS‑101 gene therapy product candidate and adversely affect our ability to conduct our business or obtain regulatory approvals for AVXS‑101.

Gene therapy remains a novel technology, with, to our knowledge, only a limited number of gene therapy products approved to date in the United States and the European Union. Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of the public or the medical community. For example, a public backlash developed against gene therapy following the death in September 1999 of a patient who had

volunteered for a gene therapy clinical trial that utilized an adenovirus vector at University of Pennsylvania School of Medicine. Researchers at the university had infused the volunteer’s liver with a gene aimed at reversing OTC deficiency. The procedure triggered an extreme immune‑system reaction that caused multiple organ failure in a very short time, leading to the first death to occur as a direct result of a gene therapy experiment. In addition, in two gene therapy studies in 2003, 20 subjects treated for X‑linked severe combined immunodeficiency using a murine gamma‑retroviral vector showed correction of the disease. However, the studies were suspended by FDA after a child in France developed leukemia and ultimately four other subjects were found to have developed leukemia.

In addition, our success will depend upon physicians who specialize in the treatment of SMA and prescribing treatments that involve the use of AVXS‑101 in lieu of, or in addition to, other treatments with which they are more familiar and for which greater clinical data may be available. More restrictive government regulations or negative public opinion would have an adverse effect on our business, financial condition, results of operations and prospects and may delay or impair the development and commercialization of AVXS‑101 or demand for any product candidate we may develop. Serious adverse events in our clinical trials, or other clinical trials involving gene therapy products or our competitors’ products, even if not ultimately attributable to the relevant product candidates, and the resulting publicity, could result in increased government regulation, unfavorable public perception, potential regulatory delays in the testing or approval of AVXS‑101, stricter labeling requirements for AVXS‑101 that are approved and a decrease in demand for AVXS‑101.

Failure to comply with ongoing regulatory requirements could cause us to suspend production or put in place costly or time‑consuming remedial measures.

The regulatory authorities may, at any time following approval of a product for sale, initiate an inspection of the manufacturing facilities for such product. If any such inspection or audit identifies a failure to comply with applicable regulations, or if a violation of product specifications or applicable regulations occurs independent of such an inspection or audit, the relevant regulatory authority may require remedial measures that may be costly or time‑consuming to implement and that may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of a manufacturing facility. Any such remedial measures imposed upon our third‑party manufacturer or us could materially harm our business, financial condition, results of operations and prospects.

If we or our third‑party manufacturer fails to comply with applicable cGMP regulations, the FDA and foreign regulatory authorities can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new product candidate or suspension or revocation of a pre‑existing approval. Such an occurrence may cause our business, financial condition, results of operations and prospects to be materially harmed.

Additionally, if supply from a manufacturing facility is interrupted, there could be a significant disruption in commercial supply of AVXS‑101. Although we are evaluating potential third parties and additional internal sources of redundant manufacturing capacity, we do not currently have a backup manufacturer for AVXS‑101 supply for clinical trials, and have not selected a manufacturer or backup manufacturer for AVXS‑101 supply for commercial sale. An alternative manufacturer would need to be qualified, through a supplement to its regulatory filing, which could result in further delay. The regulatory authorities also may require additional trials if a new manufacturer is relied upon for commercial production. Switching manufacturers may involve substantial costs and could result in a delay in our desired clinical and commercial timelines.

Any contamination in our manufacturing process, shortages of raw materials or failure of any of our key suppliers to deliver necessary components could result in delays in our clinical development or marketing schedules.

Given the nature of biologics manufacturing, there is a risk of contamination. Any contamination could materially adversely affect our ability to produce AVXS‑101 on schedule and could, therefore, harm our results of operations and cause reputational damage.

Some of the raw materials required in our manufacturing process are derived from biologic sources. Such raw materials are difficult to procure and may be subject to contamination or recall. A material shortage, contamination, recall or restriction on the use of biologically derived substances in the manufacture of AVXS‑101 could adversely

impact or disrupt the commercial manufacturing or the production of clinical material, which could materially and adversely affect our development timelines and our business, financial condition, results of operations and prospects.

The insurance coverage and reimbursement status of newly‑approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for our product candidate(s), if approved, could limit our ability to market those products and decrease our ability to generate product revenue.

We expect the cost of a single administration of gene therapy products, such as those we are developing, to be substantial, when and if they achieve regulatory approval. We expect that coverage and reimbursement by government and private payors will be essential for most patients to be able to afford these treatments. Accordingly, sales of AVXS‑101 will depend substantially, both domestically and abroad, on the extent to which the costs of AVXS‑101 will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or will be reimbursed by government authorities, private health coverage insurers and other third‑party payors. Coverage and reimbursement by a third‑party payor may depend upon several factors, including the third‑party payor’s determination that use of a product is:

Obtaining coverage and reimbursement for a product from third‑party payors is a time‑consuming and costly process that could require us to provide to the payor supporting scientific, clinical and cost‑effectiveness data. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. If coverage and reimbursement are not available, or are available only at limited levels, we may not be able to successfully commercialize AVXS‑101. Even if coverage is provided, the approved reimbursement amount may not be adequate to realize a sufficient return on our investment.

