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As confidentially submitted to the Securities and Exchange Commission on April 27, 2020, as Amendment No. 1 to the Confidential Submission dated March 24, 2020, File No. 377-03100

Registration No. 333-          

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



AKOUOS, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  2834
(Primary Standard Industrial
Classification Code Number)
  81-1716654
(I.R.S. Employer
Identification No.)

645 Summer Street
Suite 200
Boston, Massachusetts 02210
(857) 410-1818
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)



Emmanuel Simons, Ph.D., M.B.A.
President and Chief Executive Officer
Akouos, Inc.
645 Summer Street
Boston, Massachusetts 02210
(857) 410-1818
(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:
Rosemary G. Reilly, Esq.
Molly W. Fox, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Telephone: (617) 526-6000
  Divakar Gupta, Esq.
Richard C. Segal, Esq.
Brent B. Siler, Esq.
Cooley LLP
500 Boylston Street
Boston, Massachusetts 02116
Telephone: (617) 937-2300



Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement is declared effective.

                     If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

                     If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

                     If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

                     If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

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

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý   Smaller reporting company o

Emerging growth company ý

                     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 7(a)(2)(B) of the Securities Act. o



CALCULATION OF REGISTRATION FEE

       
 
Title of Each Class of Securities
to Be Registered

  Proposed Maximum
Aggregate Offering
Price(1)

  Amount of
Registration Fee(2)

 

Common stock, $0.0001 par value per share

  $                   $                

 

(1)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. Includes the aggregate offering price of additional shares that the underwriters have the option to purchase. See "Underwriting."

(2)
Calculated pursuant to Rule 457(o) under the Securities Act of 1933, as amended, based on an estimate of the proposed maximum aggregate offering price.



                     The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

   


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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion
Preliminary Prospectus dated                        , 2020

PROSPECTUS

            Shares

GRAPHIC

Common Stock



              This is Akouos, Inc.'s initial public offering. We are selling                        shares of our common stock.

              We expect the public offering price to be between $            and $            per share. Currently, no public market exists for the shares. After the pricing of the offering, we expect that the shares will trade on the Nasdaq Global Market under the symbol "AKUS."

              Investing in the common stock involves risks that are described in the "Risk Factors" section beginning on page 11 of this prospectus.

              We are an "emerging growth company" as that term is used in the Jumpstart Our Business Startups Act of 2012, and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. See "Prospectus Summary—Implications of Being an Emerging Growth Company."



 
 
Per Share
 
Total
 

Public offering price

  $     $    

Underwriting discount

  $     $    

Proceeds, before expenses, to us

  $     $    

              The underwriters may also exercise their option to purchase up to an additional                                    shares from us, at the public offering price, less the underwriting discount, for 30 days after the date of this prospectus.

              Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

              The shares will be ready for delivery on or about                        , 2020.



BofA Securities   Cowen   Piper Sandler & Co.


BTIG



   

The date of this prospectus is                        , 2020.


TABLE OF CONTENTS

 
  Page

Prospectus Summary

  1

Risk Factors

  11

Cautionary Note Regarding Forward-Looking Statements and Industry Data

  67

Use of Proceeds

  69

Dividend Policy

  71

Capitalization

  72

Dilution

  74

Selected Consolidated Financial Data

  77

Management's Discussion and Analysis of Financial Condition and Results of Operations

  78

Business

  92

Management

  152

Executive Compensation

  160

Transactions with Related Persons

  174

Principal Stockholders

  178

Description of Capital Stock

  181

Shares Eligible for Future Sale

  186

Material U.S. Tax Considerations for Non-U.S. Holders of Common Stock

  189

Underwriting

  193

Legal Matters

  202

Experts

  202

Where You Can Find More Information

  202

Index to Consolidated Financial Statements

  F-1



              Neither we nor the underwriters have authorized anyone to provide you with any information or to make any representation other than as contained in this prospectus, any amendment or supplement to this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

              For investors outside the United States: we have not, and the underwriters have not, done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.

              We own or have rights to trademarks, service marks and trade names that we use in connection with the operation of our business, including our corporate name, logos and website names. Other trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners. Solely for convenience, some of the trademarks, service marks and trade names referred to in this prospectus are listed without the ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, service marks and trade names.

              As used in this prospectus, unless the context otherwise requires, references to "we," "us," "our" and "Akouos, Inc." refer to the consolidated operations of Akouos, Inc., and its consolidated subsidiary.


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PROSPECTUS SUMMARY

              This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, including our consolidated financial statements and the related notes appearing at the end of this prospectus and the information set forth in the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Overview

              We are a precision genetic medicine company dedicated to our mission of developing gene therapies with the potential to restore, improve, and preserve high-acuity physiologic hearing for people worldwide who live with disabling hearing loss. We have built a precision genetic medicine platform that incorporates a proprietary vector library consisting of variants of a small virus commonly used in gene therapy, known as adeno-associated virus, or AAV, and a novel delivery approach. We are executing on our core strategic initiatives, which include the advancement of our lead product candidate, AK-OTOF, expansion of our pipeline, and development of internal manufacturing capabilities and, ultimately, a commercial infrastructure. Our aim is to leverage our capabilities to become a fully integrated biotechnology company. We believe our platform and our team together provide a unique advantage to efficiently develop potential genetic medicines for a variety of inner ear disorders.

              Hearing loss is one of the world's largest unmet medical needs. Approximately 466 million people around the world, including 34 million children, live with disabling hearing loss, and a growing body of evidence suggests hearing loss can have a significant impact on cognitive development, psychiatric health, and healthy aging. We estimate that AK-OTOF has a potential addressable population of up to approximately 7,000 individuals, which is a subset of the total population of individuals with hearing loss due to mutations in the otoferlin, or OTOF, gene in the United States and European Union in the aggregate. Recent advances in genetic medicine have created the possibility of addressing the root cause of disorders that have a genetic basis. Serious disorders that previously had no pharmacologic treatments and, in some cases, insufficient non-pharmacologic treatments now have the potential to be addressed with one-time gene therapy administrations, including potential gene editing therapies, that can restore critical function to the eye, the spinal cord, the brain, and other organs. Despite these advances, we believe genetic medicine development for hearing disorders has been hindered by the unique anatomical delivery challenges of the inner ear. To overcome these challenges, our team has combined a proprietary vector library of synthetic AAVs that recreates the evolutionary lineage of current naturally occurring viruses, known as ancestral AAV, or AAVAnc, and a novel, minimally invasive delivery approach that allows us to utilize AAV-enabled multimodal capabilities, including viral delivery to the target cell population where the full-length transgene is split into two vectors, known as a dual vector method.

              Our focused candidate selection criteria allow us to identify promising targets covering a range of inner ear cell types, including sensory hair cell and non-sensory supporting cells, to treat a broad range of inner ear disorders. We seek programs that have clinically well-established, objective, and quantifiable endpoints that can be incorporated in translatable preclinical models during development, which we believe may provide drug development advantages, including the potential for more rapid clinical development. Additionally, given the epidemiology and severity of the disorders we are initially targeting, available regulatory pathways such as orphan drug designation and expedited pathways for serious conditions may provide the potential for more rapid regulatory approval. Our clinical development plan includes measurement of the auditory brainstem response, or ABR, an objective, clinically accepted endpoint, which we believe provides both clinical and regulatory advantages.

              We have generated promising preclinical data for our lead product candidate, AK-OTOF, a gene therapy for the treatment of hearing loss due to mutations in the OTOF gene. The OTOF gene

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encodes otoferlin, a protein that enables the sensory cells of the ear to release neurotransmitter vesicles in response to stimulation by sound to activate auditory neurons. The auditory neurons then carry electronically encoded acoustic information to the brain, which allows us to hear. We aim to restore otoferlin expression through targeted delivery of a proprietary AAVAnc, known as AAVAnc80, containing the OTOF gene to individuals with OTOF-mediated hearing loss. We have selected AAVAnc80 from the larger AAVAnc vector library based on its high observed transduction efficiency in inner hair cells. Affected individuals are typically born deaf, which is confirmed through ABR testing, a commonly used measure of hearing loss. Based on feedback from the U.S. Food and Drug Administration, or FDA, we are designing our Phase 1/2 trial to include ABR as an efficacy endpoint. We believe that this will enable us to quickly determine a clinical response and potentially result in rapid advancement towards a pivotal trial. There are no pharmacologic therapies currently approved for the treatment or management of OTOF-mediated hearing loss, or any other form of sensorineural hearing loss. We believe our product candidate has the potential to restore physiologic hearing and provide long-lasting benefits to these individuals and their families. We plan to submit an investigational new drug application, or IND, for AK-OTOF for OTOF-mediated hearing loss to the FDA in                        , and we expect to report preliminary clinical data in                        .

              In addition to AK-OTOF, our diversified portfolio of product candidates and development programs has been selected to leverage our platform across multiple inner ear disorders, starting with those resulting from mutations in a single gene, or monogenic forms of deafness and hearing loss, such as OTOF-mediated hearing loss, and building toward clinical development of genetic medicines for the most common forms of hearing loss, such as age-related and noise-induced hearing loss. Our most advanced pipeline programs address a range of inner ear cells and leverage different modalities. These programs include CLRN1 for Usher Type 3A, an autosomal recessive disorder characterized by progressive loss of both hearing and vision; GJB2 for a common form of monogenic deafness and hearing loss; and delivery of an anti-VEGF, an inhibitor of vascular endothelial growth factor, or VEGF, a protein that can cause abnormal blood vessel growth, for the treatment of vestibular schwannoma, a tumor of the auditory vestibular nerve.

              We believe that our focus on developing internal manufacturing capabilities provides a core competitive advantage. We are currently developing internal infrastructure to manufacture vectors for good laboratory practices, or GLP, toxicology studies, which we plan to have completed by                        . We are in the planning stages of building a current good manufacturing practice, or cGMP, manufacturing facility that we believe will have capability to process gene therapy batches to support activities through Phase 1/2 clinical trials for product candidates beyond AK-OTOF. We have partnered with Lonza Houston, Inc., or Lonza, for production of GLP and cGMP material for our lead product candidate, AK-OTOF. We have made, and will continue to make, significant investments to further optimize our manufacturing capabilities to cost-effectively produce high-quality AAV vectors. We believe that our manufacturing processes, methods, expertise, facilities, and scale will give us a significant advantage in the development and, ultimately, commercialization of our AAV product candidates.

              We have initiated a process of sponsoring and building The Sing Registry, an observational global research study focused on understanding the life-long impact of genetically caused sensorineural hearing loss. We have established an advisory board comprised of key opinion leaders to oversee The Sing Registry and have completed the first advisory board meeting. The Sing Registry protocol has been reviewed and approved by a central ethics committee. We expect that approximately ten sites will participate in The Sing Registry. We believe The Sing Registry will provide both us and the broader community a greater understanding of genetic sensorineural hearing loss and will guide our research and development efforts, enhance future trial design, and promote enrollment in our future clinical trials.

              We have assembled a world-class team with expertise in auditory anatomy and physiology, otopathology, human genetics, inner ear drug delivery, gene therapy and rare disease drug

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development, and commercialization. We believe that our promising preclinical data, scientific expertise, product development strategy, planned manufacturing capabilities, and robust intellectual property portfolio position us as a leader in the development of precision genetic medicines for inner ear disorders.

              Since our inception in 2016, we have raised $162.7 million in capital from premier venture capital funds, healthcare-dedicated funds, major mutual funds, and other leading investors that share our vision to build a highly innovative, fully integrated genetic medicines company. These funds include 5AM Ventures, New Enterprise Associates, Novartis Venture Fund, Partners Innovation Fund, RA Capital Management and Sofinnova Investments, as well as Cormorant Asset Management, Cowen Healthcare Investments, EcoR1 Capital, Fidelity Management & Research Company, Pivotal bioVenture Partners, Polaris Founders Fund, Pagsgroup, Surveyor Capital (a Citadel company), Wu Capital, and other well-respected institutional investors.

Our Pipeline

              Our initial candidates and development programs have been selected to leverage our capabilities across multiple inner ear disorders, starting with monogenic deafness and building toward genetic medicines for the most common forms of hearing loss, such as age-related and noise-induced hearing loss. We have worldwide commercial rights to our entire pipeline.

GRAPHIC

Our Multimodal Approach

              Our precision genetic medicine platform enables us to address a broad landscape of monogenic and non-monogenic inner ear disorders using a variety of treatment modalities, including introduction of genetic material through viral vectors, which we refer to as vector-mediated gene transfer, reduction in the expression of a gene, known as gene knockdown, modification of a gene, known as gene editing, and delivery of transgenes that express therapeutic proteins such as antibodies using viral vectors, which we refer to as vector-mediated therapeutic protein expression. The figure below illustrates how we believe our platform could address the landscape of monogenic and non-monogenic inner ear disorders using various AAV-enabled modalities.

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GRAPHIC

Our Strategy

              Our goal is to transform the lives of deaf and hard-of-hearing individuals by restoring, improving, and preserving high-acuity physiologic hearing. We are a patient-focused organization engaged with and advocating on behalf of these individuals and their families. We intend to accomplish our goal by leveraging our inner ear precision genetic medicine platform and the expertise of our team to implement the following key elements of our strategy:

    Rapidly advance our lead product candidate, AK-OTOF, into and through clinical development and regulatory approval.

    Transform the treatment of hearing loss with single-administration therapies that carry the potential for sustained hearing restoration, improvement, or preservation.

    Continue to expand our pipeline and develop innovative potential therapies across a wide range of serious inner ear disorders.

    Continue to build internal manufacturing capabilities and set the manufacturing standard for inner ear genetic medicines.

    Establish a commercial infrastructure.

Risks Associated with Our Business

              Our business is subject to numerous risks and uncertainties, including those highlighted in the section entitled "Risk Factors" immediately following this prospectus summary. These risks include, but are not limited to, the following:

    we have incurred significant losses during all fiscal periods since our inception, have no products approved for commercial sale, and we expect to incur substantial losses for the foreseeable future;

    we have a limited operating history and are very early in our development efforts, all of our product candidates are still in preclinical development, and we may be unable to advance our product candidates to clinical development, obtain regulatory approval and ultimately commercialize our product candidates;

    even if this offering is successful, we expect that we will need to raise additional funding before we can expect to complete clinical development of any product candidates or become profitable from any future sales of approved products;

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    we have not tested any of our product candidates in clinical trials, and the outcome of preclinical studies and earlier-stage clinical trials may not be predictive of future results or the success of later-stage clinical trials;

    preclinical and clinical development involve a lengthy and expensive process with an uncertain outcome, and we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our current product candidates or any future product candidates;

    if we do not achieve our projected development goals in the timeframes we announce and expect, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business;

    our product candidates are based on a relatively novel technology with which there is little clinical experience, which makes it difficult to predict the time and cost development and of subsequently obtaining regulatory approval, if at all;

    even if we complete the necessary preclinical and clinical studies, we cannot predict when or if we will obtain regulatory approval to commercialize a product candidate or the approval may be for a narrower indication than we expect;

    the disorders we seek to treat have low prevalence and it may be difficult to identify patients with these diseases, which may lead to delays in enrollment for our trials or slower commercial revenue if approved;

    the manufacture of genetic medicine products is complex and difficult, and we could experience manufacturing problems that result in delays in our development or commercialization programs;

    we currently rely, and expect to continue to rely, on third-party manufacturers to produce clinical supply of our product candidates;

    we may not be successful in our efforts to build a pipeline of additional product candidates;

    if we are unable to obtain and maintain patent protection for our products and 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 products and technology may be adversely affected;

    our product candidates may cause undesirable and unforeseen side effects, which could delay or prevent their advancement into clinical trials or regulatory approval, limit the commercial potential or result in significant negative consequences; and

    if we fail to comply with our obligations under our existing or any future license agreements, we could lose intellectual property rights that are important to our business.

Our Corporate Information

              We were formed as a limited liability corporation under the laws of the Commonwealth of Massachusetts on March 7, 2016 under the name Akouos, LLC. We converted into a corporation under the laws of the State of Delaware on November 23, 2016 under the name Akouos, Inc. Our principal executive offices are located at 645 Summer Street, Suite 200, Boston, Massachusetts 02210 and our telephone number is (857) 410-1818. Our website address is http://www.akouos.com. The information contained on, or accessible through, our website is not incorporated by reference into this prospectus and does not constitute part of this prospectus, and you should not consider any such information to constitute a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

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Implications of Being an Emerging Growth Company

              We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, enacted in April 2012. As a result, we may take advantage of reduced reporting requirements that are otherwise applicable to public companies that are not emerging growth companies, including delaying auditor attestation of internal control over financial reporting, providing only two years of audited financial statements and related Management's Discussion and Analysis of Financial Condition and Results of Operations in this prospectus and reducing executive compensation disclosures.

              We may remain an emerging growth company until the end of 2025. However, if certain events occur prior to the end of 2025, including if we become a "large accelerated filer," our annual gross revenue exceeds $1.07 billion, or we issue more than $1 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of 2025.

              We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have elected to take advantage of this extended transition period. As a result, the information that we provide to our stockholders may be different than what you might receive from other public reporting companies in which you hold equity interests.

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The Offering

Common stock offered by us

                           shares.

Option to purchase additional shares

 

We have granted the underwriters an option for a period of 30 days to purchase up to                         additional shares of our common stock.

Common stock to be outstanding after this offering

 

                         shares (or                         shares if the underwriters exercise their option to purchase additional shares in full).

Use of proceeds

 

We estimate that the net proceeds to us from this offering will be approximately $             million (or approximately $             million if the underwriters exercise their option to purchase additional shares in full), based on an assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

We intend to use the net proceeds to us from this offering, together with our existing cash and cash equivalents, to advance clinical development of AK-OTOF for the treatment of OTOF-mediated hearing loss through                                    ; initiate clinical development of our additional product candidates, anti-VEGF, CLRN1, and GJB2; continue preclinical development of our other product candidates and development programs, including our autosomal dominant hearing disorder and our hair cell regeneration programs; establish internal manufacturing capabilities of 250-liter capacity; and for working capital and other general corporate purposes. See "Use of Proceeds" for more information.

Risk factors

 

You should read the "Risk Factors" section of this prospectus beginning on page 11 for a discussion of factors to consider carefully before deciding to invest in shares of our common stock.

Proposed Nasdaq Global Market symbol

 

"AKUS."



              The number of shares of our common stock to be outstanding after this offering is based on 421,048,539 shares of our common stock outstanding as of March 31, 2020, after giving effect to the automatic conversion of all outstanding shares of our preferred stock into an aggregate of 399,748,228 shares of our common stock upon the closing of this offering, and excludes:

    23,990,555 shares of common stock issuable upon exercise of stock options outstanding as of March 31, 2020, under our 2016 Stock Plan, as amended, or the 2016 Plan, at a weighted-average exercise price of $0.10 per share; and

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                            and                         additional shares of common stock that will become available for future issuance under our 2020 Stock Incentive Plan (which includes                        shares of our common stock available for future issuance under our 2016 Stock Plan that will become available for issuance under our 2020 Stock Incentive Plan upon its effectiveness) and our 2020 Employee Stock Purchase Plan, respectively, each of which will become effective immediately prior to the effectiveness of the registration statement of which this prospectus is a part, as well as any automatic increases in the number of shares of common stock reserved for future issuance under these plans.

              Unless otherwise indicated, all information in this prospectus assumes:

    the automatic conversion of all outstanding shares of our preferred stock into an aggregate of 399,748,228 shares of our common stock upon the closing of the offering;

    no exercise of the outstanding options described above;

    no exercise by the underwriters of their option to purchase additional shares of our common stock; and

    the filing and effectiveness of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws upon the closing of this offering.

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Summary Consolidated Financial Data

              You should read the following summary consolidated financial data together with our consolidated financial statements and the related notes appearing at the end of this prospectus and the "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of this prospectus. We have derived the consolidated statement of operations data for the years ended December 31, 2018 and 2019 and the consolidated balance sheet data as of December 31, 2019 from our audited consolidated financial statements appearing at the end of this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future.

 
  Year Ended
December 31,
 
 
  2018   2019  
 
  (in thousands, except
per share data)

 

Consolidated Statement of Operations Data:

             

Operating expenses:

             

Research and development

  $ 5,644   $ 20,473  

General and administrative

    1,776     3,410  

Total operating expenses

    7,420     23,883  

Loss from operations

    (7,420 )   (23,883 )

Other income (expense):

             

Change in fair value of preferred stock tranche liability

    1,040     (2,260 )

Interest income

    289     413  

Other income (expense), net

    78     (11 )

Total other income (expense), net

    1,407     (1,858 )

Net loss attributable to common stockholders

  $ (6,013 ) $ (25,741 )

Net loss per share attributable to common stockholders, basic and diluted(1)

  $ (0.61 ) $ (2.02 )

Weighted-average common shares outstanding, basic and diluted(1)

    9,866     12,767  

Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)(1)

        $ (0.17 )

Pro forma weighted-average common shares outstanding, basic and diluted (unaudited)(1)

          135,596  

(1)
See Note 13 to our consolidated financial statements appearing at the end of this prospectus for details on the calculation of basic and diluted net loss per share attributable to common stockholders and unaudited basic and diluted pro forma net loss per share attributable to common stockholders.

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  As of December 31, 2019  
 
  Actual   Pro Forma(2)   Pro Forma
As Adjusted(3)
 
 
  (in thousands)
 

Consolidated Balance Sheet Data:

                   

Cash and cash equivalents

  $ 25,078   $ 130,143   $    

Working capital(1)

    20,197     125,262        

Total assets

    45,162     150,227        

Finance lease obligations

    435     435        

Convertible preferred stock

    58,690            

Total stockholders' equity (deficit)

    (32,801 )   130,954        

(1)
We define working capital as current assets less current liabilities.

(2)
The pro forma consolidated balance sheet data give effect to (i) our issuance and sale in February 2020 of 221,399,223 shares of Series B preferred stock for gross proceeds of $105.1 million and (ii) the automatic conversion of all outstanding shares of our preferred stock into an aggregate of 399,748,228 shares of common stock upon the closing of this offering.

(3)
The pro forma as adjusted consolidated balance sheet data give further effect to our issuance and sale of                        shares of our common stock in this offering at an assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The pro forma as adjusted information discussed above is illustrative only and will depend on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase or decrease in the assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease the pro forma as adjusted amount of each of cash and cash equivalents, working capital, total assets and total stockholders' equity by $             million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase or decrease of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase or decrease the pro forma as adjusted amount of each of cash and cash equivalents, working capital, total assets and total stockholders' equity by $             million, assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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RISK FACTORS

              Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this prospectus, including our consolidated financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in our common stock. The risks described below are not the only risks facing us. The occurrence of any of the following risks, or of additional risks and uncertainties not presently known to us or that we currently believe to be immaterial, could cause our business, prospects, operating results and financial condition to suffer materially. In such event, the trading price of our common stock could decline, and you might lose all or part of your investment.

Risks Related to Our Financial Position and Need for Additional Capital

We have incurred significant losses during all fiscal periods since our inception, have no products approved for commercial sale, and we expect to incur substantial losses for the foreseeable future.

              Since inception, we have incurred significant operating losses. Our net losses were $6.0 million for the year ended December 31, 2018 and $25.7 million for the year ended December 31, 2019. As of December 31, 2019, we had an accumulated deficit of $33.1 million. To date, we have financed our operations primarily with proceeds from sales of preferred stock (including borrowings under convertible promissory notes, which converted into preferred stock in 2017). We have devoted substantially all of our financial resources and efforts to research and development, and our net losses have resulted principally from these research and development activities and from personnel expenses. We are still in the early stages of development of our product candidates, and we have not commenced or completed clinical development of any product candidates. We expect to continue to incur significant expenses and increasing operating losses over the next several years. Our operating expenses and net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses and capital expenditures will increase substantially in the foreseeable future as we:

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              Even if we obtain regulatory approval of and are successful in commercializing one or more of our product candidates, we will continue to incur substantial research and development and other expenditures to develop and market additional product candidates. We may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue.

We have never generated revenue from product sales and may never achieve or maintain profitability.

              We have not initiated clinical development of any product candidate and expect that it will be many years, if ever, before we have a product candidate ready for commercialization. To become and remain profitable, we must succeed in developing, and eventually commercializing, a product or products that generate significant revenue. The ability to achieve this success will require us to be effective in a range of challenging activities, including completing preclinical testing, initiating and completing clinical trials of our product candidates, discovering additional product candidates, obtaining regulatory approval for these product candidates and manufacturing, marketing, and selling any products for which we may obtain regulatory approval. We are only in the preliminary stages of these activities. We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability. Because of the numerous risks and uncertainties associated with biopharmaceutical 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. Our expenses will increase if, among other things:

              Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis as we expect to continue to engage in substantial research and development activities and to incur substantial expenses to develop and commercialize product candidates. In addition, we may encounter unforeseen expenses, difficulties, complications, delays and, other unknown factors that may adversely affect our revenues, expenses, and profitability.

              Our failure to achieve or sustain profitability would depress our market value and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our pipeline of product candidates, or even continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.

We are heavily dependent on the success of lead product candidate, AK-OTOF.

              We currently have no products that are approved for commercial sale and may never be able to develop marketable products. We expect that a substantial portion of our efforts and expenditures for the foreseeable future will be devoted to AK-OTOF. Accordingly, our business currently depends heavily on the successful development, regulatory approval, and commercialization of AK-OTOF. We cannot be certain that AK-OTOF will receive regulatory approval or be successfully commercialized even if we receive regulatory approval. If we were required to discontinue development of AK-OTOF, or if AK-OTOF does not receive regulatory approval, fails to achieve significant market acceptance, or

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fails to receive reimbursement, we would be delayed by many years in our ability to achieve profitability, if ever, and may not be able to generate sufficient revenue to continue our business.

Even after completion of the offering, we will need substantial additional capital to execute our business plan. If we are unable to raise capital when needed, we could be forced to delay, reduce, or eliminate our product development programs or commercialization efforts.

              Since inception, we have used substantial amounts of cash. The development of biopharmaceutical product candidates is capital intensive and we expect that we will continue to expend substantial resources for the foreseeable future in connection with our ongoing activities In particular, substantial resources will be required as we prepare for and initiate our planned Phase 1/2 clinical trial of AK-OTOF, advance our genetic medicine platform, and continue research and development and initiate additional clinical trials of and potentially seek marketing approval for our other product candidates. 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 regulatory approval and achieve product sales. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales, and distribution. Furthermore, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

              As of December 31, 2019, we had cash and cash equivalents of $25.1 million. We believe that the net proceeds from this offering, together with our existing cash and cash equivalents, including the $105.1 million of gross proceeds we received from the sale of our Series B preferred stock in February 2020, will enable us to fund our operating expenses and capital expenditure requirements through                        . However, we have based this estimate on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. Furthermore, because the outcome of our planned Phase 1/2 clinical trial and future clinical trials is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates. As a result, we could deplete our capital resources sooner than we currently expect.

              The timing and amount of our funding requirements will depend on many factors, including:

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              We do not have any committed external source of funds and adequate additional financing may not be available to us on acceptable terms, or at all. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. If adequate funds are not available to us on a timely basis or on terms acceptable to us, we would be required to delay, limit, reduce, or terminate preclinical studies, clinical trials, or other development activities for one or more product candidates or discovery stage programs or delay, limit, reduce, or terminate our establishment of sales and marketing capabilities or other activities that may be necessary to commercialize any product candidates.

Raising additional capital may cause dilution to our stockholders, including purchasers of our common stock in this offering, restrict our operations, or require us to relinquish rights to our technologies or product candidates.

              Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, selling or licensing our assets, making capital expenditures, declaring dividends or encumbering our assets to secure future indebtedness. Such restrictions could adversely impact our ability to conduct our operations and execute our business plan.

              If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed or on terms acceptable to us, we would be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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 commenced operations in 2016, and our operations to date have been limited to organizing and staffing our company, business planning, raising capital, conducting research and development activities, filing and prosecuting patent applications, identifying potential product candidates, soliciting input from regulators regarding development of these product candidates, and undertaking preclinical studies. All of our product candidates are still in preclinical development. We have not yet demonstrated our ability to successfully initiate or complete any clinical trials, obtain marketing approvals, manufacture a commercial scale product, or partner with contract manufacturing organizations, or CMOs, to do so on our behalf, or conduct sales, marketing, and distribution activities necessary for successful product commercialization. Consequently, any predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing genetic medicine products.

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              In addition, as our business grows, we may encounter unforeseen expenses, difficulties, complications, delays, and other known and unknown factors. We will need to transition at some point from a company with a research and development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.

              We expect our financial condition and operating results to fluctuate significantly from quarter-to-quarter and year-to-year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance.

The COVID-19 pandemic, which began in late 2019 and has spread worldwide, may affect our ability to initiate and complete preclinical studies, delay the initiation of our planned clinical trial or future clinical trials, disrupt regulatory activities, or have other adverse effects on our business and operations. In addition, this pandemic has caused substantial disruption in the financial markets and may adversely impact economies worldwide, both of which could result in adverse effects on our business and operations.

              The COVID-19 pandemic, which began in December 2019 and has spread worldwide, causing many governments to implement measures to slow the spread of the outbreak through quarantines, travel restrictions, heightened border scrutiny, and other measures. The outbreak and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. The future progression of the outbreak and its effects on our business and operations are uncertain. We and our CMOs and contract research organizations, or CROs, may face disruptions that may affect our ability to initiate and complete preclinical studies, including disruptions in procuring items that are essential for our research and development activities, such as raw materials used in the manufacture of our product candidates, laboratory supplies used in our preclinical studies, or animals that are used for preclinical testing for which there are shortages because of ongoing efforts to address the outbreak. We and our CROs and CMOs, as well as clinical trial sites, may face disruptions related to our planned clinical trial or future clinical trials arising from delays in IND-enabling studies, manufacturing disruptions, and the ability to obtain necessary institutional review board, or IRB, institutional biosafety committee, or IBC, or other necessary site approvals, as well as other delays at clinical trial sites. The response to the COVID-19 pandemic may redirect resources with respect to regulatory and intellectual property matters in a way that would adversely impact our ability to progress regulatory approvals and protect our intellectual property. In addition, we may face impediments to regulatory meetings and approvals due to measures intended to limit in-person interactions. The pandemic has already caused significant disruptions in the financial markets, and may continue to cause such disruptions, which could impact our ability to raise additional funds through public offerings and may also impact the volatility of our stock price and trading in our stock. Moreover, the pandemic has significantly impacted economies worldwide and could result in adverse effects on our business and operations. We cannot be certain what the overall impact of the COVID-19 pandemic will be on our business and it has the potential to adversely affect our business, financial condition, results of operations, and prospects.

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Risks Related to the Development of our Product Candidates

We are very early in our development efforts. Our business is dependent on our ability to advance lead product candidate, AK-OTOF, and our other current and future product candidates through preclinical studies and clinical trials, obtain marketing approval, and ultimately commercialize them. If we are unable to complete clinical development, obtain regulatory approval for, or commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.

              We are very early in our development efforts and all of our product candidates are still in preclinical development. We expect to submit an IND to the FDA with respect to our AK-OTOF program in                        . Additionally, we have a portfolio of programs, including those listed in the "Business—Our Pipeline" section of this prospectus, that are in even earlier stages of preclinical development and may never advance to clinical-stage development. Our ability to generate product revenue, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our product candidates, which may never occur. We currently generate no revenue from sales of any product, and we may never be able to develop or commercialize a marketable product.

              Additionally, the research, testing, manufacturing, labeling, approval, sale, marketing, and distribution of genetic medicine products are and will remain subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries that each have differing regulations. We are not permitted to market AK-OTOF, or any of our other current or future product candidates, in the United States until it receives approval of a biologics license application, or BLA, from the FDA, or in any foreign countries until it receives the requisite approval from such countries. We have not submitted a BLA for AK-OTOF or any other product candidate to the FDA or comparable applications to other regulatory authorities and do not expect to be in a position to do so for the foreseeable future.

              The clinical and commercial success of our product candidates will depend on several factors, including the following:

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              Many of these factors are beyond our control, including clinical outcomes, the regulatory review process, potential threats to our intellectual property rights, and the manufacturing, marketing and sales efforts of any future collaborator. If we do not succeed in 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. If we are unable to advance our product candidates to clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed. As a company, we do not have any experience in clinical development and have not advanced any product candidates into clinical development. Our lack of experience in conducting clinical development activities may adversely impact the likelihood that we will be successful in advancing our programs. Further, any predictions about the future success or viability of our programs may not be as accurate as they could be if we had a history of conducting clinical trials.

              Furthermore, because our other product candidates are based in part on similar technology to AK-OTOF, our most advance product candidate, if AK-OTOF shows unexpected adverse events or a lack of efficacy in the indications we intend to treat, or if we experience other regulatory or developmental issues associated with AK-OTOF, our development plans and business could be significantly harmed. In addition, competitors may be developing product candidates with similar technology and may experience problems with their product candidates that could identify problems that would potentially negatively impact the development of our product candidates and ultimately harm our business.

We may encounter substantial delays in commencement or completion of our clinical trials, or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities, which could prevent us from commercializing our current and future product candidates on a timely basis, if at all.

              The risk of failure for each of our product candidates is high. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. We have not yet initiated or completed a clinical trial of any of our product candidates. Clinical trials may fail to demonstrate that our product candidates are safe for humans and effective for indicated uses. Even if the clinical trials are successful, changes in marketing approval policies during the development period, changes in or the enactment or promulgation of additional statutes, regulations or guidance or changes in regulatory review for each submitted product application may cause delays in the approval or rejection of an application.

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              Before we can commence clinical trials for a product candidate, we must complete extensive preclinical testing and studies that support our planned INDs and other regulatory filings. We cannot be certain of the timely completion or outcome of our preclinical testing and studies and cannot predict if the FDA will accept our proposed clinical programs or if the outcome of our preclinical testing and studies will ultimately support the further development of any product candidates. As a result, we cannot be sure that we will be able to submit INDs for our preclinical programs on the timelines we expect, if at all, and we cannot be sure that submission of INDs will result in the FDA allowing clinical trials to begin. Furthermore, product candidates are subject to continued preclinical safety studies, which may be conducted concurrent with our clinical testing. The outcomes of these safety studies may delay the launch of or enrollment in future clinical trials and could impact our ability to continue to conduct our clinical trials.

              Clinical testing is expensive, is difficult to design and implement, can take many years to complete and is uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, or at all. A failure of one or more clinical trials can occur at any stage of testing, which may result from a multitude of factors, including, but not limited to, flaws in trial design, dose selection issues, participant enrollment criteria and failure to demonstrate favorable safety or efficacy traits.

              Events that may prevent successful or timely completion of clinical development include:

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              Any inability to successfully complete preclinical studies and clinical trials 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 our product candidates, we may need to conduct additional studies or trials to bridge our modified product candidates to earlier versions. 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, which could impair our ability to successfully commercialize our product candidates and may harm our business, financial condition, results of operations, and prospects.

If we experience delays or difficulties in participant enrollment for clinical trials, our research and development efforts and the receipt of necessary regulatory approvals could be significantly delayed or prevented.

              Identifying and qualifying individuals to participate in clinical trials of our product candidates is critical to our success. We may not be able to identify, recruit, and enroll a sufficient number of participants, or those with required or desired characteristics, to complete our clinical trials in a timely manner. Any delay or difficulty in participant enrollment could significantly delay or otherwise hinder our research and development efforts and delay or prevent receipt of necessary regulatory approvals.

              Participant enrollment and trial completion is affected by factors including:

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              Genetic medicine programs are initially targeting orphan diseases with relatively small populations, which limits the pool of potential participants subjects for our genetic medicine clinical trials. Because genetic medicine trials generally require participants who have not previously received any other genetic medicine or potentially other pharmacological therapeutics for the same indication, we will also need to compete with others who are also developing genetic medicines or pharmacologic therapeutics for these same indications for the same group of potential clinical trial participants. This competition could reduce the number and types of potential participants available to us, as some potential participants who might have opted to enroll in our clinical trials may instead opt to enroll in one being conducted by one of our competitors. In addition, individuals may also be unwilling to participate in our clinical trials because of negative publicity from adverse events in the biotechnology or biopharmaceutical industries, particularly to the extent that such negative publicity is related to genetic medicines. Challenges in recruiting and enrolling sufficient numbers of suitable participants in clinical trials could increase costs, affect the timing and outcome of our planned clinical trial or future clinical trials and result in delays to our current development plan for our product candidates. If we have difficulty enrolling a sufficient number of individuals to conduct our clinical trials as planned, we may need to delay, limit, or terminate ongoing or planned clinical trials, any of which would harm our business, financial condition, results of operations, and prospects.

Genetic medicine is an emerging field of drug development that poses many risks. We have only limited prior experience in genetic medicine research and no prior experience in genetic medicine clinical development. Our lack of experience and the limited patient populations for our genetic medicine programs may limit our ability to be successful or may delay our development efforts.

              Genetic medicine is an emerging field of drug development with a limited number of genetic medicines having received regulatory approval to date. Our genetic medicine research and development programs are at an early stage and there remain several areas of drug development risk, which pose particular uncertainty for our programs given the relatively limited development history of, and our limited prior experience with, genetic medicines. Translational science, manufacturing materials and processes, safety concerns, regulatory pathway and clinical trial design and execution all pose particular risk to our drug development activities. Furthermore, the medical community's understanding of the genetic causes of many diseases continues to evolve and further research may change the medical community's views on what therapies and approaches are most effective for addressing certain diseases.

              As an organization, we have not previously conducted any clinical trials. We have begun to establish our own genetic medicine technical capabilities, but we will need to continue to expand those capabilities by either hiring internally or seeking assistance from outside service providers. Genetic medicine is an area of significant investment by biotechnology and pharmaceutical companies and there may be a scarcity of talent available to us in these areas. If we are not able to expand our genetic medicine capabilities, we may not be able to develop in the way we intend or desire any promising product candidates that emerge from our program or our other collaborative genetic medicine sponsored research programs, which would limit our prospects for future growth. 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 trial or future clinical trials, could prevent us from or delay us in commercializing our product candidates.

              As we prepare for the potential initiation of our first genetic medicine clinical trial, we will need to build our internal and external capabilities in designing and executing a genetic medicine

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clinical trial. There are many known and unknown risks involved in translating preclinical development of gene therapies to clinical development, including selecting appropriate endpoints and dosage levels for dosing humans based on preclinical data. If we are unable to initiate and conduct our genetic medicine clinical trials in a manner that satisfies our expectations or regulatory requirements, the value of our genetic medicine programs may be diminished.

Our proprietary AAV genetic medicine product candidates are based on a relatively novel technology, which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval, if at all.

              We have concentrated our therapeutic product research and development efforts on our genetic medicine platform. Our future success is almost entirely dependent on this therapeutic approach. Because our genetic medicine candidates are based on relatively novel technology, development problems we experience in the future related to our genetic medicine platform may be difficult to solve and may cause delays and unanticipated costs. We may also experience delays in developing a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us from initiating or conducting clinical trials or commercializing our products on a timely or profitable basis, if at all.

              In addition, the clinical trial requirements of the FDA, the EMA, and other regulatory agencies 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 the potential products. The regulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known or extensively studied therapeutic approaches or biopharmaceutical or other product candidates.

              The first approvals of gene therapy products by the FDA only occurred in 2017. As a result, it is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates in either the United States or the European Union, or how long it will take to commercialize any product candidate that receives marketing approval.

Our product candidates or the process for administering our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit their commercial potential or result in significant negative consequences following any potential marketing approval.

              In past clinical trials that were conducted by others with non-AAV vectors, several significant side effects were caused by gene therapy product candidates, including reported cases of leukemia and death. Other potential side effects associated with both AAV and non-AAV vectors could include immunologic reactions or insertional oncogenesis, which is the process whereby the insertion of a functional gene near a gene that is important in cell growth or division results in uncontrolled cell division, which could potentially enhance the risk of malignant transformation. If our vectors demonstrate a similar adverse effect, or other adverse events, we may be required to halt or delay further clinical development of our product candidates.

              In addition to side effects caused by the product candidate itself, the administration process also can cause side effects. As part of our genetic medicine platform, we are developing a surgical delivery device to administer our product candidates to the inner ear. Although the procedure we have developed is based on a common technique for treatment to the outer ear, it requires training in order to administer. Moreover, any surgical procedure runs risks related to infection and damage to parts of the body adjacent to the treated area. In addition, until we are able to test the device and procedure on humans, we cannot be certain that our delivery mechanism will be successful. If side effects were to occur in connection with the surgical procedure during our planned clinical trial or if we fail to successfully apply our delivery approach in humans, our clinical trial could be suspended or terminated.

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              If in the future we are unable to demonstrate that such side effects were not caused by our product candidates or the related procedures, the FDA could order us to cease further development of, or deny approval of, our product candidates for any or all targeted indications. Even if we are able to demonstrate that any future serious adverse events are not product-related, and regulatory authorities do not order us to cease further development of our product candidates, such occurrences could cause our reputation to suffer and affect patient recruitment or the ability of enrolled participants to complete the trial. Moreover, if we elect, or are required, to delay, suspend, or terminate any clinical trial of any of our product candidates, the commercial prospects of such product candidates may be harmed and our ability to generate product revenues from any of these product candidates 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, results of operations, and prospects significantly.

              Regulatory approval of and/or demand for our potential products will depend in part on public acceptance of the use of genetic medicine for the prevention or treatment of human diseases. Public attitudes may be influenced by claims that genetic medicines are unsafe, unethical or immoral, and consequently, our products may not gain the acceptance of the public or the medical community. Adverse public attitudes may adversely impact our ability to enroll clinical trials. Moreover, our success will depend upon physicians prescribing, and their patients being willing to receive, treatments that involve the use of product candidates we may develop. In 1999, there was public backlash against the field of gene therapy following the death of a participant in a clinical trial, which utilized a different type of gene therapy product candidate vector, from an extreme type of immune response that can be life-threatening. Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates and could significantly harm our business, financial condition, results of operations, and prospects.

The outcome of preclinical studies and earlier-stage clinical trials may not be predictive of future results or the success of later-stage clinical trials.

              The results of preclinical studies may not be predictive of the results of clinical trials, and the results of any early-stage clinical trials we commence may not be predictive of the results of the later-stage clinical trials or from clinical trials of the same product candidates in other indications. In addition, initial success in clinical trials may not be indicative of results obtained when such trials are completed. For example, even if successful, the results of our planned Phase 1/2 clinical trial of AK-OTOF may not be predictive of the results of further clinical trials of this product candidate or any of our other product candidates. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. Our future clinical trials may not ultimately be successful or support further clinical development of any of our product candidates. There is a high failure rate for product candidates proceeding through clinical trials, and because our genetic medicine product candidates are based on a relatively novel technology the likelihood of success is harder to determine. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving encouraging results in earlier studies. Any such setbacks in our clinical development could materially harm our business, financial condition, results of operations, and prospects.

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Interim top-line and preliminary results from our clinical trials that we announce or publish from time to time may change as more participant data become available and are subject to audit and verification procedures, which could result in material changes in the final data.

              From time to time, we may publish interim top-line or preliminary results from our clinical trials. Interim results from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as participant enrollment continues and more participant data become available. We also make assumptions, estimations, calculations, and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully evaluate all data. Preliminary or top-line results also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. Additionally, preliminary data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. As a result, interim and preliminary data should be viewed with caution until the final data are available. Differences between preliminary or interim data and final data could be material and could significantly harm our business prospects and may cause the trading price of our common stock to fluctuate significantly.

We may not be successful in our efforts to identify or discover additional potential product candidates.

              A key element of our strategy is to apply our genetic medicine platform to address a broad array of targets and new therapeutic areas. The discovery activities that we are conducting may not be successful in identifying product candidates that are useful in restoring, improving, or preserving physiologic hearing. The process by which we identify product candidates may fail to yield product candidates for clinical development for a number of reasons, including those discussed in these risk factors and also:

              In addition, we may choose to focus our efforts and resources on a potential product candidate that ultimately proves to be unsuccessful. As a result, we may fail to capitalize on viable commercial products or profitable market opportunities, be required to forego or delay pursuit of opportunities with other product candidates or other diseases that may later prove to have greater commercial potential, or relinquish valuable rights to such product candidates through collaboration, licensing or

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other royalty arrangements in cases in which it would have been advantageous for us to retain sole development and commercialization rights. If we are unable to identify additional suitable product candidates for clinical development, this would adversely impact our business strategy, financial position, results of operations, prospects, and share price and could potentially cause us to cease operations.

Clinical trial and product liability lawsuits against us could divert our resources, could cause us to incur substantial liabilities and could limit commercialization of our product candidates.

              We face an inherent risk of clinical trial and product liability exposure related to the testing of our product candidates in clinical trials, and we will face an even greater risk if we commercially sell any products that we may develop. While we currently have no products that have been approved for commercial sale, the current and future use of product candidates by us in clinical trials, and the sale of any approved products in the future, may expose us to liability claims. These claims might be made by patients that use the product, healthcare providers, pharmaceutical companies or others selling such products. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

              We will need to increase our insurance coverage as we commence our clinical trials or if we commence commercialization of any product candidates. 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 a successful clinical trial or product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.

Risks Relating to Manufacturing

The manufacture of genetic medicine products is complex and difficult and is subject to a number of scientific and technical risks, some of which are common to the manufacture of drugs and biologics and others of which are unique to the manufacture of gene therapies. We could experience manufacturing problems that result in delays in our development or commercialization programs.

              Genetic medicine drug products are complex and difficult to manufacture. For our preclinical studies of AK-OTOF and our planned Phase 1/2 clinical trial of AK-OTOF, we will rely on the manufacturing facility of Lonza Houston, Inc., or Lonza, for supply of our product candidates. In addition to Lonza, we also rely upon other CROs and CMOs for providing certain materials for the manufacturing process. We plan to establish our own manufacturing facility for long-term commercial market supply.