There is significant uncertainty related to third‑party coverage and reimbursement of newly approved products. In the United States, third‑party payors, including government payors such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs and biologics will be covered and reimbursed. The Medicare and Medicaid programs increasingly are used as models for how private payors develop their coverage and reimbursement policies. However, no uniform policy of coverage and reimbursement exists among third‑party payors. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. One payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage, and adequate reimbursement. The Centers for Medicare & Medicaid Services, or the CMS, is the agency responsible for administering the Medicare program. It is difficult to predict what the CMS will decide with respect to coverage and reimbursement for fundamentally novel products such as ours, as there is no body of established practices and few precedents for these types of products.  Moreover, reimbursement agencies in the European Union may be more conservative than the CMS. For example, several cancer drugs have been approved for reimbursement in the United States and have not been approved for reimbursement in certain European Union Member States. It is difficult to predict what third‑party payors will decide with respect to the coverage and reimbursement for AVXS‑101.

Outside the United States, international operations generally are subject to extensive government price controls and other market regulations, and increasing emphasis on cost‑containment initiatives in the European Union, Canada and other countries may put pricing pressure on us. For example, it was announced in 2017 that the marketing authorization in Europe for one gene therapy product approved in the European Union in 2012 would not be renewed because patient usage was extremely limited. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. In general, the prices of medicines under such systems are

substantially lower than in the United States. Other countries allow companies to set their own prices for medical products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidate. Accordingly, in markets outside the United States, the reimbursement for our product candidate may be reduced compared with the United States and may be insufficient to generate commercially reasonable product revenues.

Additionally, in countries where the pricing of gene therapy products is subject to governmental control, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic, and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low‑priced and high‑priced member states, can further reduce prices. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost‑effectiveness of our product candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed, possibly materially.

Moreover, increasing efforts by government and third‑party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for AVXS‑101. Payors increasingly are considering new metrics as the basis for reimbursement rates, such as average sales price, average manufacturer price, and actual acquisition cost. The existing data for reimbursement based on some of these metrics is relatively limited, although certain states have begun to survey acquisition cost data for the purpose of setting Medicaid reimbursement rates, and the CMS has begun making pharmacy National Average Drug Acquisition Cost and National Average Retail Price data publicly available on at least a monthly basis. Therefore, it may be difficult to project the impact of these evolving reimbursement metrics on the willingness of payors to cover AVXS‑101 if we or our partners are ultimately able to commercialize it. We expect to experience pricing pressures in connection with the sale of AVXS‑101 due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become intense. As a result, increasingly high barriers are being erected to the entry of new products such as ours.

If we obtain approval to commercialize AVXS‑101 outside of the United States, in particular in the European Union, a variety of risks associated with international operations could materially adversely affect our business.

We expect that we will be subject to additional risks in commercializing AVXS‑101 outside the United States, including:

Interruptions in the supply of product or inventory loss may adversely affect our operating results and financial condition.

AVXS‑101 is manufactured using technically complex processes requiring specialized facilities, highly specific raw materials and other production constraints. The complexity of these processes, as well as strict government standards for the manufacture and storage of AVXS‑101 subjects us to production risks. While product batches released for use in clinical trials or, in the future, for commercialization undergo sample testing, some defects may only be identified following product release. In addition, process deviations or unanticipated effects of approved process changes may result in these intermediate product candidates not complying with stability requirements or specifications. AVXS‑101 must be stored and transported at temperatures within a certain range. If these environmental conditions deviate, AVXS‑101’s remaining shelf‑life could be impaired or its efficacy and safety could be adversely affected, making it no longer suitable for use.

The occurrence, or suspected occurrence, of production and distribution difficulties can lead to lost inventories and, in some cases, product recalls, with consequential reputational damage and the risk of product liability. The investigation and remediation of any identified problems can cause production delays, substantial expense, lost sales and delays of new product launches. Any interruption in the supply of finished AVXS‑101 or the loss thereof could hinder our ability to timely distribute AVXS‑101 and satisfy customer demand. Any unforeseen failure in the storage of the product or loss in supply could delay our clinical trials and, if AVXS‑101 is approved, result in a loss of our market share and negatively affect our business, financial condition, results of operations and prospects.

If AVXS‑101 becomes subject to a product recall it could harm our reputation, business and financial results.