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              We believe that the high demand for clinical genetic medicine material and a scarcity of potential contract manufacturers may cause long lead times for establishing manufacturing capabilities for genetic medicine drug development activities. Even after a manufacturer is engaged, any problems that arise during manufacturing process development may result in unanticipated delays to our timelines, including delays attributable to securing additional manufacturing slots. There may also be long lead times to manufacture or procure starting materials such as plasmids and cell lines, especially for high-quality starting materials that are cGMP compliant. In particular, plasmids, cell lines and other starting materials for genetic medicine manufacture are usually sole sourced, as there are a limited number of qualified suppliers. The progress of our genetic medicine programs is highly dependent on these suppliers providing us or our contract manufacturer with the necessary starting materials that meet our requirements in a timely manner. A failure to procure or a shortage of necessary starting materials likely would delay our manufacturing and development timelines.

              Problems with the manufacturing process, including 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 and insufficient inventory. If we successfully develop product candidates, we may encounter problems achieving adequate quantities and quality of clinical-grade materials that meet FDA or other applicable standards or specifications with consistent and acceptable production yields and costs.

              A number of factors common to the manufacturing of biologics and drugs could also cause production issues or interruptions for gene therapies, including raw material or starting material variability in terms of quality, cell line viability, productivity or stability issues, shortages of any kind, shipping, distribution, storage and supply chain failures, growth media contamination, equipment malfunctions, operator errors, facility contamination, labor problems, natural disasters, public health epidemics, disruption in utility services, terrorist activities, or acts of god that are beyond our or our contract manufacturer's control. It is often the case that early stage process development is conducted with materials that are not manufactured using cGMP starting materials, techniques or processes and which are not subject to the same level of analysis that would be required for clinical grade material. We may encounter difficulties in translating the manufacturing processes used to produce research grade materials to cGMP compliant processes, and any changes in the manufacturing process may affect the safety and efficacy profile of our product candidates.

              In addition, the FDA and comparable regulatory authorities in other jurisdictions 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 or comparable regulatory authorities in other jurisdictions may prohibit the distribution of 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 and product recalls.

              Given the nature of biologics manufacturing, there is a risk of contamination during manufacturing. Any contamination could materially harm our ability to produce product candidates on schedule and could harm our results of operations and cause reputational damage. Some of the raw materials that we anticipate will be 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 any product candidates we may develop could adversely impact or disrupt the commercial manufacturing or the production of clinical material, which could materially harm our development timelines and our business, financial condition, results of operations, and prospects.

              An important part of manufacturing drug products is performing analytical testing. Analytical testing of gene therapies involves tests that are more numerous, more complex in scope and take a

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longer time to develop and to conduct as compared to traditional drugs. We and our contract manufacturer need to expend considerable time and resources to develop assays and other analytical tests for our genetic medicine product candidates, including assays to assess the titer and potency of our genetic medicine product candidates. Some assays need to be outsourced to specialized testing laboratories. Even when assays are developed, they need to be further tested, or qualified, or validated depending on the nature of the assay and the stage of product candidate development, which may take substantial time and resources. Because of the lagging nature of analytical testing, we may proceed with additional manufacturing and other development activities without having first fully characterized our manufactured materials. If the results of the testing fail to meet our expectations, we may need to delay or repeat certain manufacturing and development activities.

Changes in methods of product candidate manufacturing or formulation may result in additional costs or delay.

              As product candidates proceed through preclinical studies to late-stage clinical trials towards potential approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered along the way in an effort to optimize processes and results. Such changes carry the risk that they will not achieve these intended objectives. Any of these changes could cause our product candidates to perform differently and affect the results of our planned clinical trial or future clinical trials conducted with the materials manufactured using altered processes. Such changes may also require additional testing, FDA notification or FDA approval. This could delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidates and jeopardize our ability to commence sales and generate revenue.

We depend on third-party suppliers for materials used in the manufacture of our product candidates, and the loss of these third-party suppliers or their inability to supply us with adequate materials could harm our business.

              We rely on third-party suppliers for certain materials and components required for the production of our product candidates. Our dependence on these third-party suppliers and the challenges we may face in obtaining adequate supplies of materials involve several risks, including limited control over pricing, availability, and quality and delivery schedules. There is substantial demand and limited supply for certain of the raw materials used to manufacture genetic medicine products. As a small company, our negotiation leverage is limited, and we are likely to get lower priority than other companies that are larger than we are. We cannot be certain that our suppliers will continue to provide us with the quantities of these raw materials that we require or satisfy our anticipated specifications and quality requirements. Any supply interruption in limited or sole sourced raw materials could materially harm our ability to manufacture our product candidates until a new source of supply, if any, could be identified and qualified. We may be unable to find a sufficient alternative supply channel in a reasonable time or on commercially reasonable terms. Any performance failure on the part of our suppliers could delay the development and potential commercialization of our product candidates, including limiting supplies necessary for clinical trials and regulatory approvals, which would have a material adverse effect on our business.

Risks Related to Our Dependence on Third Parties

We rely, and expect to continue to rely, on third parties to conduct some or all aspects of our product manufacturing, protocol development, research and preclinical and clinical testing, and these third parties may not successfully perform their obligations to us.

              We do not expect to independently conduct all aspects of our product manufacturing, protocol development, research and preclinical and clinical testing. We currently rely, and expect to continue to

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rely, on third parties with respect to many of these items. While we are planning to build our own cGMP manufacturing facility, we cannot be sure when this facility will be available for cGMP manufacturing, if at all, and, even if it is available for cGMP manufacturing, that we will be able to manufacture at commercial scale. In addition, we currently rely, and expect to continue to rely, on a third-party CMO for the manufacture of our delivery device.

              Any of these third parties may terminate their engagements with us at any time. If we need to enter into alternative arrangements, it could delay our product development activities. Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibility to ensure compliance with all required regulations and study protocols. For example, for product candidates that we develop and commercialize on our own, we will remain responsible for ensuring that each of our IND-enabling studies and clinical trials are conducted in accordance with the study plan and protocols. We compete with many other companies for the resources of these third parties. These third parties may have contractual relationships with other entities, some of which may be our competitors, which may draw time and resources from our product candidates. The third parties with whom we contract might not be diligent, careful or timely in conducting our preclinical studies or clinical trials, resulting in the preclinical studies or clinical trials being delayed or unsuccessful.

              If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our studies in accordance with regulatory requirements or our stated study plans and trial protocols, we will not be able to complete, or may be delayed in completing, the preclinical studies and clinical trials required to support future IND submissions and approval of our product candidates.

              Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured the product candidates ourselves, including:

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

We and our contract manufacturer are subject to significant regulation with respect to manufacturing our products. The manufacturing facilities on which we rely may not continue to meet regulatory requirements and have limited capacity.

              All entities involved in the preparation of therapeutics for clinical trials or commercial sale, including our existing contract manufacturer for our product candidates, are 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. 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

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approved for sale. Poor control of production processes can lead to the introduction of adventitious agents or other contaminants or to inadvertent changes in the properties or stability of our product candidates that may not be detectable in final product testing. We or our contract manufacturer must supply all necessary documentation in support of a BLA on a timely basis and must adhere to the FDA's good laboratory practices, or GLP, and cGMP regulations enforced by the FDA through its facilities inspection program. Our facilities and quality systems and the facilities and quality systems of some or all of our third-party contractors must pass a pre-approval inspection for compliance with the applicable regulations as a condition of regulatory approval of our product candidates or any of our other potential products. In addition, the regulatory authorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of our product candidates or our other potential products or the associated quality systems for compliance with the regulations applicable to the activities being conducted. If these facilities do not pass a pre-approval plant inspection, FDA approval of the products will not be granted.

              The regulatory authorities also may, at any time following approval of a product for sale, audit our manufacturing facilities or those of our third-party contractors. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly and/or time-consuming for us or a third party 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 facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.

              If we or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new drug product or biologic product, or revocation of a pre-existing approval. As a result, our business, financial condition, results of operations, and prospects may be materially harmed.

              Additionally, if supply from one approved manufacturer is interrupted, there could be a significant disruption in supply. An alternative manufacturer would need to be qualified through a BLA supplement which could result in further delay. The regulatory agencies may also require additional studies or trials if a new manufacturer is relied upon for commercial production. Switching manufacturers may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines.

              These factors could cause the delay of clinical trials, regulatory submissions, required approvals or commercialization of our product candidates, cause us to incur higher costs and prevent us from commercializing our products successfully. Furthermore, if our suppliers fail to meet contractual requirements, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our clinical trials may be delayed, or we could lose potential revenue.

We expect to rely on third parties to conduct, supervise and monitor our clinical trials, and if these third parties perform in an unsatisfactory manner, it may harm our business.

              We expect to rely on CROs and clinical trial sites to ensure our clinical trials are conducted properly and on time and we expect to have limited influence over their actual performance. We will control only certain aspects of our CROs' activities. Nevertheless, we will be responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities.

              We and our CROs will be required to comply with GCPs for conducting, recording, and reporting the results of clinical trials to assure that the data and reported results are credible and accurate and that the rights, integrity, and confidentiality of clinical trial participants are protected. The

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FDA enforces these GCPs through periodic inspections of sponsors, principal investigators, and clinical sites. If we or our CROs fail to comply with applicable GCPs, the clinical data generated in our future clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving any marketing applications. Upon inspection, the FDA may determine that our clinical trials did not comply with GCPs. In addition, our future clinical trials will require a sufficient number of participants to evaluate the safety and effectiveness of our product candidates. Accordingly, if our CROs fail to comply with these regulations or fail to recruit a sufficient number of participants, we may be required to repeat such clinical trials, which would delay the regulatory approval process.

              Our CROs are not our employees, and we are therefore unable to directly monitor whether or not they devote sufficient time and resources to our clinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenues could be delayed.

              The federal Health Insurance Portability and Accountability Act of 1996, as amended by Health Information Technology for Economic and Clinical Health Act of 2009, and their respective implementing regulations, impose obligations on "covered entities," including certain healthcare providers, health plans, and healthcare clearinghouses, as well as their respective "business associates" that create, receive, maintain, or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security, and transmission of individually identifiable health information. Such obligations may require us to pass certain obligations on to our CROs or other third parties with whom we do business, including transferal of personal information or individually identifiable health information.

Risks Related to Commercialization

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

              The development and commercialization of new drug products is highly competitive. We face competition with respect to our current product candidates from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of many of the disorders for which we are developing our product candidates. Some of these competitive products and therapies are based on scientific approaches that are the same as or similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

              While many companies focus on gene therapies targeting blood, eye, muscle, and neurologic disorders, we are aware of certain companies with active development programs in the hearing space. Decibel Therapeutics, Inc. is focused on hearing and balance disorders. Decibel's lead therapeutic candidate is being investigated for the prevention of ototoxicity associated with cisplatin chemotherapy. Decibel has announced a potential gene therapy for OTOF congenital deafness. In 2017, Decibel announced that it would include one of its product candidates in its strategic collaboration with Regeneron Pharmaceuticals, Inc. whereby Decibel retains worldwide development and commercial rights.

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              Frequency Therapeutics, Inc. is developing small-molecule therapeutics to selectively activate progenitor cells. Frequency's lead program is focused on regenerating hair cells through activation of progenitor cells for sensorineural hearing loss and is currently in Phase 2 trials. In 2019, Frequency announced a partnership with Astellas Pharma Inc. under which Astellas agreed to oversee development and commercialization of its lead program worldwide, except the United States, where Frequency will assume those responsibilities.

              Otonomy, Inc. and Applied Genetic Technologies Corporation have entered into a strategic collaboration to co-develop and co-commercialize an AAV-based gene therapy to restore hearing in individuals with sensorineural hearing loss caused by a mutation in the GJB2 gene. This program is in preclinical development.

              Sensorion SA is focused on developing potential therapies for inner ear disorders. Sensorion has announced a collaboration with Institut Pasteur in gene therapy programs targeting hearing loss. The company has two preclinical gene therapy programs targeting the Usher Syndrome Type I and OTOF-deficiency.

              See "Business—Competition" for additional information regarding competing products and product candidates.

              Our commercial opportunity could be reduced or eliminated if our 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 our product candidates, or that would render any product candidates that we may develop obsolete or non-competitive. Our competitors also may obtain FDA or other regulatory approval for their product candidates more rapidly than we may obtain approval for ours, or may obtain regulatory exclusivity, any of which could result in our competitors establishing a strong market position before we are able to enter the market.

              Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we do. Furthermore, mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors.

Even if any product candidate receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, patient advocacy groups, third-party payors and others in the medical community necessary for commercial success.

              If any product candidate receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, patient advocacy groups, third-party payors, and others in the medical community. Sales of medical products depend in part on the willingness of physicians to prescribe the treatment, which is likely to be based on a determination by these physicians that the products are safe, therapeutically effective and cost-effective. In addition, the inclusion or exclusion of products from treatment guidelines established by various physician groups and the viewpoints of influential physicians can affect the willingness of other physicians to prescribe the treatment. We cannot predict whether physicians, physicians' organizations, hospitals, other healthcare providers, government agencies, or private insurers will determine that our product is safe, therapeutically effective and cost-effective as compared with competing treatments. Efforts to educate those in the hearing health community and third-party payors on the benefits of our product candidates may require significant resources and may not be successful. If our product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become

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profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

If we are unable to establish sales, marketing and distribution capabilities or enter into sales, marketing and distribution agreements with third parties, we may not be successful in commercializing our product candidates if and when they are approved.

              We currently have no sales, marketing or commercial product distribution capabilities and have no experience in commercializing products. To achieve commercial success for any product for which we have obtained marketing approval, we will need to establish a sales, marketing and distribution organization, either ourselves or through collaborations or other arrangements with third parties.

              In the future, we expect to build a sales and marketing infrastructure to market some of our product candidates in the United States and the European Union. There are costs and risks involved with establishing our own sales, marketing and distribution capabilities. For example, recruiting and training a sales force is expensive and time-consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. These efforts may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel. We must also compete with other biotechnology and biopharmaceutical companies to recruit, hire, train and retain marketing and sales personnel.

              Factors that may inhibit our efforts to commercialize our products on our own include:

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              If we are unable to establish our own sales, marketing, and distribution capabilities and we enter into arrangements with third parties to perform these services, our product revenues and our profitability, if any, are likely to be lower than if we were to market, sell and distribute any products that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute our product candidates or may be unable to do so on terms that are acceptable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. There can be no assurance that we will be able to develop in-house sales, marketing and distribution capacities or establish or maintain relationships with third parties to perform these services. As a result, we may not successfully commercialize any product in any jurisdiction.

Risks Related to Our Intellectual Property

If we are unable to obtain and maintain adequate intellectual property protection and regulatory exclusivity for our products and technology, or if the scope of the intellectual property protection and regulatory exclusivity obtained is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to ultimately successfully commercialize our products and technology may be adversely affected.

              Our success depends, in large part, on our ability to obtain and maintain intellectual property protection in the United States and other countries with respect to our proprietary product candidates and manufacturing technology. Our licensors have sought, and we intend to seek, to protect our proprietary position by filing patent and trademark applications in the United States and abroad related to many of our novel technologies and product candidates that are important to our business.

              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, in some cases, the work of certain academic researchers in the genetic medicine field has entered the public domain, which may compromise our ability to obtain patent protection for certain inventions related to or building upon such prior work. Consequently, we may not be able to obtain any patents to prevent others from using such technology for, and developing and marketing competing products to treat, certain 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.

              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 pending and future patent applications may not result in patents being issued which protect our technology or product candidates or which effectively prevent others from commercializing competitive technologies and product candidates. Changes in either the patent

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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.

              We may not be aware of all third-party intellectual property rights potentially relating to our product candidates. Publications of discoveries in the scientific literature often lag the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing or, in some cases, not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in any owned or any licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions.

              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.

              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 candidates.

              In addition, 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. Moreover, some of our owned and in-licensed patents and patent applications are, or may in the future be, co-owned with third parties. If we are unable to obtain an exclusive license to any such third-party co-owners' interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. In addition, we or our licensors may need the cooperation of any such co-owners of our owned and in-licensed patents in order to enforce such patents against third parties, and such cooperation may not be provided to us or our licensors. Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition, results of operations, and prospects.

              We also rely on regulatory exclusivity for protection of our products. Implementation and enforcement of regulatory exclusivity, which may consist of regulatory data protection and market protection, varies widely from country to country. Failure to qualify for regulatory exclusivity, or failure to obtain or maintain the extent or duration of such protections that we expect in each of the markets for our products due to challenges, changes or interpretations in the law or otherwise, could ultimately adversely affect our ability to successfully commercialize any products and technology.

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

              Filing, prosecuting and defending patents on product candidates 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. 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. Consequently, we may not be able to obtain granted patents covering our product candidates in all countries outside the United States and, as a result, may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

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Competitors may use our technologies in jurisdictions where we have not 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 products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

              Additionally, many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. For example, an April 2019 report from the Office of the United States Trade Representative identified a number of countries, including China, Russia, Argentina, Chile and India, where challenges to the procurement and enforcement of patent rights have been reported. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

              Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely affected.

If we do not obtain patent term extension for our product candidates, our business may be harmed.

              Depending upon the timing, duration, and specifics of any FDA marketing approval of our product candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, or Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent extension term of up to five years as compensation for patent term lost during the FDA regulatory review process. In the United States, a patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended. The European Union also provides for patent term extension through Supplementary Protection Certificates, or SPCs. The rules and requirements for obtaining a SPC are similar to those in the United States. An SPC may extend the term of a patent for up to five years after its originally scheduled expiration date but cannot extend the remaining term of a patent beyond a total of fifteen years from the marketing approval. Although SPCs are available throughout the European Union, sponsors must apply on a country-by-country basis. Similar patent term extension rights exist in certain other foreign jurisdictions outside the European Union. However, we may not be granted an extension because of lack of availability of extension or, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we

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request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our revenue could be reduced.

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 United States Patent and Trademark Office, or 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 and other professionals or our licensing partners to pay these fees due to the USPTO and non-U.S. government patent agencies. The USPTO and various non-U.S. government patent agencies also require compliance with several procedural, documentary, and other similar provisions during the patent application process. We rely on our outside counsel 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, loss of priority, 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 harm our business.

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

              We currently have rights to certain intellectual property, through licenses from third parties, to develop our product candidates. Because our programs may require the use of proprietary rights held by third parties, the growth of our business likely will depend, in part, on our ability to acquire, in-license or use these proprietary rights. In addition, with respect to any patents or patent applications we co-own with third parties, we may require licenses to such co-owners' interest in such patents or patent applications. However, we may be unable to secure such licenses or otherwise acquire or in-license any compositions, methods of use, processes or other intellectual property rights from third parties that we identify as necessary for our product candidates. 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 sometimes collaborate with non-profit and academic institutions to accelerate our preclinical research or development under written agreements with these institutions. Typically, these institutions 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.

              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 be required to expend significant

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time and resources to redesign our product candidates or the methods for manufacturing them 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 the affected product candidates, which could harm our business significantly.

If we fail to comply with our obligations under our existing license agreements, or under any future intellectual property licenses, or otherwise experience disruptions to our business relationships with our current or any future licensors, we could lose intellectual property rights that are important to our business.

              We are party to license agreements with the Massachusetts Eye and Ear Infirmary and The Schepens Eye Research Institute, Inc., which we refer to collectively as MEE, and Lonza, pursuant to which we have been granted an exclusive, non-transferable, sublicensable, worldwide, royalty-bearing license to certain patent rights related to AAV ancestral technology, including a proprietary ancestral AAV, known as AAVAnc80, to research, develop, make, have made, manufacture, use, sell, offer to sell, import, export, market, promote, distribute, register and otherwise commercially exploit the licensed product in the treatment, diagnosis, prevention and palliation of balance disorders, diseases pertaining to the inner ear, and/or any and all hearing diseases or disorders. For further information regarding our exclusive license agreements, see "Business—Intellectual Property—Licensed Intellectual Property." We may enter into additional license agreements in the future. Our existing license agreements impose, and we expect that future licenses will impose, specified diligence, milestone payment, royalty, and other obligations on us. Furthermore, the licensors have the right to terminate the agreement if we materially breach the agreement and fail to cure such breach within a specified period or in the event we undergo certain bankruptcy events. In spite of our best efforts, our current or any future licensors might conclude that we have materially breached our license agreements and might therefore terminate the license agreements, thereby removing our ability to develop and commercialize product candidates and technology covered by these license agreements. If these in-licenses are terminated, or if the underlying intellectual property fails to provide the intended exclusivity, competitors could have the freedom to seek regulatory approval of, and to market, products and technologies identical to ours. This could have a material adverse effect on our competitive position, business, financial condition, results of operations, and prospects.

              Disputes may arise regarding intellectual property subject to a licensing agreement, including:

              In addition, license agreements are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that

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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. Moreover, some of our in-licensed patents and patent applications are, and may in the future be, subject to third-party interests such as co-ownership or licenses. For example, a patent application directed to several of our product candidates is co-owned by MEE and The Children's Medical Center Corporation, or Children's. At present, we have an exclusive license to MEE's ownership interest, however, we do not have a license to Children's ownership interest. If we are unable to obtain an exclusive license to such third-party co-owners' interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. In addition, we may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition, results of operations, and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected technology and product candidates, which could have a material adverse effect on our business, financial condition, results of operations, and prospects. Additionally, we do not have complete control in the preparation, filing, prosecution, maintenance, enforcement, and defense of patents and patent applications covering the technology that we license from third parties. For example, pursuant to our intellectual property licenses with MEE and Lonza, our licensors retain control of preparation, filing, prosecution, and maintenance, and, in certain circumstances, enforcement and defense of their patents and patent applications. It is possible that our licensors' enforcement of patents against infringers or defense of such patents against challenges of validity or claims of enforceability may be less vigorous than if we had conducted them ourselves or may not be conducted in accordance with our best interests. We cannot be certain that these patents and patent applications will be prepared, filed, prosecuted, maintained, enforced, and defended in a manner consistent with the best interests of our business. If our licensors fail to prosecute, maintain, enforce, and defend such patents, or lose rights to those patents or patent applications, the rights we have licensed may be reduced or eliminated, our right to develop and commercialize any of our product candidates we may develop that are the subject of such licensed rights could be adversely affected and we may not be able to prevent competitors from making, using, and selling competing products. Our licensors may have relied on third-party consultants or collaborators or on funds from third parties such that our licensors are not the sole and exclusive owners of the patents we in-licensed. If other third parties have ownership rights to our in-licensed patents, they may be able to license such patents to our competitors, and our competitors could market competing products and technology. Any of these events could have a material adverse effect on our competitive position, business, financial condition, results of operations, and prospects.