The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design, manufacture or labeling. In the case of the FDA, the authority to require a recall must be based on an FDA finding that there is a reasonable probability that the product would cause serious injury or death. In addition, foreign governmental bodies have the authority to require the recall of our product candidate in the event of material deficiencies or defects in design or manufacture. Manufacturers may, under their own initiative, recall a product if any material deficiency in a product is found. A government‑mandated or voluntary recall by us could occur as a result of manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any of our product candidate would divert managerial and financial resources and have an adverse effect on our financial condition and results of operations. The FDA requires that certain classifications of recalls be reported to the FDA within 10 working days after the recall is initiated. Companies are required to maintain records of recalls, even if they are not reportable to the FDA. We may initiate voluntary recalls involving our product candidate in the future that we determine do not require notification to the FDA. If the FDA disagrees with our determinations, we could be required to report those actions as recalls. A recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA could take enforcement action for failing to report the recalls when they were conducted.

Risks related to our business operations

If we are not successful in discovering, developing and commercializing additional product candidates, our ability to expand our business and achieve our strategic objectives would be impaired.

Although a substantial amount of our efforts will focus on our ongoing clinical trials and potential approval of AVXS‑101, a key element of our strategy is to discover, develop and potentially commercialize a portfolio of product candidates to treat rare and life‑threatening neurological genetic diseases, including Rett syndrome and genetic ALS, for which we are conducting preclinical studies. We intend to do so by exploring strategic partnerships for the development of new products and in‑licensing technologies leading to the development of new product candidates. Identifying new product candidates requires substantial technical, financial and human resources, whether or not any product candidates are ultimately identified. Even if we identify product candidates that initially show promise, we may fail to successfully develop and commercialize such product candidates for many reasons, including the following:

If we are unsuccessful in identifying and developing additional product candidates, our potential for growth may be impaired.

We may fail to capitalize on other potential product candidates that may be a greater commercial opportunity or for which there is a greater likelihood of success.

The success of our business depends upon our ability to develop and commercialize AVXS‑101. AVXS‑101 may be shown to have harmful side effects, may be commercially impracticable to manufacture or may have other characteristics that may make the product unmarketable or unlikely to receive marketing approval.

Additionally, because we have limited resources, we may forego or delay pursuit of opportunities with certain programs or product candidates or for indications that later prove to have greater commercial potential. Our spending on current and future research and development programs may not yield any commercially viable product candidates. If we do not accurately evaluate the commercial potential for a particular product candidate, we may relinquish valuable rights to that product candidate through strategic collaboration, licensing or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. Alternatively, we may allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous to enter into a partnering arrangement.

If any of these events occur, we may be forced to abandon our development efforts with respect to a particular product candidate or fail to develop a potentially successful product candidate, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain and motivate qualified personnel.

We are highly dependent on members of our executive team, the loss of whose services may adversely impact the achievement of our objectives. While we have entered into employment agreements with each of our executive officers, any of them could leave our employment at any time. We currently do not have “key person” insurance on any of our employees. The loss of the services of one or more of our current employees might impede the achievement of our research, development and commercialization objectives.

Recruiting and retaining other qualified employees, consultants and advisors for our business, including scientific and technical personnel, also will be critical to our success. There currently is a shortage of skilled individuals with substantial gene therapy experience, which is likely to continue. As a result, competition for skilled personnel, including in gene therapy research and vector manufacturing, is intense and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies and academic institutions for individuals with similar skill sets. In addition, failure to succeed in preclinical or clinical trials or applications for marketing approval may make it more challenging to recruit and retain qualified personnel. The inability to recruit, or loss of services of certain executives, key employees, consultants or advisors, may impede the progress of our research, development and commercialization objectives and have a material adverse effect on our business, financial condition, results of operations and prospects.

If we are unable to build and integrate our management team, our business could be harmed.

Our success depends largely on the development and execution of our business strategy by our senior management team. Dr. Kaspar was historically employed as our Chief Scientific Officer on a part‑time basis, while he devoted a majority of his professional time to his responsibilities at NCH. Effective September 2017, Dr. Kaspar began serving as our Chief Scientific Officer on a full‑time basis. Under the terms of his former NCH employment agreement, NCH owns all inventions and discoveries, whether patentable or not, that Dr. Kaspar made, conceived or reduced to practice while at NCH, unless otherwise specifically provided for by the terms of a sponsored research agreement between NCH and us.

We cannot assure you that our new management will succeed in working together as a team, working well with our other existing employees or successfully executing our business strategy in the near‑term or at all, which could harm our business and financial prospects. Further, integrating new management into existing operations may be challenging. If we are unable to effectively integrate our new executive management team, our operations and prospects could be harmed.

If we are unable to manage expected growth in the scale and complexity of our operations, our performance may suffer.