              Furthermore, inventions contained within some of our in-licensed patents and patent applications may have been made using U.S. government funding. We rely on our licensors to ensure compliance with applicable obligations arising from such funding, such as timely reporting, an obligation associated with our in-licensed patents and patent applications. The failure of our licensors to meet their obligations may lead to a loss of rights or the unenforceability of relevant patents. For example, the U.S. government could have certain rights in such in-licensed patents, including a non-exclusive license authorizing the U.S. government to use the invention or to have others use the invention on its behalf. If the U.S. government decides to exercise these rights, it is not required to engage us as its contractor in connection with doing so. The U.S. government's rights may also permit it to disclose the funded inventions and technology to third parties and to exercise march-in rights to use or allow third parties to use the technology we have licensed that was developed using U.S. government funding. The U.S. government may also exercise its march-in rights if it determines that

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action is necessary because we or our licensors failed to achieve practical application of the U.S. 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 in-licensed U.S. government-funded inventions may be subject to certain requirements to manufacture product candidates embodying such inventions in the United States. Any of the foregoing could harm our business, financial condition, results of operations, and prospects significantly.

Issued patents covering our product candidates could be found invalid or unenforceable if challenged. We may not be able to protect our trade secrets in court.

              If we or one of our licensors initiate legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, lack of written description, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld information material to patentability from the USPTO, or made a misleading statement, during prosecution. Third parties also may raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, interference proceedings, post grant review, inter partes review and equivalent proceedings such as opposition, invalidation, and revocation proceedings in foreign jurisdictions. Such proceedings could result in the revocation or cancellation of or amendment to our patents in such a way that they no longer cover our product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which the patent examiner and we or our licensing partners were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we could lose at least part, and perhaps all, of the patent protection on one or more of our product candidates. Such a loss of patent protection could harm our business.

              In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information, or technology that is not covered by patents. However, trade secrets can be difficult to protect and some courts inside and outside the United States are less willing or unwilling to protect trade secrets. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors. We cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could harm our business.

              Our commercial success depends upon our ability and the ability of our collaborators to research, develop, manufacture, market, and sell our product candidates and use our proprietary technologies without infringing the proprietary rights and intellectual property of third parties. The

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biotechnology and pharmaceutical industries are characterized by extensive and complex litigation regarding patents and other intellectual property rights. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of their merit. There is a risk that third parties may choose to engage in litigation with us to enforce or to otherwise assert their patent rights against us. Even if we believe such claims are without merit, a court of competent jurisdiction could hold that these third-party patents are valid, enforceable and infringed, which could adversely affect our ability to commercialize our product candidates or any other of our product candidates or technologies covered by the asserted third-party patents. In order to successfully challenge the validity of any such U.S. patent in federal court, we would need to overcome a presumption of validity. As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S. patent. If we are found to infringe a third party's valid and enforceable intellectual property rights, we could be required to obtain a license from such third party to continue developing, manufacturing and marketing our product candidates and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. We could be forced, including by court order, to cease developing, manufacturing and commercializing the infringing technology or product candidates. In addition, we could be found liable for monetary damages, including treble damages and attorneys' fees, if we are found to have willfully infringed a patent or other intellectual property right. A finding of infringement could prevent us from manufacturing and commercializing our product candidates or force us to cease some of our business operations, which could harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business, financial condition, results of operations, and prospects.

Intellectual property litigation or other proceedings could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

              Competitors may challenge the validity and enforceability of our patents, infringe our patents or the patents of our licensing partners, or we may be required to defend against claims of infringement. To defend the validity of our patents, assert infringement or unauthorized use claims, or to defend against claims of infringement can be expensive and time-consuming. Even if resolved in our favor, litigation or other proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could adversely affect our ability to compete in the marketplace.

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We may be subject to claims asserting that our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property.

              Many of our employees, consultants, or advisors are currently, or were previously, employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants, and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these individuals or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual's current or former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

              In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property.

Changes in patent law in the United States or worldwide could diminish the value of patents in general, thereby impairing our ability to protect our products.

              Changes in either the patent laws or interpretation of patent laws in the United States and worldwide, including patent reform legislation such as the Leahy-Smith America Invents Act, or the Leahy-Smith Act, could increase the uncertainties and costs surrounding the prosecution of our owned and in-licensed patent applications and the maintenance, enforcement or defense of our owned and in-licensed issued patents. The Leahy-Smith Act includes a number of significant changes to United States patent law. These changes include provisions that affect the way patent applications are prosecuted, redefine prior art, provide more efficient and cost-effective avenues for competitors to challenge the validity of patents, and enable third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent at USPTO-administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. Assuming that other requirements for patentability are met, prior to March 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to the patent. After March 2013, under the Leahy-Smith Act, the United States transitioned to a first-to-file system in which, assuming that the other statutory requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. As such, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

              In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents once obtained. Depending on future actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change

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in unpredictable ways that could have a material adverse effect on our patent rights and our ability to protect, defend and enforce our patent rights in the future.

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

              We or our licensors may be subject to claims that former employees, collaborators, or other third parties have an interest in our owned or in-licensed patents, trade secrets, or other intellectual property as an inventor or co-inventor. For example, we or our licensors may have inventorship disputes arise from conflicting obligations of employees, consultants or others who are involved in developing any product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or our or our licensors' ownership of our owned or in-licensed patents, trade secrets, or other intellectual property. If we or our licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to any product candidates. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

              We have registered trademarks with the USPTO for the mark "Akouos" and the Akouos logo. Our trademarks or trade names may be challenged, infringed, circumvented, or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively, and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely impact our financial condition or results of operations.

Intellectual property rights do not necessarily address all potential threats.

              The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:

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              Should any of these events occur, they could significantly harm our business, financial condition, results of operations, and prospects.

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.

              Because we currently rely on certain third parties to manufacture all or part of our product candidates and to perform quality testing, and because we collaborate with various organizations and academic institutions for the advancement of our product engine and pipeline, 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, sponsored research 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 harm 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.

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Risks Related to Regulatory Approval and Other Legal Compliance Matters

Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-consuming, and uncertain and may prevent us from obtaining approvals for the commercialization of any product candidates we develop. If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize, or will be delayed in commercializing, product candidates we develop, and our ability to generate revenue will be materially impaired.

              Any product candidates we develop and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale, and distribution, are subject to comprehensive regulation by the FDA and other regulatory authorities in the United States, and by comparable authorities in other countries. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate in a given jurisdiction. We have not received approval to market any product candidates from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party CROs to assist us in this process. Securing regulatory approval requires the submission of extensive preclinical and clinical data and supporting information to the various regulatory authorities for each therapeutic indication to establish the biologic product candidate's safety, purity, and potency. Securing regulatory approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority. Any product candidates we develop may not be effective, may be only moderately effective, or may prove to have undesirable or unintended side effects, toxicities, or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.

              The process of obtaining marketing approvals, both in the United States and outside the United States, is expensive, may take many years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity, and novelty of the product candidates involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. The FDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical, clinical, or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit, or prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved medicine not commercially viable.

              If we experience delays in obtaining approval or if we fail to obtain approval of any product candidates we develop, the commercial prospects for those product candidates may be harmed, and our ability to generate revenues will be materially impaired.

Failure to obtain marketing approval in foreign jurisdictions would prevent any product candidates we develop from being marketed in such jurisdictions, which, in turn, would materially impair our ability to generate revenue.

              In order to market and sell any product candidates we develop in the European Union and many other foreign jurisdictions, we or our collaborators must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the

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United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We or these third parties may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our medicines in any jurisdiction, which would materially impair our ability to generate revenue.

              Additionally, on June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union, commonly referred to as Brexit. Following protracted negotiations, the United Kingdom left the European Union on January 31, 2020. Under the withdrawal agreement, there is a transitional period until December 31, 2020 (extendable up to two years). Discussions between the United Kingdom and the European Union have so far mainly focused on finalizing withdrawal issues and transition agreements but have been extremely difficult to date. To date, only an outline of a trade agreement has been reached. Much remains open, but the Prime Minister has indicated that the United Kingdom will not seek to extend the transitional period beyond the end of 2020. If no trade agreement has been reached before the end of the transitional period, there may be significant market and economic disruption. The Prime Minister has also indicated that the United Kingdom will not accept high regulatory alignment with the European Union.

              Since the regulatory framework for pharmaceutical products in the United Kingdom covering quality, safety, and efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales, and distribution of pharmaceutical products is derived from European Union directives and regulations, Brexit could materially impact the future regulatory regime that applies to products and the approval of product candidates in the United Kingdom. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, may force us to restrict or delay efforts to seek regulatory approval in the United Kingdom for our product candidates, which could significantly and materially harm our business.

Regulatory requirements governing genetic medicine products are periodically updated and may continue to change in the future.

              Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future. For example, the FDA has established the Office of Tissues and Advanced Therapies (formerly the Office of Cellular, Tissue and Gene Therapies) within its Center for Biologics Evaluation and Research, or CBER, to consolidate the review of gene therapy and related products, and the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its review. Additionally, gene therapy clinical trials conducted at institutions that receive funding for recombinant DNA research from the U.S. National Institutes of Health, or the NIH, also are potentially subject to oversight by a committee within the NIH's Office of Science Policy called the Novel and Exceptional Technology and Research Advisory Committee; however, as of 2019, the charter of this review group has evolved to focus public review on clinical trials that cannot be evaluated by standard oversight bodies and pose unusual risks.

              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 these product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, 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 our product candidates. Delay or failure to obtain,

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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 to maintain our business.

              The FDA decides whether individual genetic medicine protocols may proceed and it can put an IND on a clinical hold. If we were to engage an NIH-funded institution to conduct a clinical trial, that institution's IRB would need to review the proposed clinical trial to assess the safety of the trial. In addition, adverse developments in clinical trials of genetic medicine products conducted by others may cause the FDA or other oversight bodies to change the requirements for approval of our product candidates. Similarly, the EMA may issue new guidelines concerning the development and marketing authorization for genetic medicine products and require that we comply with these new guidelines.

              In addition, ethical, social, and legal concerns about genetic medicine, genetic testing and genetic research could result in additional regulations or prohibiting the processes we may use. Federal and state agencies, congressional committees and foreign governments have expressed their intentions to further regulate biotechnology. More restrictive regulations or claims that our product candidates 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.

              As we advance our product candidates through clinical development, we will be required to consult with these regulatory and advisory groups, and comply with applicable guidelines. These regulatory review committees and advisory groups and any 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 our product candidates or lead to significant post-approval limitations or restrictions. 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.

We may seek fast track, breakthrough therapy, and/or regenerative medicine advanced therapy designations or priority review for one or more of our product candidates, but we might not receive such designation or priority review, and even if we do, such designation or priority review may not lead to a faster development or regulatory review or approval process, and does not assure FDA approval of our product candidates.

              The FDA has several designations that have the potential to accelerate the regulatory review and approval process, including the fast track, breakthrough therapy, and regenerative medicine advanced therapy designations. Each of these designations has specific requirements and, if granted, has the potential for a non-conventional FDA review process. In addition, if the FDA determines that a product candidate offers major advances in treatment or provides a treatment where no adequate therapy exists, the FDA may designate the product candidate for priority review. A priority review designation means that the goal for the FDA to review an application is six months, rather than the standard review period of ten months. Any such designation or priority review status does not ensure that the product candidate will receive marketing approval or that approval will be granted within any particular timeframe. As a result, while we may seek and receive one or more of these designation for our product candidates, we may not experience a faster development process, review, or approval compared to conventional FDA procedures. The FDA has broad discretion with respect to whether or not to grant such designations or priority review status to a product candidate, so even if we believe a particular product candidate is eligible for such designation or status, the FDA may decide not to grant it. In addition, the FDA may withdraw a designation if it believes that the designation is no longer supported by data from our clinical development program. Moreover, fast track, breakthrough therapy,

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or regenerative medicine advanced therapy designations alone do not guarantee qualification for the FDA's priority review procedures.

We may seek a rare pediatric disease designation for one or more of our product candidates. However, a BLA for one or more of our product candidates may not meet the eligibility criteria for a priority review voucher upon approval.

              With enactment of the Food and Drug Administration Safety and Innovation Act in 2012, Congress authorized the FDA to award priority review vouchers to sponsors of certain rare pediatric disease product applications that meet the criteria specified in the law. This provision is designed to encourage development of new drug and biological products for prevention and treatment of certain rare pediatric diseases. Specifically, under this program, a sponsor who receives an approval for a drug or biologic for a "rare pediatric disease" may qualify for a voucher that can be redeemed to receive a priority review of a subsequent marketing application for a different product. The sponsor of a rare pediatric disease drug product receiving a priority review voucher may transfer (including by sale) the voucher to another sponsor. The voucher may be further transferred any number of times before the voucher is used, as long as the sponsor making the transfer has not yet submitted the application.

              For the purposes of this program, a "rare pediatric disease" is a (i) serious or life-threatening disease in which the serious or life-threatening manifestations primarily affect individuals aged from birth to 18 years, including age groups often called neonates, infants, children, and adolescents; and (ii) rare disease or conditions within the meaning of the Orphan Drug Act. The FDA may determine that a BLA for one or more of our product candidates does not meet the eligibility criteria for a priority review voucher upon approval. Moreover, even if one or more of our product candidates does satisfy those criteria, the product will need to be designated as a drug for a rare pediatric disease before September 30, 2020, and licensed before September 30, 2022, in order to be granted a rare disease priority review voucher.

We may not be able to obtain orphan drug exclusivity for one or more of our product candidates, and even if we do, that exclusivity may not prevent the FDA or the EMA from approving other competing products.

              Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug or biologic intended to treat a rare disease or condition. A similar regulatory scheme governs approval of orphan products by the EMA in the European Union. Generally, if a product candidate with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or the EMA from approving another marketing application for the same product for the same therapeutic indication for that time period. The applicable period is seven years in the United States and ten years in the European Union. The exclusivity period in the European Union can be reduced to six years if a product no longer meets the criteria for orphan drug designation, in particular if the product is sufficiently profitable so that market exclusivity is no longer justified.

              In order for the FDA to grant orphan drug exclusivity to one of our products, the agency must find that the product is indicated for the treatment of a condition or disease with a patient population of fewer than 200,000 individuals annually in the United States. The FDA may conclude that the condition or disease for which we seek orphan drug exclusivity does not meet this standard. Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different products can be approved for the same condition. In particular, the concept of what constitutes the "same drug" for purposes of orphan drug exclusivity remains in flux in the context of gene therapies, and the FDA has issued recent draft guidance suggesting that it would not consider two genetic medicine products to be different drugs solely based on minor differences in the transgenes or vectors within a given vector class. In addition, even after an orphan drug is approved, the FDA can subsequently approve the same product for the same condition if the FDA

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concludes that the later product is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. Orphan drug exclusivity may also be lost if the FDA or EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of the patients with the rare disease or condition.

              In 2017, the Congress passed the FDA Reauthorization Act of 2017, or FDARA. FDARA, among other things, codified the FDA's pre-existing regulatory interpretation, to require that a drug sponsor demonstrate the clinical superiority of an orphan drug that is otherwise the same as a previously approved drug for the same rare disease in order to receive orphan drug exclusivity. The new legislation reverses prior precedent holding that the Orphan Drug Act unambiguously requires that the FDA recognize the orphan exclusivity period regardless of a showing of clinical superiority. The FDA may further reevaluate the Orphan Drug Act and its regulations and policies. We do not know if, when, or how the FDA may change the orphan drug regulations and policies in the future, and it is uncertain how any changes might affect our business. Depending on what changes the FDA may make to its orphan drug regulations and policies, our business could be adversely impacted.

AK-OTOF and our other product candidates will be a biologic-device combination involving a proprietary delivery approach, which may result in additional regulatory and other risks.

              We are developing AK-OTOF and our other product candidates as a biologic-device combination for administration directly to the cochlea, or the organ in the inner ear responsible for hearing, using our delivery approach. There are currently no approved fluids, drugs, or biologics that are delivered directly into the cochlea and, as such, no delivery device is available to facilitate this route of delivery. We may experience delays in obtaining regulatory approval of AK-OTOF and our other product candidates given the increased complexity of the review process when approval of a biologic and a delivery device is sought under a single marketing application. The delivery will be subject to FDA device requirements regarding design, performance and validation as well as human factors testing, among other things. AK-OTOF may be regulated as a biologic-device combination product, which requires coordination within the FDA for review of the product candidate's device and biologic components. The determination whether a combination product requires a single marketing application or two separate marketing applications for each component is made by the FDA on a case-by-case basis. Although a single marketing application may be sufficient for the approval of a combination product, the FDA may determine that separate marketing applications are necessary. This determination could significantly increase the resources and time required to bring our combination product to market. Although the FDA has systems in place for the review and approval of combination products such as ours, we may experience delays in the development and commercialization of our product candidate due to regulatory timing constraints and uncertainties in the product development and approval process, as well as coordination between two different centers within FDA responsible for review of the different components of the combination product. Furthermore, we may elect to pursue the de novo pathway for our delivery device within the Center for Devices and Radiological Heath, or CDRH, of the FDA. The decision to seek a de novo pathway may cause us to experience regulatory delays that could adversely impact our development timelines.

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Even if we complete the necessary preclinical studies and clinical trials, we cannot predict when or if we will obtain regulatory approval to commercialize a product candidate or the approval may be for a narrower indication than we expect.

              We cannot commercialize a product until the appropriate regulatory authorities have reviewed and approved the product candidate. Even if our product candidates demonstrate safety and efficacy in clinical trials, the regulatory agencies 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 agency policy during the period of product development, clinical trials and the review process. Regulatory agencies also may approve a treatment candidate for fewer or more limited indications than requested or may grant approval subject to the performance of post-marketing commitments. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our treatment candidates. For example, the development of our product candidates for pediatric use is an important part of our current business strategy, and if we are unable to obtain regulatory approval for the desired age ranges, our business may suffer.

Even if we, or any collaborators we may have, obtain marketing approvals for any product candidates we develop, the terms of approvals and ongoing regulation of our products could require the substantial expenditure of resources and may limit how we, or they, manufacture and market our products, which could materially impair our ability to generate revenue.

              Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising, and promotional activities for such medicine, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to quality control, quality assurance and corresponding maintenance of records and documents, and requirements regarding the distribution of samples to physicians and recordkeeping. 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. For genetic medicines that use AAV vectors as a delivery system, the FDA typically advises that individuals receiving AAV vectors undergo follow-up observations for potential adverse events for up to a five-year period. The holder of an approved BLA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling, or manufacturing process. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the medicine may be marketed or to the conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the medicine.

              Accordingly, assuming we, or any collaborators we may have, receive marketing approval for one or more product candidates we develop, we, and such collaborators, and our and their contract manufacturers will continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance, and quality control. If we and such collaborators are not able to comply with post-approval regulatory requirements, we and such collaborators could have the marketing approvals for our products withdrawn by regulatory authorities and our, or such collaborators', ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability. Further, the cost of compliance with post-approval regulations may have a negative effect on our business, operating results, financial condition, and prospects.

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              If we fail to comply with applicable regulatory requirements following approval of any of our product candidates, a regulatory agency 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 our product candidates and generate revenues.

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

              The FDA and other regulatory agencies closely regulate the post-approval marketing and promotion of medicines to ensure that they are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA and other regulatory agencies impose stringent restrictions on manufacturers' communications regarding off-label use, and if we do not market our medicines for their approved indications, we may be subject to enforcement action for off-label marketing by the FDA and other federal and state enforcement agencies, including the Department of Justice. Violation of the Federal Food, Product, and Cosmetic Act and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription products may also lead to investigations or allegations of violations of federal and state healthcare fraud and abuse laws and state consumer protection laws.

              In addition, later discovery of previously unknown problems with our medicines, manufacturers, or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:

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              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 any product candidates we develop and adversely affect our business, financial condition, results of operations, and prospects.

              Additionally, if any of our product candidates receives marketing approval, the FDA could require us to adopt a Risk Evaluation and Mitigation Strategy, or 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 healthcare practitioners. Furthermore, if we or others later identify undesirable side effects caused by our product candidate, several potentially significant negative consequences could result, including:

The efforts of the current presidential administration to pursue regulatory reform may limit the FDA's ability to engage in oversight and implementation activities in the normal course, and that could negatively impact our business.

              The current presidential administration has taken several executive actions, including the issuance of a number of executive orders, that could impose significant burdens on, or otherwise materially delay, the FDA's ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. On January 30, 2017, the president issued an executive order, applicable to all executive agencies, including the FDA, that requires that for each notice of proposed rulemaking or final regulation to be issued in fiscal year 2017, the agency shall identify at least two existing regulations to be repealed, unless prohibited by law. These requirements are referred to as the "two-for-one" provisions. This executive order includes a budget neutrality provision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealed regulations, to be no greater than zero, except in limited circumstances. For fiscal years 2018 and beyond, the executive order requires agencies to identify regulations to offset any incremental cost of a new regulation. In interim guidance issued by the Office of Information and Regulatory Affairs within the Office of Management and on February 2, 2017, the administration indicates that the "two-for-one" provisions may apply not only to agency regulations, but also to significant agency guidance documents. It is difficult to predict how these requirements will be implemented, and the extent to which they will impact the FDA's ability to exercise its regulatory authority. If these executive actions impose constraints on FDA's ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

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Our relationships with healthcare providers, physicians, and third-party payors will be subject to applicable anti-kickback, fraud and abuse, and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, and diminished profits and future earnings.

              Healthcare providers, physicians, and third-party payors play a primary role in the recommendation and prescription of any product candidates that we develop for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell, and distribute our medicines for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:

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              The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order, or use of medicinal products is prohibited in the European Union. The provision of benefits or advantages to physicians is also governed by the national anti-bribery laws of European Union Member States, such as the United Kingdom Bribery Act 2010. Infringement of these laws could result in substantial fines and imprisonment.

              Payments made to physicians in certain European Union Member States must be publicly disclosed. Moreover, agreements with physicians often must be the subject of prior notification and approval by the physician's employer, his or her competent professional organization, and/or the regulatory authorities of the individual European Union Member States. These requirements are provided in the national laws, industry codes, or professional codes of conduct applicable in the European Union Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines, or imprisonment.

              Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations, or case law involving applicable fraud and abuse or other healthcare laws and regulations. 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, disgorgement, exclusion from government funded healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, and the curtailment or restructuring of our operations, any of which could adversely affect our business, financial condition, results of operations, and prospects. If any of the physicians or other providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to significant criminal, civil, or administrative sanctions, including exclusions from government funded healthcare programs. Liabilities they incur pursuant to these laws could result in significant costs or an interruption in operations, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Recently enacted and future legislation may increase the difficulty and cost for us and any future collaborators to obtain marketing approval of and commercialize our product candidates and affect the prices we, or they, may obtain.

              In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability, or the ability of any future collaborators, to profitably sell any products for which we, or they, obtain marketing approval. We expect that current laws, 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, or any future collaborators, may receive for any approved products.

              The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or the PPACA, which became law in 2010, contains provisions of importance to our business, including, without limitation, our ability to commercialize and the prices we may obtain for any of our product candidates and that are approved for sale, the following:

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              In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. 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 2013 through 2021, was unable to reach required goals, thereby triggering the legislation's automatic reduction to several government programs. These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2029 unless additional Congressional action is taken. The American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.