If we are successful in executing our business strategy, we will need to expand our managerial, operational, financial and other systems and resources to manage our operations, continue our research and development activities and, in the longer term, build a commercial infrastructure to support commercialization of AVXS‑101 if it is approved for sale. Future growth would impose significant added responsibilities on members of management. It is likely that our management, finance, development personnel, systems and facilities currently in place may not be adequate to support this future growth. Our need to effectively manage our operations, growth and any future product candidates requires that we continue to develop more robust business processes and improve our systems and procedures in each of these areas and to attract and retain sufficient numbers of talented employees. We may be unable to successfully implement these tasks on a larger scale and, accordingly, may not achieve our research, development and growth goals.

Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including non‑compliance with regulatory standards and requirements and insider trading.

We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants and commercial partners. Misconduct by these parties could include intentional failures to comply with FDA regulations

or the regulations applicable in the European Union and other jurisdictions, provide accurate information to the FDA, the European Commission and other regulatory authorities, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self‑dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Such misconduct also could involve the improper use of information obtained in the course of clinical trials or interactions with the FDA or other regulatory authorities, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from government investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, financial condition, results of operations and prospects, including the imposition of significant fines or other sanctions.

Healthcare legislative reform measures may have a material adverse effect on our business and results of operations.

In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post‑approval activities, and affect our ability to profitably sell any product candidates for which we obtain marketing approval.

For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or the PPACA, was passed, which substantially changes the way healthcare is financed by both the government and private insurers, and significantly impacts the U.S. pharmaceutical industry. The PPACA, among other things: (i) addresses a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; (ii) increases the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations; (iii) establishes annual fees and taxes on manufacturers of certain branded prescription drugs; (iv) expands the availability of lower pricing under the 340B drug pricing program by adding new entities to the program; and (v) establishes a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (and 70% commencing on January 1, 2019) point‑of‑sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.

Some of the provisions of the PPACA have yet to be implemented, and there have been judicial and Congressional challenges to certain aspects of the PPACA, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the PPACA. Since January 2017, President Trump has signed two Executive Orders designed to delay the implementation of certain provisions of the PPACA or otherwise circumvent some of the requirements for health insurance mandated by the PPACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the PPACA. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the PPACA have been signed into law. The Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain PPACA-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amends the PPACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”. Congress also could consider subsequent legislation to repeal or repeal and replace other elements of the PPACA We continue to evaluate the possible impact of the PPACA, as amended, and the possible repeal and/or replacement of the PPACA on our business.

Additionally, in the United States, the Biologics Price Competition and Innovation Act of 2009 created an abbreviated approval pathway for biologic products that are demonstrated to be “highly similar” or “biosimilar or interchangeable” with an FDA‑approved biologic product. This pathway allows competitors to reference data from biologic products already approved after 12 years from the time of approval. This could expose us to potential competition by lower‑cost biosimilars even if we commercialize a product candidate faster than our competitors. Moreover, this abbreviated approval pathway does not preclude or delay a third party from pursuing approval of a competitive product candidate via the traditional approval pathway based on their own clinical trial data. Other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. For example, in August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2012 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2027 unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to certain providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Additionally, there have been several recent U.S. Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.

Additionally, there have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration’s budget proposal for fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid and to eliminate cost sharing for generic drugs for low-income patients. While any proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.  At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We expect that these initiatives, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms could result in reduced demand for AVXS‑101 or additional pricing pressures, and may prevent us from being able to generate revenue, attain profitability, or commercialize our products.

Our relationships with customers, physicians, and third‑party payors will be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, health information privacy and security laws, and other healthcare laws and regulations. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

Our operations may be directly, or indirectly through our prescribers, customers and purchasers, subject to various federal and state fraud and abuse laws and regulations, including, without limitation, the federal Anti‑Kickback Statute, the federal civil and criminal laws and Physician Payments Sunshine Act and regulations. These laws will impact, among other things, our clinical research, proposed sales, marketing and educational programs. In addition, we

may be subject to patient privacy laws by both the federal government and the states in which we conduct our business. The laws that will affect our operations include, but are not limited to:

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, the curtailment or restructuring of operations, the exclusion from participation in federal and state healthcare programs, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, individual imprisonment, and additional reporting requirements and oversight if a person becomes subject to a corporate integrity agreement or similar agreement to resolve allegations of non‑compliance with these laws. Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs.

The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with different compliance and/or reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the requirements.

Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of any product candidate that we may develop.

We face an inherent risk of product liability exposure related to the clinical testing of AVXS‑101 and any future product candidates in clinical trials and may face an even greater risk if we commercialize any product candidate that we may develop. If we cannot successfully defend ourselves against claims that our product candidates caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

Although we maintain product liability insurance coverage, such insurance may not be adequate to cover all liabilities that we may incur. We anticipate that we will need to increase our insurance coverage each time we commence a clinical trial and if we successfully commercialize any product candidate. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the generation, handling, use, storage, treatment, manufacture, transportation and disposal of, and exposure to, hazardous materials and wastes, as well as laws and regulations relating to occupational health and safety. Our operations involve the use of hazardous and flammable materials, including chemicals and biologic

materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties. We do not carry specific biological or hazardous waste insurance coverage, and our property, casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended.