              Since enactment of the PPACA, there have been, and continue to be, numerous legal challenges and executive and Congressional actions to repeal and replace provisions of the law. For example, with enactment of the Tax Cuts and Jobs Act of 2017, which was signed by President Trump on December 22, 2017, Congress repealed the "individual mandate." The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, became effective in 2019. Additionally, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the PPACA-mandated "Cadillac" tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. Further, the Bipartisan Budget Act of 2018, among other things, amended the PPACA, effective January 1, 2019, to increase from 50% to 70% the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the "donut hole."

              Further, each chamber of the Congress has put forth multiple bills designed to repeal or repeal and replace portions of the PPACA. Although none of these measures has been enacted by Congress to date, Congress may consider other legislation to repeal and replace elements of the PPACA. It is possible that repeal and replacement initiatives, if enacted into law, could ultimately result in fewer

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individuals having health insurance coverage or in individuals having insurance coverage with less generous benefits.

              In addition, the current presidential administration has also taken executive actions to undermine or delay implementation of the PPACA. For example, the president has signed 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. One executive order directed federal agencies with authorities and responsibilities under the PPACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the PPACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Another executive order terminated the cost-sharing subsidies that reimburse insurers under the PPACA.

              On December 14, 2018, a Texas U.S. District Court Judge ruled that the PPACA is unconstitutional in its entirety because the "individual mandate" was repealed by Congress as part of the Tax Cuts and Jobs Act of 2017. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the PPACA are invalid as well. On March 2, 2020, the U.S. Supreme Court granted the petitions for writs of certiorari to review this case, and has allotted one hour for oral arguments, which are expected to occur in the fall. It is unclear how such litigation and other efforts to repeal and replace the PPACA will impact the PPACA.

              The costs of prescription pharmaceuticals have also been the subject of considerable discussion in the United States, and members of Congress and the executive branch have stated that they will address such costs through new legislative and administrative measures. To date, there have been several recent U.S. congressional inquiries and proposed and enacted state and federal legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products. At the federal level, the current presidential administration's 2021 budget proposal includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. On March 10, 2020, the current presidential administration sent "principles" for drug pricing to Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases. Moreover, the administration previously released a "Blueprint" to lower drug prices and reduce out of pocket costs of drugs that contained proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. While some of these measures may require additional authorization to become effective, Congress and the current presidential administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, individual states are increasingly aggressive in 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. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing. We expect that additional state and federal healthcare reform measures will be

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adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressures.

              We expect that these healthcare reforms, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we receive for any approved product and/or the level of reimbursement physicians receive for administering any approved product we might bring to market. Reductions in reimbursement levels may negatively impact the prices we receive or the frequency with which our potential products are prescribed or administered. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.

The commercial success of our products depends on the availability and sufficiency of third-party payor coverage and reimbursement.

              Our ability to commercialize any products successfully will depend in part on the extent to which coverage and adequate reimbursement for such products will be available from third-party payors. Even if we succeed in bringing one or more products to the market, these products may not be considered cost-effective, and the amount reimbursed for any products may be insufficient to allow us to sell our products on a competitive basis. Because our programs are in the early stages of development, we are unable at this time to determine their cost-effectiveness or the likely level or method of coverage and reimbursement.

              Further, no uniform policy for coverage and reimbursement exists in the United States, and coverage and reimbursement can differ significantly from payor to payor. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement rates, but also have their own methods and approval process apart from Medicare determinations. As such, one third-party payor's determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Additionally, we may develop companion diagnostic tests for use with our product candidates. If we do, we will be required to obtain coverage and reimbursement for these tests separate and apart from the coverage and reimbursement we seek for our product candidates, once approved. While we have not yet developed any companion diagnostic test for our product candidates, if we do, there is significant uncertainty regarding our ability to obtain coverage and adequate reimbursement for the same reasons applicable to our product candidates. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for our products and/or any companion diagnostics could have a material and adverse effect on our business, financial condition, results of operations, and prospects.

If we are required by the FDA to obtain approval of a companion diagnostic in connection with approval of a candidate therapeutic product, and if we do not obtain or there are delays in obtaining FDA approval of a diagnostic device, we will not be able to commercialize the product candidate and our ability to generate revenue will be materially impaired.

              In August 2014, the FDA issued final guidance clarifying the requirements that will apply to approval of therapeutic products and in vitro companion diagnostics. According to the guidance, if the FDA determines that a companion diagnostic device is essential to the safe and effective use of a novel therapeutic product or indication, the FDA generally will not approve the therapeutic product or new therapeutic product indication if the companion diagnostic is not also approved or cleared for that indication. For example, it is possible the FDA might require a companion diagnostic in the event that high pre-existing neutralizing antibody levels impede delivery to the intracochlear space, although we have not observed this in our preclinical studies in non-human primates. Under the Federal Food, Drug, and Cosmetic Act, or FDCA, companion diagnostics are regulated as medical devices and the

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FDA has generally required companion diagnostics intended to select the patients who will respond to a product candidate to obtain premarket approval, or a PMA. The PMA process, including the gathering of clinical and preclinical data and the submission to and review by the FDA, involves a rigorous premarket review during which the applicant must prepare and provide the FDA with reasonable assurance of the device's safety and effectiveness and information about the device and its components regarding, among other things, device design, manufacturing, and labeling. PMA approval is not guaranteed and may take considerable time, and the FDA may ultimately respond to a PMA submission with a not approvable determination based on deficiencies in the application and require additional clinical trial or other data that may be expensive and time-consuming to generate and that can substantially delay approval. As a result, if we are required by the FDA to obtain approval of a companion diagnostic for a candidate therapeutic product, and we do not obtain or there are delays in obtaining FDA approval of a diagnostic device, we will not be able to commercialize the product candidate and our ability to generate revenue will be materially impaired.

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, consultants, and partners, and, if we commence clinical trials, our principal investigators. 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. We have adopted a code of conduct applicable to all of our employees, but 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.

Laws and regulations governing any international operations we may have in the future may preclude us from developing, manufacturing and selling certain product candidates outside of the United States and require us to develop and implement costly compliance programs.

              We are subject to numerous laws and regulations in each jurisdiction outside the United States in which we operate. The creation, implementation and maintenance of international business practices compliance programs is costly and such programs are difficult to enforce, particularly where reliance on third parties is required.

              The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party, or candidate for the purpose of influencing any act or decision of the

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foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. The anti-bribery provisions of the FCPA are enforced primarily by the Department of Justice. The Securities and Exchange Commission, or SEC, is involved with enforcement of the books and records provisions of the FCPA.

              Compliance with the FCPA and other anti-corruption laws potentially applicable to our business is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the compliance with the FCPA and other anti-corruption laws presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

              We are also subject to other laws and regulations governing our international operations, including applicable export control laws, economic sanctions on countries and persons, and customs requirements. In addition, various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. Our expansion outside of the United States has required, and will continue to require, us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing, or selling certain drugs and drug candidates outside of the United States, which could limit our growth potential and increase our development costs.

              There is no assurance that we will be completely effective in ensuring our compliance with the FCPA and other applicable anti-corruption, export, sanctions, and customs laws. The failure to comply with laws governing international business practices may result in substantial penalties, including suspension or debarment from government contracting. Violations of these laws, including the FCPA, can result in significant civil and criminal penalties. Indictment alone under the FCPA can lead to suspension of the right to do business with the U.S. government until the pending claims are resolved. Conviction of a violation of the FCPA can result in long-term disqualification as a government contractor. The termination of a government contract or relationship as a result of our failure to satisfy any of our obligations under laws governing international business practices would have a negative impact on our operations and harm our reputation and ability to procure government contracts. The SEC also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA's accounting provisions.

Risks Related to Employee Matters, Managing Growth, and General Business Operations

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

              We are highly dependent on the research and development, clinical, financial, operational, and other business expertise of our executive officers, as well as the other principal members of our management, scientific and clinical teams. Although we have entered into employment offer letters with our executive officers, each of them may terminate their employment with us at any time. We do not maintain "key person" insurance for any of our executives or other employees. Recruiting and retaining qualified scientific, clinical, manufacturing, accounting, legal, and sales and marketing personnel will also be critical to our success.

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              The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain, or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. Our success as a public company also depends on implementing and maintaining internal controls and the accuracy and timeliness of our financial reporting. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.

We expect to expand our development and regulatory capabilities and potentially implement sales, marketing, and distribution capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

              As we seek to advance our product candidates through clinical trials and commercialization, we will need to expand our development, regulatory, manufacturing, marketing, and sales capabilities or contract with third parties to provide these capabilities. We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug development, clinical, regulatory affairs, and, if any product candidate receives marketing approval, sales, marketing, and distribution. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational, and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

Our operations might be affected by the occurrence of a natural disaster or other catastrophic event.

              We depend on our employees, consultants, CMOs, CROs, as well as regulatory agencies and other parties, for the continued operation of our business. While we maintain disaster recovery plans, they might not adequately protect us. Despite any precautions we take for natural disasters or other catastrophic events, these events, including terrorist attack, pandemic flu, hurricanes, fire, floods, and ice and snowstorms, could result in significant disruptions to our research and development, preclinical studies, clinical trials, and, ultimately, commercialization of our products. Long-term disruptions in the infrastructure caused by events, such as natural disasters, the outbreak of war, the escalation of hostilities and acts of terrorism or other "acts of God," particularly involving cities in which we have offices, manufacturing or clinical trial sites, could adversely affect our businesses. Although we carry business interruption insurance policies and typically have provisions in our contracts that protect us in certain events, our coverage might not respond or be adequate to compensate us for all losses that may occur. Any natural disaster or catastrophic event affecting us, our CMOs, our CROs, regulatory agencies, or other parties with which we are engaged could have a significant negative impact on our operations and financial performance.

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Our internal computer systems, or those used by our CROs, CMOs, or other contractors or consultants, may fail or suffer security breaches.

              Despite the implementation of security measures, our internal computer systems and those of our CROs, CMOs, and other contractors and consultants are vulnerable to damage from computer viruses and unauthorized access. While we have not experienced any such material system failure 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. For example, the loss of our preclinical data and clinical trial data from preclinical studies or clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we currently rely on third parties for the manufacture of our product candidates and expect to rely on third parties to conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business. 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 and the further development and commercialization of our product candidates could be delayed.

Risks Related to this Offering, Ownership of Our Common Stock, and Our Status as a Public Company

An active trading market for our common stock may not develop.

              Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations with the underwriters. Although we have applied to have our common stock approved for listing on the Nasdaq Global Market, an active trading market for our shares may never develop or be sustained following this offering. If an active market for our common stock does not develop, it may be difficult for you to sell shares you purchase in this offering without depressing the market price for the shares or at all.

If you purchase shares of common stock in this offering, you will suffer immediate dilution of your investment.

              The initial public offering price of our common stock will be substantially higher than the pro forma as adjusted net tangible book value per share of our common stock after this offering. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our pro forma as adjusted net tangible book value per share after this offering. Based on an assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, you will experience immediate dilution of $            per share, representing the difference between our pro forma as adjusted net tangible book value per share as of March 31, 2020, after giving effect to this offering, and the assumed initial public offering price. To the extent outstanding options are exercised, you will incur further dilution.

If securities analysts do not publish or cease publishing research or reports or publish misleading, inaccurate or unfavorable research about our business or if they publish negative evaluations of our stock, the price and trading volume of our stock could decline.

              The trading market for our common stock will rely, in part, on the research and reports that industry or financial analysts publish about us or our business. We do not currently have, and may never obtain, research coverage by industry or financial analysts. If no, or few, analysts commence coverage of us, the trading price of our stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock or publish inaccurate or unfavorable research about our business, or provides more favorable relative

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recommendations about our competitors, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price and trading volume to decline.

The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock in this offering.

              Our stock price is likely to be volatile. The stock market in general and the market for smaller biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the initial public offering price. The market price for our common stock may be influenced by many factors, including:

              In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted against that company. Any lawsuit to which we are a party, with or without merit, may result in an unfavorable judgment. We also may decide to settle lawsuits on unfavorable terms. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation, or adverse changes to our offerings or business practices. Such litigation may also cause us to incur other substantial costs to defend such claims and divert management's attention and resources.

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After this offering, our executive officers, directors, and principal stockholders, if they choose to act together, will continue to have the ability to control all matters submitted to stockholders for approval.

              Upon the closing of this offering, based on the number of shares outstanding as of March 31, 2020, our executive officers and directors and our stockholders who owned more than 5% of our outstanding common stock before this offering will, in the aggregate, beneficially own shares representing approximately        % of our common stock. As a result, if these stockholders were to choose to act together, they would be able to control all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these stockholders, if they choose to act together, would control the election of directors and approval of any merger, consolidation, or sale of all or substantially all of our assets.

              This concentration of ownership control may:

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

              Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

              We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

A significant portion of our total outstanding shares are eligible to be sold into the market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.

              Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After this offering, we will have            shares of common stock outstanding, based on the number of shares outstanding as of , 2020. This includes the shares that we are selling in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates. The remaining            shares are currently restricted as a result of securities laws or lock-up agreements but will become eligible to be sold at various times after the offering as described in the section of this prospectus titled "Shares Eligible for Future Sale." The representatives of the underwriters may release some or all of the shares of common stock subject to lock-up agreements at any time and without notice, which would allow for earlier sales of shares in the public market.

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              Moreover, beginning 180 days after the completion of this offering, holders of an aggregate of            shares of our common stock will have rights, along with holders of an additional shares of our common stock issuable upon exercise of outstanding options, subject to specified conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. We also intend to register all shares of common stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the "Shares Eligible for Future Sale" section of this prospectus.

We are an "emerging growth company," and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

              We are an "emerging growth company," or EGC, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We may remain an EGC until the end of 2025, although if the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of any June 30 before that time or if we have annual gross revenues of $1.07 billion or more in any fiscal year, we would cease to be an EGC as of December 31 of the year in which such event occurs. We also would cease to be an EGC if we issue more than $1.0 billion of non-convertible debt over a three-year period. For so long as we remain an EGC, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not EGCs. These exemptions include:

              We have taken advantage of reduced reporting obligations in this prospectus. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an EGC.

              In addition, the JOBS Act permits an EGC to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to take advantage of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either irrevocably elect to "opt out" of such extended transition period or no longer qualify as an EGC. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

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              We cannot predict if investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

              As a public company, and particularly after we are no longer an EGC, we will incur significant legal, accounting, and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Global Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs, particularly as we hire additional financial and accounting employees to meet public company internal control, and financial reporting requirements and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors.

              We are evaluating these rules and regulations and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

              Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in our second annual report due to be filed with the SEC after becoming a public company, we will be required to furnish a report by our management on our internal control over financial reporting. However, while we remain an EGC, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, including through hiring additional financial and accounting personnel, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses in our internal control over financial reporting, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.

              Effective internal control over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to

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prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could harm our business and have a negative effect on the trading price of our stock.

              We will be required to disclose changes made in our internal controls and procedures on a quarterly basis and our management will be required to assess the effectiveness of these controls annually. However, for as long as we are an EGC under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404. We could be an EGC for up to five years. Our assessment of internal controls and procedures may not detect material weaknesses in our internal control over financial reporting. Undetected material weaknesses in our internal control over financial reporting could lead to financial statement restatements and require us to incur the expense of remediation, which could have a negative effect on the trading price of our stock.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

              Upon completion of this offering, we will become subject to certain reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected.

Comprehensive tax reform legislation passed in 2017 could adversely affect our business and financial condition.

              On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act, or the Tax Act, which significantly reformed the U.S. Internal Revenue Code of 1986, as amended, or the Code. The Tax Act, among other things, contains significant changes to corporate taxation, including reducing the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limiting the tax deduction for net interest expense to 30% of adjusted taxable income (except for certain small businesses), limiting the deduction for net operating losses, or NOLs, arising in taxable years beginning after December 31, 2017 to 80% of current year taxable income and elimination of NOL carrybacks for losses arising in taxable years ending after December 31, 2017 (though any such NOLs may be carried forward indefinitely), a one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, eliminating 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. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the Tax Act remains uncertain and our business

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and financial condition could be adversely affected. In addition, how various states will respond to the Tax Act continues to be uncertain. The impact of this tax reform on holders of our common stock is also uncertain and could be adverse. This prospectus does not discuss any such tax legislation or the manner in which it might affect us or investors in or holders of our common stock. We urge prospective investors in our common stock to consult with their legal and tax advisors with respect to Tax Act and the potential tax consequences of investing in or holding our common stock.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

              We have incurred substantial losses since inception and do not expect to become profitable in the near future, if ever. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any. As of December 31, 2019, we had federal NOL carryforwards of $28.1 million, which may be available to offset future taxable income, of which $0.4 million begin to expire in 2036, while the remaining $27.7 million do not expire but are limited in their usage to an annual deduction equal to 80% of annual taxable income. In addition, as of December 31, 2019, we had state NOL carryforwards of $28.0 million, which may be available to offset future taxable income and expire at various dates beginning in 2036. Under Sections 382 and 383 of the Code, if a corporation undergoes an "ownership change," generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a rolling three-year period, the corporation's ability to use its pre-change NOLs and other pre-change tax attributes (such as research tax credits) to offset its post-change income or taxes may be limited. We may have experienced ownership changes in the past and may experience ownership changes in the future as a result of subsequent shifts in our stock ownership (some of which shifts are outside our control). As a result, if we earn net taxable income, our ability to use our pre-change NOLs to offset such taxable income may be subject to limitations. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. In addition, the Tax Act limits the use of NOLs to 80% of annual taxable income in respect of NOLs generated during or after 2018. Furthermore, any federal NOLs incurred in 2018 and in future years may be carried forward indefinitely, but NOL carrybacks have been eliminated. At the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. As a result, even if we attain profitability, we may be unable to use a material portion of our NOLs and other tax attributes, which could negatively impact our future cash flows.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current directors and members of management.

              Provisions in our certificate of incorporation and our bylaws that will become effective upon the closing of this offering may discourage, delay, or prevent a merger, acquisition, or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:

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              Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or the DGCL, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

Our certificate of incorporation that will become effective upon the closing of this offering designates the state courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against the company and our directors, officers, and employees.

              Our certificate of incorporation that will become effective upon the closing of this offering provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for the following types of proceedings:

              These choice of forum provisions will not apply to suits brought to enforce a duty or liability created by the Securities Act of 1933, as amended, the Exchange Act, or any other claim for which federal courts have exclusive jurisdiction.

              These exclusive forum provisions may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors, officers, or employees, which may discourage such lawsuits against us and our directors, officers, and employees. Alternatively, if a court were to find the choice of forum provisions contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition, and operating results.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

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

              The forward-looking statements in this prospectus include, among other things, statements about:

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              We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this prospectus, particularly in the "Risk Factors" section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Moreover, we operate in a competitive and rapidly changing environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures, or investments we may make or enter into.

              You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus is a part completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this prospectus are made as of the date of this prospectus, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

              In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

              This prospectus includes statistical and other industry and market data that we obtained from independent industry publications and research, surveys, and studies conducted by independent third parties as well as our own estimates of potential addressable patient populations. The market data used in this prospectus involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our estimates of the potential addressable patient population for our product candidates include several key assumptions based on our industry knowledge, industry publications, third-party research and other surveys, which may be based on a small sample size and may fail to accurately reflect the addressable patient population. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions.

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USE OF PROCEEDS

              We estimate that the net proceeds to us from our issuance and sale of            shares of our common stock in this offering will be approximately $             million, assuming an initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their option to purchase additional shares in full, we estimate that our net proceeds to us will be approximately $             million.

              Each $1.00 increase or decrease in the assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease the net proceeds to us from this offering by approximately $             million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each increase or decrease of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase or decrease the net proceeds to us from this offering by approximately $             million, assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We do not expect that a change in the initial public offering price or the number of shares by these amounts would have a material effect on our use of the net proceeds from this offering, although it may accelerate the time at which we will need to seek additional capital.

              As of December 31, 2019, we had cash and cash equivalents of $21.5 million, and in February 2020, we received gross proceeds of $105.1 million from the sale of our Series B preferred stock. We currently estimate that we will use the net proceeds to us from this offering, together with our existing cash and cash equivalents, as follows:

              Based on our planned use of the net proceeds from this offering and our existing cash and cash equivalents, we anticipate that such funds will be sufficient to enable us to fund our operating expenses and capital expenditure requirements through            . We have based this estimate on assumptions that may prove to be incorrect, and we could use our available capital resources sooner than we currently expect. We may satisfy our future cash needs through equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements, or any combination thereof.

              The expected use of net proceeds from this offering and our existing cash and cash equivalents represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve. We believe opportunities may exist from time to time to expand our current business through acquisitions of complementary companies, products or technologies. While we have no current agreements, commitments, or understandings for any specific acquisitions at this time, we may use a portion of the net proceeds for these purposes. The amounts

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and timing of our actual expenditures may vary significantly depending on numerous factors, including the progress of our development, the initiation of, status of, and results from preclinical studies and clinical trials, the timing of regulatory submissions and the outcome of regulatory review, as well as any collaborations that we may enter into with third parties for our product candidates or otherwise, and any unforeseen cash needs. Our management will retain broad discretion over the allocation of the net proceeds from this offering.

              Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments, and U.S. government securities.

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DIVIDEND POLICY

              We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future.

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CAPITALIZATION

              The following table sets forth our cash and cash equivalents and our capitalization as of December 31, 2019:

              You should read the information in this table together with our consolidated financial statements and the related notes appearing at the end of this prospectus and the "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of this prospectus.

 
  As of December 31, 2019  
 
  Actual   Pro Forma   Pro Forma
As Adjusted
 
 
  (in thousands, except share and per share data)
 

Cash and cash equivalents

  $ 25,078   $ 130,143   $    

Convertible preferred stock (Series Seed, Seed 1, A, and B), $0.0001 par value; 178,349,005 shares authorized, 178,349,005 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted

 
$

58,690
 
$

 
$
 

Stockholders' equity (deficit):

                   

Preferred stock, $0.0001 par value; no shares authorized, issued or outstanding, actual;            shares authorized and no shares issued or outstanding, pro forma and pro forma as adjusted

               

Common stock, $0.0001 par value; 235,000,000 shares authorized, 21,012,917 shares issued and outstanding, actual;            shares authorized, 420,761,145 shares issued and outstanding, pro forma;            shares authorized,             shares issued and outstanding, pro forma as adjusted

    2     42        

Additional paid-in capital

    321     164,036        

Accumulated deficit

    (33,124 )   (33,124 )      

Total stockholders' equity (deficit)

    (32,801 )   130,954        

Total capitalization

  $ 25,889   $ 130,954   $    

              The pro forma as adjusted information above is illustrative only, and our capitalization following the closing of this offering will depend on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase or decrease in the assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the

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cover page of this prospectus, would increase or decrease the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders' equity, and total capitalization by $             million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each increase or decrease of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase or decrease the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders' equity, and total capitalization by $             million, assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

              The table above is based on 21,012,917 shares of common stock outstanding as of December 31, 2019, and excludes:

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DILUTION

              If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering.

              Our historical net tangible book value (deficit) as of December 31, 2019 was $(32.8) million, or $(1.56) per share of common stock. Our historical net tangible book value (deficit) is the amount of our total tangible assets less our total liabilities and the carrying value of our preferred stock, which is not included within stockholders' equity (deficit). Historical net tangible book value (deficit) per share represents historical net tangible book value (deficit) divided by the 21,012,917 shares of common stock outstanding as of December 31, 2019.

              Our pro forma net tangible book value as of December 31, 2019 was $131.0 million, or $0.31 per share of common stock. Pro forma net tangible book value represents the amount of our total tangible assets less our total liabilities, after giving effect to (i) our issuance and sale in February 2020 of 221,399,223 shares of Series B preferred stock for gross proceeds of $105.1 million and (ii) the automatic conversion of all outstanding shares of our preferred stock into an aggregate of 399,748,228 shares of common stock upon the closing of this offering. Pro forma net tangible book value per share represents pro forma net tangible book value divided by the total number of shares outstanding as of December 31, 2019, after giving effect to the pro forma adjustments described above.

              After giving further effect to our issuance and sale of            shares of our common stock in this offering at an assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of December 31, 2019 would have been $             million, or $            per share. This represents an immediate increase in pro forma as adjusted net tangible book value per share of $            to existing stockholders and immediate dilution of $            in pro forma as adjusted net tangible book value per share to new investors purchasing common stock in this offering. Dilution per share to new investors is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the assumed initial public offering price per share paid by new investors. The following table illustrates this dilution on a per share basis:

Assumed initial public offering price per share

        $    

Historical net tangible book value (deficit) per share as of December 31, 2019

  $ (1.56 )      

Increase per share attributable to the pro forma adjustments described above

    1.87        

Pro forma net tangible book value per share as of December 31, 2019

    0.31        

Increase in pro forma as adjusted net tangible book value per share attributable to new investors purchasing common stock in this offering

             

Pro forma as adjusted net tangible book value per share immediately after this offering

             

Dilution per share to new investors purchasing common stock in this offering

        $    

              The dilution information discussed above is illustrative only and will depend on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase or decrease in the assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease our pro forma as adjusted net tangible book value per share after this offering by $            and dilution per share to new investors purchasing common stock in this offering by $            , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after

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deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase our pro forma as adjusted net tangible book value per share after this offering by $            and decrease the dilution per share to new investors purchasing common stock in this offering by $            , assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. A decrease of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would decrease our pro forma as adjusted net tangible book value per share after this offering by $            and increase the dilution per share to new investors purchasing common stock in this offering by $            , assuming no change in the assumed initial public offering price and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

              If the underwriters exercise in full their option to purchase additional shares of our common stock, our pro forma as adjusted net tangible book value per share after this offering would be $            , representing an immediate increase in pro forma as adjusted net tangible book value per share of $            to existing stockholders and immediate dilution in pro forma as adjusted net tangible book value per share of $            to new investors purchasing common stock in this offering, assuming an initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

              The following table summarizes, as of December 31, 2019, on the pro forma as adjusted basis described above, the total number of shares of common stock purchased from us on an as converted to common stock basis, the total consideration and the average price per share (1) paid by existing stockholders and (2) to be paid by new investors in this offering at the assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. As the table shows, new investors purchasing common stock in this offering will pay an average price per share substantially higher than our existing stockholders paid.

 
  Shares Purchased   Total Consideration    
 
 
  Average Price
Per Share
 
 
  Number   Percentage   Amount   Percentage  

Existing stockholders

            % $         % $    

Investors participating in this offering

                          $    

Total

          100.0 % $       100.0 %      

              The table above assumes no exercise of the underwriters' option to purchase additional shares in this offering. If the underwriters exercise in full their option to purchase additional shares of our common stock, the number of shares of our common stock held by existing stockholders would be reduced to        % of the total number of shares of our common stock outstanding after this offering, and the number of shares of common stock held by new investors purchasing common stock in this offering would be increased to        % of the total number of shares of our common stock outstanding after this offering.

              The tables and discussion above are based on 21,012,917 shares of our common stock outstanding as of December 31, 2019, and excludes:

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              To the extent that outstanding stock options are exercised, new stock options or warrants are issued, or we issue additional shares of common stock in the future, there will be further dilution to our stockholders, including investors purchasing common stock in this offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result in further dilution to our stockholders, including investors purchasing common stock in this offering.

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SELECTED CONSOLIDATED FINANCIAL DATA

              You should read the following selected consolidated financial data together with our consolidated financial statements and the related notes appearing at the end of this prospectus and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this prospectus. We have derived the consolidated statement of operations data for the years ended December 31, 2018 and 2019 and the consolidated balance sheet data as of December 31, 2018 and 2019 from our audited consolidated financial statements appearing at the end of this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future.

 
  Year Ended December 31,  
 
  2018   2019  
 
  (in thousands, except per share data)
 

Consolidated Statement of Operations Data:

             

Operating expenses:

             

Research and development

  $ 5,644   $ 20,473  

General and administrative

    1,776     3,410  

Total operating expenses

    7,420     23,883  

Loss from operations

    (7,420 )   (23,883 )

Other income (expense):

             

Change in fair value of preferred stock tranche liability

    1,040     (2,260 )

Interest income

    289     413  

Other income (expense), net

    78     (11 )

Total other income (expense), net

    1,407     (1,858 )

Net loss attributable to common stockholders

  $ (6,013 ) $ (25,741 )

Net loss per share attributable to common stockholders, basic and diluted(1)

  $ (0.61 ) $ (2.02 )

Weighted-average common shares outstanding, basic and diluted(1)

    9,866     12,767  

Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)(1)

        $ (0.17 )

Pro forma weighted-average common shares outstanding, basic and diluted (unaudited)(1)

          135,596  

(1)
See Note 13 to our consolidated financial statements appearing at the end of this prospectus for details on the calculation of basic and diluted net loss per share attributable to common stockholders and basic and unaudited diluted pro forma net loss per share attributable to common stockholders.
 
  As of December 31,  
 
  2018   2019  
 
  (in thousands)
 

Consolidated Balance Sheet Data:

             

Cash and cash equivalents

  $ 23,023   $ 25,078  

Working capital(1)

    18,407     20,197  

Total assets

    25,778     45,162  

Capital or finance lease obligations

    533     435  

Preferred stock tranche liability

    3,767      

Convertible preferred stock

    27,647     58,690  

Total stockholders' deficit

    (7,229 )   (32,801 )

(1)
We define working capital as current assets less current liabilities.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

              You should read the following discussion and analysis of our financial condition and results of operations together with the "Selected Consolidated Financial Data" section of this prospectus and our consolidated financial statements and related notes appearing at the end of this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this prospectus, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

              We are a precision genetic medicine company dedicated to our mission of developing gene therapies with the potential to restore, improve, and preserve high-acuity physiologic hearing for people worldwide who live with disabling hearing loss. We have built a precision genetic medicine platform that incorporates a proprietary vector library of a small virus commonly used in gene therapy, known as adeno-associated virus, or AAV, and a novel delivery approach. We are executing on our core strategic initiatives, which include the advancement of our lead product candidate, AK-OTOF, expansion of our pipeline, and development of internal manufacturing capabilities and, ultimately, a commercial infrastructure. Our aim is to leverage our capabilities to become a fully integrated biotechnology company. We believe our platform and our team together provide a unique advantage to efficiently develop potential genetic medicines for a variety of inner ear disorders.

              Since our inception, we have focused substantially all of our resources on organizing and staffing our company, business planning, raising capital, conducting research and development activities, filing and prosecuting patent applications, identifying potential product candidates, soliciting input from regulators regarding development of these product candidates, and undertaking preclinical studies. We do not have any products approved for sale and have not generated any revenue from product sales. To date, we have funded our operations with proceeds from sales of preferred stock (including borrowings under convertible promissory notes, which converted into preferred stock in 2017). Through December 31, 2019, we had received gross proceeds of $57.7 million from sales of our preferred stock. In addition, in February 2020, we received gross proceeds of $105.1 million from the sale of our Series B preferred stock. Since our inception, we have incurred significant operating losses. Our ability to generate any product revenue or product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates.

              For the years ended December 31, 2018 and 2019, we reported net losses of $6.0 million and $25.7 million, respectively. As of December 31, 2019, we had an accumulated deficit of $33.1 million. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We expect that our expenses and capital expenditures will increase substantially in connection with our ongoing activities, particularly if and as we:

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              We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for one or more of our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing, and distribution. Further, following the completion of this offering, we expect to incur additional costs associated with operating as a public company.

              As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, licensing arrangements, and strategic alliances. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back, or discontinue the development and commercialization of one or more of our product candidates.

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

Components of Our Results of Operations

Revenue

              To date, we have not generated any revenue from any sources, including product sales, and do not expect to generate any revenue from the sale of products for the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval or collaboration or license agreements with third parties, we may generate revenue in the future from product sales, payments from collaboration or license agreements that we may enter into with third parties, or any combination thereof.

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Operating Expenses

Research and Development Expenses

              Research and development expenses consist of costs incurred for our research activities, including our discovery efforts, and the development of our programs. These expenses include:

              We expense research and development costs as incurred. Non-refundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered or the services rendered. Upfront payments and annual maintenance fees under license agreements are expensed in the period in which they are due. Milestone payments under license agreements are accrued, with a corresponding expense being recognized, in the period in which the milestone is determined to be probable of achievement and the related amount is reasonably estimable.

              Our direct external research and development expenses are tracked on a program-by-program basis, including our early-stage programs, and consist of costs that include fees, reimbursed materials, and other costs paid to consultants, contractors, CMOs, and CROs in connection with our preclinical and manufacturing activities. We do not allocate employee costs, costs associated with our discovery efforts, laboratory supplies, and facilities expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple programs and our platform and, as such, are not separately classified.

              Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase substantially in connection with our planned preclinical and clinical development activities in the near term and in the future. In particular, we expect that the research and development expenses of our AK-OTOF program will increase substantially in the near term related to our plans to submit an IND for AK-OTOF for OTOF-mediated hearing loss to the FDA in                        , and initiate a planned Phase 1/2 clinical trial of AK-OTOF thereafter. We also expect that the research and development expenses of our anti-VEGF, CLRN1, and GJB2 programs will increase in the near term as we initiate clinical development of those product candidates. At this time, we cannot accurately estimate or know the nature, timing, and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates. The successful development of

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our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development, including the following:

              A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates.

General and Administrative Expenses

              General and administrative expenses consist primarily of salaries and personnel-related costs, including stock-based compensation, for our personnel in executive, legal, finance and accounting, human resources, and other administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees paid for accounting, auditing, consulting, and tax services; insurance costs; travel expenses; and facility costs not otherwise included in research and development expenses.

              We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our programs and platform. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance, and investor and public relations expenses associated with operating as a public company.

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Other Income (Expense)

Change in Fair Value of Preferred Stock Tranche Liability

              Our Series A preferred stock purchase agreement obligated the Series A investors to participate in a subsequent offering of Series A preferred stock upon the achievement of specified development milestones by us or upon the vote of at least 55% of the holders of the Series A preferred stock, which we refer to as the preferred stock tranche right. The preferred stock tranche right was classified as a liability and initially recorded at fair value upon the issuance date of the right. The liability was subsequently remeasured to fair value at each reporting date until settled, and changes in fair value of the preferred stock tranche liability were recognized as a component of other income (expense) in our consolidated statements of operations and comprehensive loss. In September 2019, pursuant to a vote of the holders of Series A preferred stock, the preferred stock tranche right was exercised, upon which we issued additional shares of Series A preferred stock. Immediately prior to the issuance of such shares, the preferred stock tranche right was remeasured to fair value for the last time with the change in fair value recognized as a component of other income (expense). Upon the issuance of the additional shares of preferred stock in September 2019, the preferred stock tranche liability was settled. As a result, we will no longer recognize changes in the fair value of the preferred stock tranche liability in our consolidated statements of operations and comprehensive loss.

Interest Income

              Interest income consists of interest earned on our invested cash balances. We expect our interest income will increase as we invest the cash received from the sale of Series B preferred stock in February 2020 and the net proceeds from this offering.

Other Income (Expense), Net

              Other income (expense), net includes interest expense related to a capital lease, which upon our adoption of the new lease standard as of January 1, 2019, we now refer to as a finance lease, and miscellaneous other income and expense unrelated to our core operations.

Income Taxes

              Since our inception, we have not recorded any income tax benefits for the net losses we have incurred or for the research and development tax credits earned in each year, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credit carryforwards will not be realized.

              As of December 31, 2019, we had federal net operating loss carryforwards of $28.1 million, which may be available to offset future taxable income, of which $0.4 million begin to expire in 2036, while the remaining $27.7 million do not expire but are limited in their usage to an annual deduction equal to 80% of annual taxable income. In addition, as of December 31, 2019, we had state net operating loss carryforwards of $28.0 million, which may be available to offset future taxable income and expire at various dates beginning in 2036. As of December 31, 2019, we also had federal and state research and development tax credit carryforwards of $1.2 million and $0.5 million, respectively, which may be available to reduce future tax liabilities and expire at various dates beginning in 2036 and 2033, respectively. We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.

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Results of Operations

Comparison of the Years Ended December 31, 2018 and 2019

              The following table summarizes our results of operations for the years ended December 31, 2018 and 2019:

 
  Year Ended
December 31,
   
 
 
  2018   2019   Change  
 
  (in thousands)
 

Operating expenses:

                   

Research and development

  $ 5,644   $ 20,473   $ 14,829  

General and administrative

    1,776     3,410     1,634  

Total operating expenses

    7,420     23,883     16,463  

Loss from operations

    (7,420 )   (23,883 )   (16,463 )

Other income (expense):

                   

Change in fair value of preferred stock tranche liability

    1,040     (2,260 )   (3,300 )

Interest income

    289     413     124  

Other income (expense), net

    78     (11 )   (89 )

Total other income (expense), net

    1,407     (1,858 )   (3,265 )

Net loss

  $ (6,013 ) $ (25,741 ) $ (19,728 )

Research and Development Expenses

 
  Year Ended
December 31,
   
 
 
  2018   2019   Change  
 
  (in thousands)
 

Direct research and development expenses by program:

                   

AK-OTOF

  $ 1,240   $ 5,771   $ 4,531  

Other early-stage programs

    238     1,736     1,498  

Platform, research and discovery and unallocated expenses:

                   

Platform-related external costs

    977     2,085     1,108  

Personnel related (including stock-based compensation)

    2,279     6,876     4,597  

Facility related and other

    910     4,005     3,095  

Total research and development expenses

  $ 5,644   $ 20,473   $ 14,829  

              Research and development expenses were $5.6 million for the year ended December 31, 2018, compared to $20.5 million for the year ended December 31, 2019. The increase of $4.5 million in direct costs related to our AK-OTOF program was primarily due to $4.7 million of contract manufacturing costs incurred for preclinical toxicology studies, partially offset by a decrease of $0.4 million in costs incurred for preclinical in vivo studies. The increase of $1.5 million in research and development expenses for our other early-stage programs was primarily due to advancement and initiation of new early-stage programs.

              The increase of $1.1 million in platform-related external costs was primarily due to increases in spending related to the development of our inner ear delivery approach and manufacturing processes as well as costs related to our initiation of a process of sponsoring and building The Sing Registry. The increase of $4.6 million in personnel-related costs was due to increased headcount in our research and development function. Personnel-related costs included stock-based compensation expense of less than

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$0.1 million for the year ended December 31, 2018 and $0.1 million for the year ended December 31, 2019. The increase of $3.1 million in facility-related and other expenses was primarily due to an increase in facility costs and laboratory costs related to our new corporate headquarters, for which our lease commenced in May 2019, and our expanded discovery efforts.

General and Administrative Expenses

 
  Year Ended
December 31,
   
 
 
  2018   2019   Change  
 
  (in thousands)
 

Personnel related (including stock-based compensation)

  $ 1,223   $ 2,458   $ 1,235  

Professional and consultant fees

    387     556     169  

Facility related and other

    166     396     230  

Total general and administrative expenses

  $ 1,776   $ 3,410   $ 1,634  

              General and administrative expenses for the year ended December 31, 2018 were $1.8 million, compared to $3.4 million for the year ended December 31, 2019. Personnel-related costs increased by $1.2 million as a result of the increase in headcount in our general and administrative function. Personnel-related costs included stock-based compensation expense of less than $0.1 million for the year ended December 31, 2018 and $0.1 million for the year ended December 31, 2019. Professional and consultant fees increased by $0.2 million primarily due to increased patent activities. The increase in facility-related and other expenses of $0.2 million was primarily due to an increase in facility costs related to our new corporate headquarters, for which our lease commenced in May 2019.

Other Income (Expense)

              Change in Fair Value of Preferred Stock Tranche Liability.    The change in the fair value of the preferred stock tranche liability resulted in other income of $1.0 million during the year ended December 31, 2018, compared to other expense of $2.3 million during the year ended December 31, 2019. The change in fair value of the preferred stock tranche liability during 2018 was primarily due to a decrease in the estimated remaining term of the tranche right. The change in the fair value of the preferred stock tranche liability during 2019 was primarily due to an increase in the fair value of the underlying preferred stock during the year.

              Interest Income.    Interest income for the years ended December 31, 2018 and 2019 was $0.3 million and $0.4 million, respectively, consisting of interest earned on invested cash balances.

              Other Income (Expense), Net.    Interest expense was less than $0.1 million for each of the years ended December 31, 2018 and 2019 and was related to capital or finance lease liabilities. Other income (expense), net for the year ended December 31, 2018 also included income of $0.1 million related to funding from a government contract that reimbursed us for certain allowable costs for funded projects. This contract was completed in 2018, and, therefore, we did not receive any similar funding during the year ended December 31, 2019.

Liquidity and Capital Resources

              Since our inception, we have incurred significant operating losses. We expect to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and, if successful, the clinical development of our programs. To date, we have funded our operations primarily with proceeds from sales of preferred stock (including borrowings under convertible promissory notes, which converted into preferred stock in 2017). Through December 31, 2019, we had received gross proceeds of $57.7 million from sales of our preferred stock. As of December 31, 2019, we had cash and

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cash equivalents of $25.1 million. In addition, in February 2020, we received gross proceeds of $105.1 million from the sale of our Series B preferred stock.

Cash Flows

              The following table summarizes our sources and uses of cash for each of the periods presented:

 
  Year Ended December 31,  
 
  2018   2019  
 
  (in thousands)
 

Cash used in operating activities

  $ (6,735 ) $ (19,510 )

Cash used in investing activities

    (532 )   (3,440 )

Cash provided by financing activities

    24,847     25,005  

Net increase in cash, cash equivalents, and restricted cash

  $ 17,580   $ 2,055  

Operating Activities

              During the year ended December 31, 2019, operating activities used $19.5 million of cash, primarily resulting from our net loss of $25.7 million, partially offset by non-cash charges of $3.1 million and net cash provided by changes in our operating assets and liabilities of $3.1 million. Net cash provided by changes in our operating assets and liabilities for the year ended December 31, 2019 consisted primarily of a net $3.2 million increase in accounts payable and accrued expenses and other current liabilities and a $0.7 million increase in operating lease liabilities, both partially offset by a $0.7 million increase in prepaid expenses and other current assets.

              During the year ended December 31, 2018, operating activities used $6.7 million of cash, primarily resulting from our net loss of $6.0 million and net non-cash income of $1.0 million, partially offset by net cash provided by changes in our operating assets and liabilities of $0.2 million. Net cash provided by changes in our operating assets and liabilities for the year ended December 31, 2018 consisted primarily of a $0.5 million increase in accounts payable and accrued expenses and other current liabilities, partially offset by a $0.3 million increase in prepaid expenses and other current assets.

              Changes in accounts payable, accrued expenses and other current liabilities, and prepaid expenses and other current assets in both periods were generally due to growth in our business, the advancement of our research programs, and the timing of vendor invoicing and payments.

Investing Activities

              During the years ended December 31, 2019 and 2018, net cash used in investing activities was $3.4 million and $0.5 million, respectively, due to purchases of property and equipment. The purchases of property and equipment during the year ended December 31, 2019 were related to leasehold improvements and furniture and fixture purchases for our new corporate headquarters, which we moved into in 2019.

Financing Activities

              During the years ended December 31, 2019 and 2018, net cash provided by financing activities was $25.0 million and $24.8 million, respectively, consisting primarily of net proceeds from the issuance of our Series A preferred stock.

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Funding Requirements

              We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and studies and initiate clinical trials for our product candidates in development. The timing and amount of our funding requirements will depend on many factors, including:

              We believe that the net proceeds from this offering, together with our existing cash and cash equivalents, including the $105.1 million of gross proceeds we received in February 2020 from the sale of our Series B preferred stock, will enable us to fund our operating expenses and capital expenditure requirements through                                    . We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

              Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures, or declaring dividends. If we raise additional funds through collaborations, licensing arrangements, or strategic alliances with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce, or terminate our research, product development, or future commercialization efforts, or grant rights to develop and market drugs that we would otherwise prefer to develop and market ourselves.

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Contractual Obligations and Commitments

              The following table summarizes our contractual obligations as of December 31, 2019:

 
  Payments Due by Period  
 
  Total   Less Than
1 Year
  1 to 3
Years
  4 to 5
Years
  More Than
5 Years
 
 
  (in thousands)
 

Operating lease commitments(1)

  $ 20,674   $ 2,004   $ 4,837   $ 5,136   $ 8,697  

Finance lease commitments(2)

    442     253     189          

Total

  $ 21,116   $ 2,257   $ 5,026   $ 5,136   $ 8,697  

(1)
Amounts in the table reflect payments due for our lease of office and laboratory space in Boston, Massachusetts under an operating lease agreement that expires in February 2028.

(2)
Amounts in the table reflect payments due for our lease of laboratory equipment under a finance lease agreement that expires in September 2021.

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

              We have also entered into license agreements under which we are obligated to make specified milestone and royalty payments. We have not included future payments under these agreements in the table of contractual obligations above since the payment obligations under these agreements are contingent upon future events, such as our achievement of specified development, regulatory, and sales milestones, or generating product sales. As of December 31, 2019, we were unable to estimate the timing or likelihood of achieving these milestones or generating future product sales. For additional information, see "Business—Intellectual Property—Licensed Intellectual Property" and Note 10 to our consolidated financial statements appearing elsewhere in this prospectus.

Critical Accounting Policies and Significant Judgments and Estimates

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

              While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements appearing at the end of this prospectus, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

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Accrued Research and Development Expenses

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

              We record the expense and accrual related to contract research and manufacturing based on our estimates of the services received and efforts expended considering a number of factors, including our knowledge of the progress towards completion of the research, development, and manufacturing activities; invoicing to date under contracts; communication from the CROs, CMOs, and other companies of any actual costs incurred during the period that have not yet been invoiced; and the costs included in the contracts and purchase orders. The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or the amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.