Although we maintain workers’ compensation insurance for certain costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials or other work related injuries, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for toxic tort claims that may be asserted against us in connection with our storage or disposal of biologic, hazardous or radioactive materials.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations, which have tended to become more stringent over time. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions or liabilities, which could materially adversely affect our business, financial condition, results of operations and prospects.

Third parties on which we rely and we may be adversely affected by natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

Natural disasters could severely disrupt our operations or the operations of manufacturing facilities and have a material adverse effect on our business, financial condition, results of operations and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as manufacturing facilities, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and may not prove adequate in the event of a serious disaster or similar event.

Our internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs.

Our internal computer systems and those of our current and any future collaborators and other contractors or consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we are not aware of any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive position could be harmed and the further development and commercialization of AVXS‑101 could be delayed.

The recently enacted comprehensive tax reform legislation could adversely affect our business and financial condition.

On December 22, 2017, President Trump signed into law new legislation that significantly revises the Internal Revenue Code of 1986, as amended. The newly enacted federal income tax law, contains significant changes to corporate taxation including, among other things, reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense (except for certain small businesses), limitation of

the deduction for future net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits, including the Orphan Drug credit. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain and our business and financial condition could be adversely affected. In addition, it is uncertain if and to what extent various states will conform to the newly enacted federal tax law. The impact of this tax reform on holders of our common stock is also uncertain and could be adverse. We urge prospective investors to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our common stock.

Risks related to our intellectual property

Our rights to develop and commercialize AVXS‑101 and our preclinical programs for Rett syndrome and genetic ALS are subject to the terms and conditions of licenses granted to us by others.

We do not currently own any patents or patent applications and we are heavily reliant upon licenses to certain patent rights and proprietary technology from third parties that are important or necessary to the development of our technology and product candidate(s), including technology related to our manufacturing process and AVXS‑101. These and other licenses may not provide exclusive rights to use such intellectual property and technology, at all, or in all relevant fields of use and in all territories in which we may wish to develop or commercialize our technology and product candidate(s) in the future. As a result, we may not be able to prevent competitors from developing and commercializing competitive products, including in territories included in all of our licenses. Our licenses are limited by field.

Licenses to additional third‑party technology and materials that may be required for our development programs, including additional technology and materials owned by NCH or any of our current licensors, may not be available in the future or may not be available on commercially reasonable terms, or at all, which could have a material adverse effect on our business and financial condition.

In some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents covering technology that we license from third parties. For example, pursuant to each of our intellectual property licenses with NCH and REGENXBIO Inc., or REGENXBIO, our licensors retain control of such activities. Therefore, we cannot be certain that these patents and applications will be prosecuted, maintained and enforced in a manner consistent with the best interests of our business. If our licensors fail to maintain such patents, or lose rights to those patents or patent applications, the rights we have licensed may be reduced or eliminated and our right to develop and commercialize any of our product candidate(s) that are the subject of such licensed rights could be adversely affected. In addition to the foregoing, the risks associated with patent rights that we license from third parties will also apply to patent rights we may own in the future.

The research resulting in certain of our licensed patent rights and technology, including that licensed from REGENXBIO and NCH, was funded in part by the U.S. government. As a result, the government may have certain rights, including march‑in rights, to such patent rights and technology. When new technologies are developed with government funding, the government generally obtains certain rights in any resulting patents, including a non‑exclusive license authorizing the government to use the invention for government purposes. These rights may permit the government to disclose our confidential information to third parties and to exercise march‑in rights to use or allow third parties to use our licensed technology. The government can exercise its march‑in rights if it determines that action is necessary because we fail to achieve practical application of the government‑funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations or to give preference to U.S. industry. In addition, our rights in such inventions may be subject to certain requirements to manufacture product candidate(s) embodying such inventions in the United States. Any exercise by the government of such rights could harm our competitive position, business, financial condition, results of operations and prospects.

If we are unable to obtain and maintain patent protection for our current product candidate, any future product candidates we may develop and our technology, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize our current product candidate, any future product candidates we may develop and our technology may be adversely affected.

Our success depends, in large part, on our ability to seek, obtain and maintain patent protection in the United States and other countries with respect to AVXS‑101 and to future innovation related to our manufacturing technology. Our licensors have sought and we intend to seek to protect our proprietary position by filing patent applications in the United States and, in some cases, abroad related to certain technologies and AVXS‑101 that are important to our business. Our current patent portfolio contains a limited number of patents and applications, all of the patents and patent applications currently in our patent portfolio are in‑licensed from third parties and all of the exclusively licensed patents and patent applications in our patent portfolio are limited to compositions and methods that use an AAV9 capsid. However, the risks associated with patent rights generally apply to patent rights that we in‑license now or in the future, as well as patent rights that we may own in the future. Moreover, the risks apply with respect to patent rights and other intellectual property applicable to AVXS‑101, as well as to any intellectual property rights that we may acquire in the future related to future product candidates, if any.