Stock-Based Compensation

              We measure all stock-based awards granted to employees, non-employees, and directors based on their fair value on the date of the grant using the Black-Scholes option-pricing model for options or the fair value of our common stock for restricted stock awards. Compensation expense for those awards is recognized over the requisite service period, which is generally the vesting period of the respective award. We use the straight-line method to record the expense of awards with only service-based vesting conditions. We have not issued any stock-based awards with performance-based or market-based vesting conditions.

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

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Determination of Fair Value of Common Stock

              As there has been no public market for our common stock to date, the estimated fair value of our common stock has been determined by our board of directors as of the date of each option grant, with input from management, considering our most recently available third-party valuations of common stock and our board of directors' assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants' Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Our common stock valuations were prepared using an option pricing method, or OPM, which used market approaches to estimate our enterprise value. The OPM treats common stock and preferred stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company's securities changes. Under this method, the common stock has value only if the funds available for distribution to stockholders exceeded the value of the preferred stock liquidation preferences at the time of the liquidity event, such as a strategic sale or a merger. A discount for lack of marketability of the common stock is then applied to arrive at an indication of value for the common stock. These third-party valuations were performed at various dates, which resulted in valuations of our common stock of $0.04 per share as of July 17, 2018, $0.08 per share as of September 3, 2019, $0.11 per share as of September 30, 2019, and $0.15 per share as of January 9, 2020. In addition to considering the results of these third-party valuations, our board of directors considered various objective and subjective factors to determine the fair value of our common stock as of each grant date, including:

              The assumptions underlying these valuations represented management's best estimate, which involved inherent uncertainties and the application of management's judgment. As a result, if we had used significantly different assumptions or estimates, the fair value of our common stock and our stock-based compensation expense could have been materially different.

              Once a public trading market for our common stock has been established in connection with the completion of this offering, it will no longer be necessary for our board of directors to estimate the fair value of our common stock in connection with our accounting for granted stock options and other such awards we may grant, as the fair value of our common stock will be determined based on the quoted market price of our common stock.

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Options Granted

              The following table summarizes by grant date the number of shares subject to options granted between January 1, 2019 and April 27, 2020, the per share exercise price of the options, the per share fair value of our common stock on each grant date, and the per share estimated fair value of the options:

Grant Date
  Number of
Shares Subject
to Options
Granted
  Per Share
Exercise
Price of
Options
  Per Share Fair
Value of
Common Stock
on Grant Date
  Per Share
Estimated
Fair Value of
Options
 

March 28, 2019

    440,000   $ 0.04   $ 0.04   $ 0.03  

June 21, 2019

    235,000   $ 0.04   $ 0.04   $ 0.03  

September 6, 2019

    2,516,000   $ 0.08   $ 0.08   $ 0.06  

October 18, 2019

    11,871,221   $ 0.11   $ 0.11   $ 0.08  

January 23, 2020

    4,545,000   $ 0.15   $ 0.15   $ 0.11  

Valuation of Preferred Stock Tranche Liability

              Our Series A preferred stock purchase agreement obligated the Series A investors to participate in a subsequent offering of Series A preferred stock upon the achievement of specified development milestones by us or upon the vote of at least 55% of the holders of Series A preferred stock, which we refer to as the preferred stock tranche right. We determined that the preferred stock tranche right was required to be recorded as a liability because it was a freestanding financial instrument that would require us to transfer assets upon exercise of the right. The preferred stock tranche right met the definition of a freestanding financial instrument because it was legally detachable and separately exercisable from the Series A preferred stock. The preferred stock tranche right was classified as a liability and initially recorded at fair value upon the issuance date of the right. The liability was subsequently remeasured to fair value at each reporting date until settled, and changes in the fair value of the preferred stock tranche liability were recognized as a component of other income (expense) in our consolidated statements of operations and comprehensive loss. In September 2019, pursuant to a vote of the holders of Series A preferred stock, the preferred stock tranche right was exercised, upon which we issued additional shares of Series A preferred stock. Immediately prior to the issuance of such shares, the preferred stock tranche right was remeasured to fair value for the last time with the change in fair value recognized as a component of other income (expense). Upon the issuance of the additional shares of preferred stock in September 2019, the preferred stock tranche liability was settled, resulting in a reclassification of the $6.0 million fair value of the preferred stock tranche liability at that time to the carrying value of the Series A preferred stock.

              We utilized the Black-Scholes option-pricing model, which incorporated assumptions and estimates, to value the preferred stock tranche liability prior to its settlement. Estimates and assumptions impacting the fair value measurement included the fair value per share of the underlying Series A preferred stock, the expected term of the preferred stock tranche right, risk-free interest rate, expected dividend yield, and expected volatility of the price of the underlying preferred stock. The most significant assumptions in the Black-Scholes option-pricing model impacting the fair value of the preferred stock tranche right were the fair value of the Series A preferred stock as of each remeasurement date and the estimated remaining term of the tranche right as of each remeasurement date. We determined the fair value per share of the underlying preferred stock by taking into consideration the most recent sales of our preferred stock as well as additional factors that we deemed relevant. We assessed these assumptions and estimates on a quarterly basis as additional information impacting the assumptions was obtained. As of December 31, 2018 and September 25, 2019, the final measurement date of the preferred stock tranche right, the fair value of our Series A preferred stock was $0.27 per share and $0.41 per share, respectively. We historically have been a private company and

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lack company-specific historical and implied volatility information of our stock. Therefore, we estimated our expected stock volatility based on the historical volatility of a representative group of public companies in the biopharmaceutical industry for the expected terms. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the expected term of the preferred stock tranche right. We estimated a 0% dividend yield based on the expected dividend yield and the fact that we have never paid or declared dividends.

Off-Balance Sheet Arrangements

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

Recently Issued Accounting Pronouncements

              A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements appearing at the end of this prospectus.

Emerging Growth Company Status

              The Jumpstart Our Business Startups Act of 2012 permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to "opt out" of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to "opt out" of such extended transition period or (ii) no longer qualify as an emerging growth company. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

Quantitative and Qualitative Disclosures about Market Risks

              As of December 31, 2019, we had cash and cash equivalents of $25.1 million, which consisted of cash and money market funds. Interest income is sensitive to changes in the general level of interest rates; however, due to the nature of these investments, an immediate 10% change in market interest rates would not have a material effect on the fair market value of our investment portfolio.

              We are not currently exposed to significant market risk related to changes in foreign currency exchange rates. Our operations may be subject to fluctuations in foreign currency exchange rates in the future.

              We do not believe that inflation has had a material effect on our business, financial condition, or results of operations during the years ended December 31, 2018 and 2019.

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BUSINESS

"Akouos," from the Greek verb akouo : to listen, to learn, to understand.

Overview

              We are a precision genetic medicine company dedicated to our mission of developing gene therapies with the potential to restore, improve, and preserve high-acuity physiologic hearing for people worldwide who live with disabling hearing loss. We have built a precision genetic medicine platform that incorporates a proprietary vector library consisting of variants of a small virus commonly used in gene therapy, known as adeno-associated virus, or AAV, and a novel delivery approach. We are executing on our core strategic initiatives, which include the advancement of our lead product candidate, AK-OTOF, expansion of our pipeline, and development of internal manufacturing capabilities and, ultimately, a commercial infrastructure. Our aim is to leverage our capabilities to become a fully integrated biotechnology company. We believe our platform and our team together provide a unique advantage to efficiently develop potential genetic medicines for a variety of inner ear disorders.

              Hearing loss is one of the world's largest unmet medical needs. Approximately 466 million people around the world, including 34 million children, live with disabling hearing loss, and a growing body of evidence suggests hearing loss can have a significant impact on cognitive development, psychiatric health, and healthy aging. We estimate that AK-OTOF has a potential addressable population of up to approximately 7,000 individuals, which is a subset of the total population of individuals with hearing loss due to mutations in the otoferlin, or OTOF, gene in the United States and European Union in the aggregate. Recent advances in genetic medicine have created the possibility of addressing the root cause of disorders that have a genetic basis. Serious disorders that previously had no pharmacologic treatments and, in some cases, insufficient non-pharmacologic treatments now have the potential to be addressed with one-time gene therapy administrations, including potential gene editing therapies, that can restore critical function to the eye, the spinal cord, the brain, and other organs. Despite these advances, we believe genetic medicine development for hearing disorders has been hindered by the unique anatomical delivery challenges of the inner ear. To overcome these challenges, our team has combined a proprietary vector library of synthetic AAVs that recreates the evolutionary lineage of current naturally occurring viruses, known as ancestral AAV, or AAVAnc, and a novel, minimally invasive delivery approach that allows us to utilize AAV-enabled multimodal capabilities, including viral delivery to the target cell population where the full-length transgene is split into two vectors, known as a dual vector method.

              Our focused candidate selection criteria allow us to identify promising targets covering a range of inner ear cell types, including sensory hair cell and non-sensory supporting cells, to treat a broad range of inner ear disorders. We seek programs that have clinically well-established, objective, and quantifiable endpoints that can be incorporated in translatable preclinical models during development, which we believe may provide drug development advantages, including the potential for more rapid clinical development. Additionally, given the epidemiology and severity of the disorders we are initially targeting, available regulatory pathways such as orphan drug designation and expedited pathways for serious conditions may provide the potential for more rapid regulatory approval. Our clinical development plan includes measurement of the auditory brainstem response, or ABR, an objective, clinically accepted endpoint, which we believe provides both clinical and regulatory advantages.

              We have generated promising preclinical data for our lead product candidate, AK-OTOF, a gene therapy for the treatment of hearing loss due to mutations in the OTOF gene. The OTOF gene encodes otoferlin, a protein that enables the sensory cells of the ear to release neurotransmitter vesicles in response to stimulation by sound to activate auditory neurons. The auditory neurons then carry electronically encoded acoustic information to the brain, which allows us to hear. We aim to restore

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otoferlin expression through targeted delivery of a proprietary AAVAnc, known as AAVAnc80, containing the OTOF gene to individuals with OTOF-mediated hearing loss. We have selected AAVAnc80 from the larger AAVAnc vector library based on its high observed transduction efficiency in inner hair cells. Affected individuals are typically born deaf, which is confirmed through ABR testing, a commonly used measure of hearing loss. Based on feedback from the U.S. Food and Drug Administration, or FDA, we are designing our Phase 1/2 trial to include ABR as an efficacy endpoint. We believe that this will enable us to quickly determine a clinical response and potentially result in rapid advancement towards a pivotal trial. There are no pharmacologic therapies currently approved for the treatment or management of OTOF-mediated hearing loss, or any other form of sensorineural hearing loss. We believe our product candidate has the potential to restore physiologic hearing and provide long-lasting benefits to these individuals and their families. We plan to submit an investigational new drug application, or IND, for AK-OTOF for OTOF-mediated hearing loss to the FDA in                         , and we expect to report preliminary clinical data in                        .

              In addition to AK-OTOF, our diversified portfolio of product candidates and development programs has been selected to leverage our platform across multiple inner ear disorders, starting with those resulting from mutations in a single gene, or monogenic forms of deafness and hearing loss, such as OTOF-mediated hearing loss, and building toward clinical development of genetic medicines for the most common forms of hearing loss, such as age-related and noise-induced hearing loss. Our most advanced pipeline programs address a range of inner ear cells and leverage different modalities. These programs include CLRN1 for Usher Type 3A, an autosomal recessive disorder characterized by progressive loss of both hearing and vision; GJB2 for a common form of monogenic deafness and hearing loss; and delivery of an anti-VEGF, an inhibitor of vascular endothelial growth factor, or VEGF, a protein that can cause abnormal blood vessel growth, for the treatment of vestibular schwannoma, a tumor of the auditory vestibular nerve.

              We believe that our focus on developing internal manufacturing capabilities provides a core competitive advantage. We are currently developing internal infrastructure to manufacture vectors for good laboratory practices, or GLP, toxicology studies, which we plan to have completed by                        . We are in the planning stages of building a current good manufacturing practice, or cGMP, manufacturing facility that we believe will have capability to process gene therapy batches to support activities through Phase 1/2 clinical trials for product candidates beyond AK-OTOF. We have partnered with Lonza Houston, Inc., or Lonza, for production of GLP and cGMP material for our lead product candidate, AK-OTOF. We have made, and will continue to make, significant investments to further optimize our manufacturing capabilities to cost-effectively produce high-quality AAV vectors. We believe that our manufacturing processes, methods, expertise, facilities, and scale will give us a significant advantage in the development and ultimately commercialization of our AAV product candidates.

              We have initiated a process of sponsoring and building The Sing Registry, an observational global research study focused on understanding the life-long impact of genetically caused sensorineural hearing loss. We have established an advisory board comprised of key opinion leaders to oversee The Sing Registry and have completed the first advisory board meeting. The Sing Registry protocol has been reviewed and approved by a central ethics committee. We expect that approximately ten sites will participate in The Sing Registry. We believe The Sing Registry will provide both us and the broader community a greater understanding of genetic sensorineural hearing loss and will guide our research and development efforts, enhance future trial design, and promote enrollment.

              We have assembled a world-class team with expertise in auditory anatomy and physiology, otopathology, human genetics, inner ear drug delivery, gene therapy and rare disease drug development, and commercialization. We believe that our promising preclinical data, scientific expertise, product development strategy, planned manufacturing capabilities, and robust intellectual

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property portfolio position us as a leader in the development of precision genetic medicines for inner ear disorders.

              Since our inception in 2016, we have raised $162.7 million in capital from premier venture capital funds, healthcare-dedicated funds, major mutual funds, and other leading investors that share our vision to build a highly innovative, fully integrated genetic medicines company. These funds include 5AM Ventures, New Enterprise Associates, Novartis Venture Fund, Partners Innovation Fund, RA Capital Management, and Sofinnova Investments, as well as Cormorant Asset Management, Cowen Healthcare Investments, EcoR1 Capital, Fidelity Management & Research Company, Pivotal bioVenture Partners, Polaris Founders Fund, Pagsgroup, Surveyor Capital (a Citadel company), Wu Capital, and other well-respected institutional investors.

Our Pipeline

              We have built our pipeline to serve our mission to restore, improve, and preserve high-acuity physiologic hearing for people worldwide who live with disabling hearing loss. Our diversified portfolio of product candidates and development programs has been selected to leverage our capabilities across multiple inner ear disorders, starting with monogenic deafness and building toward genetic medicines for the most common forms of hearing loss, such as age-related and noise-induced hearing loss. We have worldwide commercial rights to our entire pipeline.

GRAPHIC

Our Strategy

              Our goal is to transform the lives of deaf and hard-of-hearing individuals by restoring, improving, and preserving high-acuity physiologic hearing. We are a patient-focused organization engaged with and advocating on behalf of these individuals and their families. We intend to accomplish our goal by leveraging our inner ear precision genetic medicine platform and the expertise of our team to implement the following key elements of our strategy:

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Our Strengths

              We believe our focus on the local delivery of precision genetic medicines for inner ear disorders supports more informed decision-making and better execution and will ultimately maximize our probability of success in pioneering the development of inner ear genetic medicines while providing a long-term competitive advantage. We believe our key strengths are:

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Our Focus—Otology

Hearing Loss Overview

              Hearing loss is one of the world's largest unmet medical needs. Approximately 466 million people around the world, including 34 million children, live with disabling hearing loss. A growing body of evidence suggests hearing loss can have a significant impact on cognitive development, psychiatric health, and healthy aging. In a 2017 report, The World Health Organization estimated that the annual cost of unaddressed hearing loss is $770 billion globally, a figure that includes direct medical costs as well as indirect cost to families and society. In the United States, the direct cost to the healthcare system due to hearing loss is up to $12.8 billion annually, and this number fails to capture the considerable indirect societal costs. Early intervention has the potential to significantly improve the lives of affected individuals and their families as well as to reduce the significant economic impact of hearing loss. In addition, we estimate that AK-OTOF has a potential addressable population of up to approximately 7,000 individuals, which is a subset of the total population of individuals with hearing loss due to mutations in the OTOF gene in the United States and European Union in the aggregate.

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              Hearing loss can occur from the interference or blockage of sound transmission in the ear canal or middle ear, referred to as conductive hearing loss. Hearing loss can also occur as a result of dysfunction of the cochlea or auditory nerve, which is referred to as sensorineural hearing loss and includes many forms of genetic hearing loss, age related hearing loss, and noise related hearing loss. Sensorineural hearing loss is the most prevalent form of hearing loss across all age groups. Our initial goal is to restore, improve, and preserve hearing for those with sensorineural hearing loss by targeting a known disorder-causing gene or pathway.

              Congenital hearing loss is hearing loss at birth, and it is one of the most prevalent chronic conditions in children. Approximately 80% of congenital hearing loss in the United States and Europe is sensorineural hearing loss due to genetic causes, which suggests that over 14,000 children are born with genetic sensorineural hearing loss every year in these regions. Approximately 75% of these genetic hearing loss cases are nonsyndromic, meaning hearing loss that is not associated with other signs or other symptoms of medical importance. The remaining individuals with genetic hearing loss have syndromic hearing loss, which means that in addition to hearing loss the individual has other symptoms of medical importance. More than 400 syndromes that include hearing loss have been identified, including Usher's Syndrome, the most common type of autosomal recessive syndromic hearing loss, which typically also results in disabling vision loss.

How We Hear

              Hearing is the physiologic process by which environmental sounds are converted to a stream of neurologic signals that are processed by the brain. The ear consists of the outer ear, the middle ear, and the inner ear, which includes the cochlea. Sound enters the ear through the external auditory canal of the outer ear, where it vibrates the tympanic membrane, or the ear drum. These sound vibrations are then relayed through the middle ear by a chain of three small bones called ossicles. The last of these bones, called the stapes, articulates with the cochlea at the oval window and passes sound energy into the cochlea. There are two openings from the middle ear into the inner ear, the round window membrane, or RWM, and the oval window. The cochlea contains a long, coiled, ribbon-like epithelial membrane that is suspended between two cochlear fluid compartments (shown in pink and blue in the left image below). Sensory cells called hair cells, arranged in a highly ordered fashion, sense the movement of fluid and convert the fluid waves into nerve impulses that are sent along the auditory nerve to the brain. As shown in the image on the right below, the cochlea contains a single row of inner hair cells and three rows of outer hair cells, along with a variety of non-sensory supporting cells, such as Pillar cells, Hensen's cells, inner border cells and Claudius cells. Neurotransmitter vesicles at the junction of the inner hair cells and the spiral ganglion neurons, which are surrounded by satellite glial cells, carry acoustic information to the brain.

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Image of Middle and Inner Ear and Image of Close-up of Cochlea

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              The mechanical, biochemical, and molecular properties of the hair cells vary systematically along the length of the coiled membrane of the cochlea such that it is more responsive to high frequency sounds at the base and to low frequency sounds at the apex.

              The human cochlea takes shape early in fetal development and is normally fully functional before birth. The cells that make up the cochlea do not divide post-development, and, as a result, the size of the cochlea (approximately 9mm × 5mm) remains unchanged from birth through adulthood.

              The intricate interplay of inner ear structures required for hearing can be disrupted by changes in the DNA that encodes essential proteins or that regulates their function. Millions of people worldwide have disabling hearing loss as a result of genetic mutations affecting any one of over 150 genes linked to cochlear dysfunction. There are more than 6,000 known variants across these genes that can result in cochlear pathology and hearing loss. Depending on the genes involved, various subpopulations of cells in the cochlea can be affected.

Diagnosing Hearing Loss

              A diagnosis of sensorineural hearing loss depends on the demonstration of reduced hearing sensitivity, or acuity, by auditory testing. Typically, sounds are played to an individual through headphones at different loudness levels and different frequencies. The frequency, or pitch, of tones at which hearing loss is assessed is measured in hertz, or Hz, and can be designated as:

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              The audiometric threshold is the quietest level at which the individual responds at each frequency. For individuals who are unable to respond to sound by raising their hand or speaking, ABR testing can be used to determine the audiometric threshold by indicating whether the inner ear and the brain pathways respond to sounds; in other words, ABR testing can determine the audiometric threshold without the need for a voluntary subject response. ABR is measured with electrodes that attach to the skin near the ear, and the electrodes are connected to a computer that records brain wave activity in response to sounds transmitted through earphones. In ABR testing, the audiometric threshold is the quietest level that can produce a brain wave.

              Hearing loss is measured in decibels, or dB, relative to normal hearing, with 0 dB hearing loss serving as the normative reference. Hearing acuity for children is classified as normal if audiometric thresholds are 25 dB hearing loss or less. Severity of hearing loss is graded as follows:

These hearing loss classification ranges are depicted in the audiogram below, which includes examples of speech and environmental sounds and shows an individual with Severe to Profound hearing loss that is bilateral, or appearing in both ears. The red circles and blue Xs represent hearing thresholds at given sound frequencies in the right and left ears, respectively. An individual with this audiogram would be unable to hear sounds at lower dB levels above the red circles and blue Xs.

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              Children with Severe to Profound hearing loss cannot perceive typical speech sounds, depicted in the darker shaded area of the figure above and sometimes referred to as the speech banana, and are unlikely to develop verbal language. The American Academy of Pediatrics recognizes congenital hearing loss as a potential neurodevelopmental emergency that should be identified as early as possible in order

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to enable early intervention. Experience with pediatric cochlear implants, or CIs, has demonstrated that a child has a better chance to develop normal speech and language the earlier a child receives the implant. There appears to be a window of time during the development of the auditory cortex where the absence of auditory input results in failure to develop the synaptic and neuronal networks necessary for verbal language. As a result, with federal government support, every state in the United States has established an Early Hearing Detection and Intervention program.

              Today, 97% of newborns in the United States have their hearing screened, and most individuals with Severe to Profound congenital hearing loss in the United States are identified shortly after birth. Hospitals typically use either ABR or otoacoustic emission, or OAE, testing to identify hearing loss in newborns. ABR testing reflects how the cochlea, auditory nerve, and auditory pathways in the brain are working. OAE testing reflects whether outer hair cells in the cochlea respond to sound. These cells respond to sound by vibrating, and each vibration produces a very quiet sound that echoes back into the ear canal and can be measured with a microphone. In OAE testing, a small earphone containing speakers and a microphone is placed in the ear to play sounds into the ear and measure the sounds that come back. OAE testing is more sensitive to other middle ear problems than ABR but does not detect problems in the auditory nerve or brain pathways. ABR testing, on the other hand, provides direct evidence of an auditory signal that is transmitted from the cochlea to the brain. As a result, though OAE testing could be an important eligibility determinant for future interventional trials or treatment options because it can be used to evaluate the presence and viability of hair cells, ABR testing is a more relevant measure of clinical efficacy, and is routinely relied upon in clinical practice to determine whether sound is being encoded by and transmitted through the cochlea and auditory nerve to the brain.