The patent prosecution process is expensive, time‑consuming and complex, and we may not be able to file, prosecute, maintain, enforce or license all necessary or desirable patent applications at a reasonable cost or in a timely manner. For example, one of the patent application families licensed to us related to AVXS‑101 was filed in the United States only. As a result, we will not have the opportunity to obtain patent protection for the inventions disclosed in that patent application family outside the United States. In addition, certain patents in the field of gene therapy that may have otherwise potentially provided patent protection for our product candidate will soon expire.

We believe our in‑licensed patent portfolio includes claims that, if issued, would cover our AVXS‑101 product candidate. Should a pending application containing such claims issue as a patent, such patent would expire in 2029 in the United States. However, claims covering AVXS‑101 may never issue from this pending application. Additionally, there are no foreign counterpart patents or applications, and thus, comparable protection will not be available outside the United States. Our patent applications are at an early stage and there is no assurance that patents will issue from such applications.

In some cases, the work of certain academic researchers in the gene therapy field has entered the public domain, which we believe precludes our ability to obtain patent protection for certain inventions relating to such work. Consequently, we will not be able to assert any such patents to prevent others from using our technology for, and developing and marketing competing products to treat, these indications. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.

We are a party to intellectual property license agreements with NCH, REGENXBIO and AskBio, each of which is important to our business, and we expect to enter into additional license agreements in the future. Our existing license agreements impose, and we expect that future license agreements will impose, various diligence, development and commercialization timelines, milestone payments, royalties and other obligations on us. See “Business—Our Collaboration and License Agreements.” If we fail to comply with our obligations under these agreements, or we are subject to a bankruptcy, or, in some cases, under other circumstances, the licensor may have the right to terminate the license, in which event we would not be able to market product candidate(s) covered by the license. In addition, certain of these license agreements are not assignable by us without the consent of the respective licensor, which may have an adverse effect on our ability to engage in certain transactions.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has, in recent years, been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our licensed patent rights and future patent applications that we may own or license may not result in patents being issued which protect our technology or product candidate(s), effectively prevent others from commercializing competitive technologies and product candidates or otherwise provide any competitive advantage. In fact, patent applications may

not issue as patents at all. Even assuming patents issue from patent applications in which we have rights, changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.

Other parties have developed technologies that may be related or competitive to our own and such parties may have filed or may file patent applications, or may have received or may receive patents, claiming inventions that may overlap or conflict with those claimed in our own patent applications or issued patents. We may not be aware of all third‑party intellectual property rights potentially relating to AVXS‑101 or any future product candidates. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and in other jurisdictions are typically not published until 18 months after filing, or, in some cases, not at all. Therefore, we cannot know with certainty whether the inventors of our licensed patents and applications were the first to make the inventions claimed in those patents or pending patent applications, or that they were the first to file for patent protection of such inventions. Similarly, should we own any patents or patent applications in the future, we may not be certain that we were the first to file for patent protection for the inventions claimed in such patents or patent applications. As a result, the issuance, scope, validity and commercial value of our patent rights cannot be predicted with any certainty.

Even if the patent applications we license or may own in the future do issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us or otherwise provide us with any competitive advantage. Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative technologies or products in a non‑infringing manner. Even if issued, the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and product candidate(s). Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

The degree of patent protection we require to successfully compete in the marketplace may be unavailable or severely limited in some cases and may not adequately protect our rights or permit us to gain or keep any competitive advantage. We cannot provide any assurances that any of our licensed patents have, or that any of our pending licensed patent applications that mature into issued patents will include, claims with a scope sufficient to protect AVXS‑101 or otherwise provide any competitive advantage. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Furthermore, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our licensed patent portfolio may not provide us with adequate and continuing patent protection sufficient to exclude others from commercializing products similar to our product candidates, including biosimilar versions of such products. In addition, the patent portfolio licensed to us by REGENXBIO may be used by REGENXBIO or licensed to third parties outside our field, and such third parties may have certain enforcement rights. Thus, patents licensed to us could be put at risk of being invalidated or interpreted narrowly in litigation filed by or against REGENXBIO or another licensee or in administrative proceedings brought by or against REGENXBIO or another licensee in response to such litigation or for other reasons.

Even if we acquire patent protection that we expect should enable us to maintain some competitive advantage, third parties, including competitors, may challenge the validity, enforceability or scope thereof, which may result in such patents being narrowed, invalidated or held unenforceable. In litigation, a competitor could claim that our patents, if issued, are not valid for a number of reasons. If a court agrees, we would lose our rights to those challenged patents.

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability and our licensed patents may be challenged in courts or patent offices in the United States and abroad. For example, we may be subject to a third‑party submission of prior art to the U.S. Patent and Trademark Office, or USPTO, challenging the

validity of one or more claims of our licensed patents. Such submissions may also be made prior to a patent’s issuance, precluding the granting of a patent based on one of our pending licensed patent applications. We may become involved in opposition, derivation, reexamination, inter partes review, post‑grant review or interference proceedings challenging the patent rights of others from whom we have obtained licenses to such rights. Competitors may claim that they invented the inventions claimed in our issued patents or patent applications prior to the inventors of our licensed patents, or may have filed patent applications before the University of Pennsylvania, as owner of the patent rights licensed by us from REGENXBIO, or NCH did. A competitor who can establish an earlier filing or invention date may also claim that we are infringing their patents and that we therefore cannot practice our technology as claimed under our licensed patents, if issued. Competitors may also contest our licensed patents, if issued, by showing that the invention was not patent‑eligible, was not novel, was obvious or that the patent claims failed any other requirement for patentability.

In addition, the University of Pennsylvania or NCH may in the future be subject to claims by former employees or consultants asserting an ownership right in our licensed patents or patent applications, as a result of the work they performed. An adverse determination in any such submission or proceeding may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar technology and therapeutics, without payment to us, or could limit the duration of the patent protection covering our technology and product candidates. Such challenges may also result in our inability to manufacture or commercialize our product candidates without infringing third party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.

Even if they are unchallenged, our licensed patents and pending patent applications, if issued, may not provide us with any meaningful protection or prevent competitors from designing around our patent claims to circumvent our licensed patents by developing similar or alternative technologies or therapeutics in a non‑infringing manner. For example, a third party may develop a competitive therapeutic that provides benefits similar to one or more of our product candidates but that uses a vector or an expression construct that falls outside the scope of our patent protection. If the patent protection provided by the patents and patent applications we hold or pursue with respect to our product candidates is not sufficiently broad to impede such competition, our ability to successfully commercialize our product candidates could be negatively affected, which would harm our business.

Our intellectual property licenses with third parties may be subject to disagreements over contract interpretation, which could narrow the scope of our rights to the relevant intellectual property or technology or increase our financial or other obligations to our licensors.

We currently depend, and will continue to depend, on our license agreements, including our agreements with NCH and our agreements with REGENXBIO and AskBio, whereby we obtain rights in certain patents and patent applications owned by the Trustees of the University of Pennsylvania and the University of North Carolina, respectively. Further development and commercialization of AVXS‑101 may and development of any future product candidates will require us to enter into additional license or collaboration agreements, including, potentially, additional agreements with NCH or any of our other licensors. The agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

If any of our licenses or material relationships or any in‑licenses upon which our licenses are based including the underlying agreements between REGENXBIO and the Trustees of the University of Pennsylvania, and AskBio and the University of North Carolina, are terminated or breached, we may:

In addition, as described in Note 11, Commitments and Contingencies to the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report, Sophia’s Cure Foundation, or SCF, has filed a complaint alleging that our performance under our license agreement with NCH, including our sponsorship of the IND and clinical trial for AVXS‑101, interferes with SCF’s rights under a donation agreement that SCF entered into with NCH in 2012. If this claim is successful, it may adversely affect our rights and ability to advance AVXS‑101 as a clinical candidate or subject us to liability for monetary damages, any of which would have a material adverse effect on our business, financial condition, results of operations and prospects.

These risks apply to any agreements that we may enter into in the future for AVXS‑101 or for any future product candidates. If we experience any of the foregoing, it could have a material adverse effect on our business, financial condition, results or operations and prospects.

If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.

We have entered into license agreements with third parties and may need to obtain additional licenses from one or more of these same third parties or from others to advance our research or allow commercialization of AVXS‑101. It is possible that we may be unable to obtain additional licenses at a reasonable cost or on reasonable terms, if at all. In that event, we may be required to expend significant time and resources to redesign AVXS‑101 or the methods for manufacturing it or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize AVXS‑101, which would harm our business significantly. We cannot provide any assurances that third‑party patents or other intellectual property rights do not exist which might be enforced against our current manufacturing methods, product candidate or future methods, resulting in either an injunction prohibiting our manufacture or sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties.

In each of our existing license agreements, and we expect in our future agreements, patent prosecution of our licensed technology is controlled solely by the licensor, and we may be required to reimburse the licensor for their costs of patent prosecution. If our licensors fail to obtain and maintain patent or other protection for the proprietary intellectual property we license from them, we could lose our rights to the intellectual property or our exclusivity with respect to those rights, and our competitors could market competing products using the intellectual property. Further, in each of our license agreements our licensors have the first right to bring any actions against any third party for infringing on the patents we have licensed. Our license agreements also require us to meet development thresholds to maintain the license, including establishing a set timeline for developing and commercializing product candidate(s). Disputes may arise regarding intellectual property subject to a licensing agreement, including:

If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize AVXS‑101.

We may not be successful in obtaining necessary rights to AVXS‑101 through acquisitions and in‑licenses.

We currently have certain rights to the intellectual property, through licenses from third parties, to develop AVXS‑101. Because our programs may require the use of additional proprietary rights held by these or other third parties, the growth of our business likely will depend, in part, on our ability to acquire, in‑license or use these proprietary rights. We may be unable to acquire or in‑license any compositions, methods of use, processes or other intellectual property rights from third parties that we identify as necessary for AVXS‑101. The licensing or acquisition of third‑party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third‑party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third party intellectual property rights on terms that would allow us to make an appropriate return on our investment.

We may collaborate with non‑profit and academic institutions to accelerate our preclinical research or development under written agreements with these institutions. These institutions may provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our program.

Our Chief Scientific Officer, Dr. Brian Kaspar, was a faculty member at NCH. NCH owns inventions and discoveries, whether patentable or not, that Dr. Kaspar made, conceived or reduced to practice while he was an employee of NCH, unless otherwise specifically provided for by the terms of a sponsored research agreement between us and NCH. If we are unable to secure sufficient rights in intellectual property made by Dr. Kaspar, our business, including the ability to pursue development and commercialization of AVXS‑101, may be harmed.

If we are unable to successfully obtain rights to required third‑party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of AVXS‑101 and our business, financial condition, results of operations and prospects could suffer. Moreover, to the extent that we seek to develop other product candidates in the future, we will likely require acquisition or in‑license of additional proprietary rights held by third parties.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non‑compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees and various other government fees on patents and/or applications will be due to be paid to the USPTO, and various government patent agencies outside of the United States over the lifetime of our licensed patents and/or applications and any patent rights we may own in the future. We rely on our outside counsel or our licensing partners to pay these fees due to non‑U.S. patent agencies. The USPTO and various non‑U.S. government patent agencies require compliance with several procedural, documentary, fee payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply and we are also dependent on our licensors to take the necessary action to comply with these requirements with respect to our licensed intellectual property. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in which non‑compliance

can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market and this circumstance could have a material adverse effect on our business.

Some intellectual property which we have in‑licensed may have been discovered through government funded programs and thus may be subject to federal regulations such as “march‑in” rights, certain reporting requirements, and a preference for U.S. industry. Compliance with such regulations may limit our exclusive rights, and limit our ability to contract with non‑U.S. manufacturers.

Some of the intellectual property rights we have licensed, including rights owned by the Trustees of the University of Pennsylvania and licensed from REGENXBIO, and rights licensed from NCH, may have been generated through the use of U.S. government funding and may therefore be subject to certain federal regulations. As a result, the U.S. government may have certain rights to intellectual property embodied in our current or future product candidates pursuant to the Bayh‑Dole Act of 1980, or Bayh‑Dole Act. These U.S. government rights in certain inventions developed under a government‑funded program include a non‑exclusive, non‑transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the U.S. government has the right to require us to grant exclusive, partially exclusive, or non‑exclusive licenses to any of these inventions to a third party if it determines that: (i) adequate steps have not been taken to commercialize the invention; (ii) government action is necessary to meet public health or safety needs; or (iii) government action is necessary to meet requirements for public use under federal regulations (also referred to as “march‑in rights”). The U.S. government also has the right to take title to these inventions if we, or the applicable licensor, fail to disclose the invention to the government and fail to file an application to register the intellectual property within specified time limits. Intellectual property generated under a government funded program is also subject to certain reporting requirements, compliance with which may require us or the applicable licensor to expend substantial resources. In addition, the U.S. government requires that any products embodying the subject invention or produced through the use of the subject invention be manufactured substantially in the United States. The manufacturing preference requirement can be waived if the owner of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible. This preference for U.S. manufacturers may limit our ability to contract with non‑U.S. product manufacturers for products covered by such intellectual property. To the extent any of our current or future intellectual property is generated through the use of U.S. government funding, the provisions of the Bayh‑Dole Act may similarly apply. Any exercise by the government of certain of its rights could harm our competitive position, business, financial condition, results of operations and prospects.

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

Filing, prosecuting and defending patents on product candidate(s) in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States. Although our license agreements with NCH and REGENXBIO grant us worldwide rights, certain of our in‑licensed U.S. patent rights related to intravenous delivery of AVXS‑101 lack corresponding foreign patents or patent applications, and in the case of NCH, the patent application families licensed to us related to the intravenous delivery of AVXS‑101, which were filed in the United States only. Thus, in some cases, we will not have the opportunity to obtain patent protection for certain licensed technology outside the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States even in jurisdictions where we do pursue patent protection. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, even in jurisdictions where we do pursue patent protection or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not pursued and obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our product candidate(s) and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.