Current Treatment Options

              Children and adults with Severe to Profound sensorineural hearing loss do not benefit from hearing aids. Currently, the only option for some forms of Severe to Profound sensorineural hearing loss is receiving a CI, a surgically implanted device. However, only approximately 50% of deaf children in the United States receive a CI even though more than 90% of deaf children are born to hearing parents. Among adults who have developed Severe to Profound hearing loss in the United States, fewer than 10% choose to have CIs.

              Receiving a CI requires a surgical procedure that takes approximately two to four hours and typically involves drilling through the mastoid bone and placement of a permanent electrode in the cochlea. The damage inherently sustained by the sensory epithelium in this procedure makes the CI likely incompatible with future restorative biologic therapies involving the cochlear sensory cells. Although CIs have changed the outcomes of many congenitally deaf children, the auditory signal they transmit is impoverished compared to that provided by physiologic hearing and a CI does not restore normal hearing. Recipients of CIs often report difficulty understanding speech in many real-world environments, even with low levels of background noise, and complex multiple-speaking conversations typical of many group settings are often challenging. The normal, physiologic ear's fine frequency discrimination and sensitivity to a wide, dynamic range of sound intensities allows for extraction of emotional content from speech, environmental sounds, and music. In contrast, the CI is not able to transmit this complex auditory content.

              In addition, although the cochlea itself does not increase in size from birth through adulthood, the surrounding skull changes considerably over time. As a result, children who receive an implant at a young age can experience negative consequences from anatomical movement and may require surgical revision to correct poor outcomes due to CI migration. Furthermore, extensive speech-language therapy following implantation is required for children to develop verbal language. The necessity of this therapy, combined with the frequent follow-ups required for device maintenance, contribute to poorer outcomes in children from lower socioeconomic backgrounds. Moreover, CIs can fail, resulting in

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revision surgeries or reimplantation in up to 10% of cases, with a median time to device failure of 60 months.

              Some companies are studying investigational product candidates in clinical trials, such as corticosteroids for sudden sensorineural hearing loss, that are administered to the middle ear through the ear drum, or intratympanically. Intratympanic administration consists of injecting drug in liquid or gel form through the ear drum and relies on passive diffusion of the drug from the middle ear into the inner ear through the RWM. Many drugs cannot readily cross these barriers and are therefore not candidates for intratympanic delivery. In general, the larger a molecule, the less amenable it is to diffusion across biological barriers. AAV vectors are more than 10,000-fold larger than the small molecules currently being tested using intratympanic administration. Even the small molecules that can diffuse across these barriers do so in a manner that is expected to be highly variable between individuals, and once they enter the inner ear fluid space, poor diffusion throughout the length of the cochlea is anticipated. This would result in large concentration gradients from the base of the cochlear spiral, where the molecules enter the inner ear, toward the apex; very little drug would reach even the middle frequency regions of the cochlea that are important for functional hearing. We believe that for AAV vectors to achieve consistent distribution throughout the full length of the cochlear sensory epithelium, a novel delivery approach is required.

Advantages and Potential for Genetic Medicine

              Recent advances in genetic medicine have created the possibility of addressing the root cause of disorders that have a genetic basis. Serious disorders that previously had no pharmacologic treatments and, in some cases, insufficient non-pharmacologic treatments can now potentially be addressed with one-time gene therapy administrations, including potential gene editing therapies, that can restore critical function to the eye, the spinal cord, the brain, and other organs.

              We believe the anatomy and biology of the inner ear make it uniquely suited for the delivery of one-time gene modifying therapeutics. Genetic medicine using AAV vectors is a promising therapeutic approach for inner ear disorders for several reasons:

              Despite these advantages, AAV genetic medicine development for hearing disorders has been hindered by the unique anatomical delivery challenges of the inner ear. Because the sensory epithelium of the inner ear is suspended between two fixed-volume fluid chambers and encased in bone, it has proven challenging to achieve sufficient drug distribution without damaging sensory cells. Multiple studies have demonstrated that infusion of fluid into a closed cochlear system can produce threshold shifts, or decreases in hearing sensitivity, that are dependent on flow rate and infusion time. Others have shown that diffusion-based delivery, from the middle ear into and through the inner ear fluids, is

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highly variable and too slow relative to absorption by surrounding tissue to result in even distribution along the sensory epithelium. These challenges informed our strategy of developing an inner ear delivery approach designed to consistently achieve even distribution throughout the cochlea.

              By building upon recent advances in genetic medicine and combining them with the appropriate delivery approach, we believe we can effectively address the underlying cause of many different forms of inner ear dysfunction and hearing loss with single-administration therapies that carry the potential to restore, improve, and preserve high-acuity physiologic hearing for people worldwide who live with disabling hearing loss.

Our Platform

              Our precision genetic medicine platform enables delivery of genetic medicines to the inner ear utilizing a proprietary library of approximately 38,000 novel AAVAnc capsids, for which we have an exclusive license as to the ear, and a minimally invasive surgical delivery approach. We believe these AAVAnc vectors have superior transduction of cochlear cells compared to other AAV serotypes and allow for a multimodal therapeutic approach. For example, AAVAnc80 enables us to target a larger landscape of inner ear disorders using different vector-mediated modalities. We have established scalable manufacturing processes and expertise, and plan to internalize these capabilities, which we view as a key competitive advantage because it may give us significant control over process development timelines, costs, and intellectual property. We believe our platform's attributes, along with our disciplined development program and product candidate selection criteria, will allow us to develop genetic medicines for a wide range of inner ear disorders.

Our Delivery Approach

              As part of our precision genetic medicine platform, we are developing a delivery device designed to allow for the safe and effective delivery of our lead product candidate, AK-OTOF, and other product candidates into the cochlea. Intracochlear delivery poses a unique set of challenges. The cochlea is in the base of the skull, and access requires a surgical approach. The cochlea in humans and non-human primates is a relatively closed space, and pumping fluid into the cochlea results in deleterious elevations in pressure. Drug delivered to one part of the cochlea must spread by diffusion to other parts, and this results in significant variation in drug concentration throughout the cochlea. The challenge is to deliver a uniform concentration of drug along the length of the cochlea without elevating cochlear pressure. Our delivery approach utilizes a minimally invasive, well-accepted surgical technique for accessing the middle ear through the ear canal. We open one of the physical barriers between the middle and inner ear at the oval window and then use our delivery device to deliver product candidates, at a controlled flow rate and in a fixed volume, through the RWM, as depicted in the image on the left below. The opening at the oval window serves as a vent to prevent pressure build-up and facilitates the flow of drug throughout the entire length of the cochlea. This approach is designed to ensure that our product candidates are distributed across the full length of the cochlea and can therefore target the appropriate cell types at the base, middle, and apex of the cochlea. In preclinical studies involving non-human primates, our team's pioneering inner ear delivery work has allowed us to determine flow rate and volume parameters that show distribution across the entire length of the primate cochlea without damaging therapeutically relevant cell types.

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              The mechanical, biochemical, and molecular properties of the hair cells vary along the length of the coiled membrane of the cochlea such that it is more responsive to high frequency sounds at the base and low frequency sounds at the apex, as indicated in the image above on the right, in which the normally coiled membrane of the cochlea has been elongated to illustrate the delivery of our product candidates through the length of the cochlea.

              Our delivery device was specifically designed to facilitate intracochlear administration using a minimally invasive surgical approach. Due to the size and compartmentalization of the inner ear, and the observed high transduction efficiency of AAVAnc80, we anticipate our product candidates, including AK-OTOF, will be administered in a low volume and a low dose to the inner ear using the device and approach described above. Procedures to access the inner ear up to the point of delivery are routinely performed by surgeons experienced in performing ear surgery, such as otolaryngologists and neurotologists, and we anticipate our approach will promote consistency and ease of use across surgeons.

Our Vector Technology

              We have access to a library of approximately 38,000 AAVAncs for the potential treatment of inner ear and hearing related disorders through our exclusive licenses. As we build out our product candidate pipeline, this AAVAnc vector library presents flexibility with respect to transgene delivery and AAV-enabled modality. We are screening the AAVAnc library for improved AAV properties such as tropism, or the ability to target distinct types of cells, transduction efficiency, and production efficiency. We also evaluate capsid technology beyond the AAVAnc library to select the optimal capsid for each of our future programs.

              We have selected the AAVAnc80 capsid for much of our initial work based on its observed high transduction efficiency for many important target cells in the cochlea. AAVAnc80 is a rationally designed AAV capsid developed by Dr. Luk Vandenberghe, an Akouos founder, Director of the Grossbeck Gene Therapy Center, Associate Professor at Harvard Medical School, and Associate Member of the Broad Institute of Harvard and MIT. Harnessing the power of computational and predictive biology, the AAVAnc80 sequence was inferred by ancestral sequence reconstruction and is

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the predicted ancestor of the widely studied AAV serotypes 1, 2, 8, and 9. The AAVAnc80 capsid variant has a distinctive composition with a divergent external surface particle distribution that yields a stable and functional AAV variant.

              Multiple independent investigations have shown high inner hair cell transduction efficiency of AAVAnc80 relative to other AAV serotypes in mice of various ages, and this transduction efficiency has also been observed in adult and juvenile non-human primates, supporting the translatability of the AAVAnc80 vector across models. We have conducted preclinical studies across three different non-human primate models. These studies used green fluorescent protein, or GFP, as a reporter gene delivered by AAVAnc80 to demonstrate that AAVAnc80 can efficiently transduce not just inner hair cells, but multiple target cell populations throughout the cochlea in the primate inner ear. Shown in red in the bottom left corner of the figure below, Myo7a, a hair cell marker, is used to make inner and outer hair cells visible. As illustrated below, in this study, non-human primates receiving AAVAnc80-GFP showed extensive transduction of inner hair cells, outer hair cells, and various non-sensory supporting cells, including Hensen's cells, Pillar cells, inner border cells, and satellite glial cells in the spiral ganglion.

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Transduction of Multiple Sensory and Non-Sensory Cells in the Inner Ears of Non-Human Primates

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              Preliminary data from two additional preclinical studies, in two different non-human primate models, indicate that pre-existing neutralizing antibodies to AAVAnc80, even at relatively high levels in serum, did not inhibit inner hair cell and other cochlear cell transduction when an AAVAnc80 vector was delivered through an intracochlear route of administration.

              In another non-human primate study, we observed that inner hair cell transduction, when measured at three weeks following administration of an AAVAnc80 vector encoding GFP, was at least 75% at a modest dose of 6E10 vector genomes, or vg, or above, as shown in the image below. In this image, each symbol denotes an individual non-human primate (six total), and the blue and green symbols show animals receiving vector at or above this modest dose level, while the pink symbols show less complete transduction across the cochlea, specifically an apex to base gradient, in animals that received a lower dose of vector.

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Percentage of Inner Hair Cells Expressing GFP Three Weeks Following
Administration of an AAVAnc80 Vector Encoding GFP

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              We have observed that AAVAnc80 tropism and transduction efficiency are consistent across multiple preclinical animal models, from rodents to multiple non-human primate species. This consistency helps support dose selection across species and supports our view that AAVAnc80 is well suited to clinical development. In addition, the ability to transduce many different cell types opens a unique opportunity to address a broad range of inner ear disorders, as illustrated below. As shown in the diagram below, different genes are associated with the different cell types in the ear, including inner hair cells, outer hair cells, and supporting cells, and in some cases, genes are expressed in more than one type of cell.

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Access to Multiple Cell Types Opens Large Target Landscape

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              The high observed transduction efficiency of AAVAnc80 coupled with the compartmentalization of the inner ear paves the way for us to utilize a dual vector approach to deliver larger transgenes to this target area. In the dual vector approach, two vectors, each of which contains a portion of the full-length transgene, are delivered to a target cell population. A target cell needs to receive a copy of both vectors, one containing the 5' fragment of the transgene and the other containing the 3' fragment of the transgene. After both vectors enter a target cell, the two transgene components can recombine to enable expression of full-length protein. In a non-human primate study, we tested the dual vector approach using a GFP transgene that is divided and packaged into two separate AAVAnc80 vectors. Each vector alone would not result in GFP expression, but delivery of both vectors together resulted in full-length GFP expression. As shown in the image below, of four non-human primates that received dual AAVAnc80 vectors encoding GFP, we observed more than 80% transduction of inner hair cells throughout the entire cochlea in three of the animals at three weeks following administration.

              The reconstitution of a complete transgene using dual AAVAnc80 vectors was accomplished in non-human primate inner hair cells at doses equivalent to those we believe would be well tolerated in humans.

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Percentage of Inner Hair Cells Expressing a GFP Three Weeks Following
Administration of Dual AAVAnc80 Vectors Encoding GFP

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              We believe the degree of dual vector transduction efficiency that we have observed in our preclinical studies creates the potential for the treatment of additional hearing loss disorders with a genetic basis beyond OTOF-mediated hearing loss.

Our Multimodal Capabilities

              While our lead product program, AK-OTOF, involves dual AAVAnc80 transgene delivery, we are also using our precision genetic medicine platform to build a product candidate pipeline with the potential to address a broad landscape of monogenic and non-monogenic inner ear disorders using vector-mediated gene transfer, gene knockdown, gene editing, and the delivery of transgenes that express therapeutic proteins such as antibodies using viral vectors, which we refer to as vector-mediated therapeutic protein expression. The figure and text below illustrate how we believe our platform could address the landscape of monogenic and non-monogenic inner ear disorders using various AAV-enabled modalities.

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Our Rigorous Process for Selecting Product Candidates

              Over 150 genes have been linked to monogenic hearing loss. While many of these genes are expressed in the hair cells, some of the most common monogenic forms of hearing loss result from mutations in genes expressed in non-sensory supporting cells within the inner ear. We believe we can leverage our precision genetic medicine platform to deliver a range of transgenes to multiple cell types in the inner ear. We apply the following selection criteria in identifying opportunities to pursue:

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Our Programs

              Our diversified portfolio of product candidates and development programs has been selected to leverage our capabilities across multiple inner ear disorders. We are targeting disorders resulting from genetic mutations in a single gene, or monogenic deafness, in hair cells and supporting cells of the inner ear. Additionally, we are targeting other inner ear disorders that may be amenable to treatment approaches that rely on secreted proteins. Our pipeline programs have been selected to leverage the learnings of our lead program to increase the efficiency and the likelihood of success with which subsequent product candidates are developed.

Our Lead Product Candidate: AK-OTOF

              Using our precision genetic medicine platform, we are developing our lead product candidate, AK-OTOF, a gene therapy intended for the treatment of individuals with OTOF-mediated hearing loss. AK-OTOF is designed to treat the underlying cause of OTOF-mediated hearing loss through delivery of a transgene using a dual vector technology that results in expression of normal, functional otoferlin protein in the affected cells, namely inner hair cells, in the cochlea. We believe that AK-OTOF has the potential to meaningfully improve overall hearing function in individuals with OTOF-mediated hearing loss. We plan to submit an IND for AK-OTOF for OTOF-mediated hearing loss to the FDA in                        , and we expect to report preliminary clinical data in                        .

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Overview of the Disorder

              The OTOF gene encodes otoferlin, a protein that enables the sensory cells of the ear to release neurotransmitter vesicles in response to stimulation by sound to activate auditory neurons. The auditory neurons then carry electronically encoded acoustic information to the brain that allows us to hear. Most individuals with OTOF mutations have congenital, Severe to Profound sensorineural hearing loss and no or highly abnormal ABR.

              The physiologic defect resulting from OTOF mutations is localized, and only synaptic transmission between the hair cell and the auditory nerve is impaired. In young individuals, the rest of the cochlea appears to be functional as determined by OAE testing, suggesting that restoration of otoferlin has the potential to restore hearing. The image below illustrates the localization of otoferlin within the inner hair cells of the cochlea. Otoferlin is required for the priming and fusion of neurotransmitter vesicles at the junction of the inner hair cells and the spiral ganglion neurons, which carry acoustic information to the brain.

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              A diagnosis of OTOF-mediated hearing loss is typically indicated by clinical findings, including results of ABR and OAE testing, and is later confirmed by genetic testing. The clinical descriptors associated with an individual with OTOF-mediated hearing loss may vary depending on the treatment center, what specific tests have been performed, whether these tests were performed before or after loss of OAE, and physician training and preference.

              Mutations in the OTOF gene are a major cause of genetic nonsyndromic hearing loss, affecting an estimated 200,000 individuals worldwide. Based on published natural history data, and the subset of individuals we believe could obtain the greatest benefit from AK-OTOF, we estimate a potential addressable population with OTOF-mediated hearing loss of up to approximately 7,000 individuals in the United States and European Union in the aggregate.

              There are currently no approved pharmacologic therapies to address OTOF-mediated hearing loss. In the absence of an approved pharmacologic therapy, the only options consist of hearing aids or

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CIs. Hearing aids do not benefit children born Profoundly deaf at birth, as in the case for most individuals with congenital OTOF-mediated hearing loss. Although CIs have been shown to be effective for children with monogenic hearing loss, CIs have significant drawbacks and are generally not an optimal solution. We believe that a genetic medicine, delivered as a one-time therapy without the need for extensive follow-up care and maintenance, that addresses sensorineural hearing loss and has the ability to restore physiologic hearing could be impactful in these patient populations while being less invasive and potentially more effective.

Our Solution

              AK-OTOF is designed to treat individuals with OTOF-mediated hearing loss by delivering the normal OTOF gene in order to produce normal, functional otoferlin in affected inner hair cells. The presumed mechanism of action for AK-OTOF is the recovery of otoferlin protein function resulting in an increased signal from the affected inner hair cells to the auditory cortex in the brain. AK-OTOF uses AAVAnc80 as a delivery vehicle for the normal human OTOF gene. Because the length of the OTOF complementary DNA, or cDNA, exceeds the packaging capacity of an individual AAV vector, we are using a dual vector approach. In the case of AK-OTOF, one AAVAnc80 vector carries the 5' fragment of the OTOF gene, and the other AAVAnc80 vector carries the 3' fragment of the OTOF gene.

Pharmacology

              In multiple preclinical studies, it has been observed that the delivery of the OTOF gene into the affected inner hair cells of mice using AAV vectors, including AAVAnc80, restored auditory function. Mouse models of OTOF-mediated hearing loss exhibit the same characteristic phenotype as that observed in the human population, including absent ABR, which measures signals traveling to the brain, and present OAE, which measures the existence of outer hair cells. In addition, OTOF knock-out mice are known to maintain surviving inner hair cells and outer hair cells after cochlear development is complete, which allows evaluation of the treatment potential at an age relevant to the human population.

              Two early proof of concept studies were performed using different mouse models of OTOF-dependent hearing loss. In the first of these two proof of concept studies, conducted at University of Goettingen, data indicated restoration of auditory function following dual vector administration of the OTOF gene using AAV6 vectors three to four weeks following administration, as measured by ABR in response to broadband clicks and tone bursts at different sound pressure levels, or SPLs. Additionally, by quantifying click-evoked ABR wave amplitudes and AAV transduction by immunolabeling, it was observed that higher full-length otoferlin inner hair cell transduction rates correlated with higher overall ABR wave amplitudes.

              The second proof of concept study was performed at the University of California, San Francisco in an OTOF knock-out mouse model, denoted as Otof-/-. In this study, the mice received a dual vector administration of the OTOF gene using AAV2 quadY-F vectors at a dose of approximately 2.2E10 vg per cochlea (1.3E10 vg of the 5' vector and 9.0E9 vg of the 3' vector) through the RWM at one of three different intervention times (10, 17, and 30 days post-natal). Recovery of auditory function was assessed at multiple times post-treatment. As shown in the graphic on the left below, ABR recordings in the mice four weeks after treatment demonstrated a substantial restoration of brainstem activity in response to click stimuli and tone-burst stimuli (at 8, 16, and 32 kHz) in treated mice. No restoration was observed in mice receiving 5' OTOF vector alone or untreated knock-out mice. As shown in the graphic on the right below, the ABR thresholds for click stimuli in the dual vector treated mice did not change significantly from those of wild-type mice when measured at either four or 30 weeks post-treatment, indicating a sustained effect of the treatment.

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Restoration of ABR Thresholds in OTOF knock-out
Mice Receiving a Dual AAV Vector Expressing OTOF

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              In this study, eight weeks after the treatment, otoferlin protein was detected in more than 60% of the inner hair cells of the mice treated with the dual vector, but not in other cell types of the cochlea, suggesting that a large cDNA can effectively be reconstituted in cochlear sensory cells upon the local delivery of two AAV vectors in vivo, with sustained, widespread production of the otoferlin protein in a large proportion of the target cells in the cochlea.

              The published data from these two separate labs represent preclinical proof of the concept that cochlear delivery of two AAV-OTOF vectors can enable production of the full-length otoferlin protein, resulting in sustained correction of hearing loss and supporting the rationale for our development of a dual AAV vector approach for the treatment of OTOF-mediated hearing loss.

              In a third preclinical study in OTOF knock-out mice conducted in collaboration with researchers at the University of Goettingen, the intracochlear delivery of a dual AAVAnc80 vector encoding human OTOF was assessed. The OTOF knock-out mice were treated at post-natal day six or seven with two different doses: 5.1E9 total vg/cochlea (3.1E9 vg/cochlea 5' vector and 2.0E9 vg/cochlea 3' vector) and 1.1E9 total vg/cochlea (6.2E8 vg/cochlea 5' vector and 3.9E8 vg/cochlea 3' vector). Treated mice were measured at approximately one month, three months, seven months, and ten months post-treatment. As shown in the graphic below, treatment of these mice with AK-OTOF resulted in ABR click-evoked thresholds nearly comparable to wild-type mice. Treated mice showed significant click-evoked ABR recovery of 45 dB SPL of the treated ear and showed tone burst-evoked ABR responses of 60 to 80 dB SPL at 6 to 12 kHz, indicating hearing recovery in the apex region of the cochlea, at approximately one month through at least ten months post-treatment.

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Intracochlear Delivery of AK-OTOF Resulted in Significant,
Long-term Hearing Recovery in OTOF knock-out Mice

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              We conducted an initial dose range finding study in OTOF knock-out mice to determine the biologically active dose range of AK-OTOF. These data have informed the proposed dosing for our IND-enabling preclinical studies and, in combination with other pharmacology and toxicology data, help support a proposed starting clinical dose in humans. AK-OTOF was administered to mice aged 21 to 25 days, at multiple doses ranging from 3.1E8 total vg per cochlea to 3.1E10 total vg per cochlea, through the RWM into the cochlea. While the human cochlea is fully mature at birth, the mouse cochlea continues to mature through day 20 and, as a result, we selected mice aged 21 to 25 days to approximate the developmental stage of the cochlea in a human newborn.

              The preliminary data from this dose-ranging study demonstrated recovery of ABR thresholds and robust hair cell survival four weeks post-administration in some of the dose groups. The most consistent and pronounced ABR threshold recovery was seen following delivery of AK-OTOF at doses of 3.1E9 vg and 9.9E9 vg per cochlea. Five of the six mice receiving these doses had at least one tone-burst frequency in which ABR thresholds were within the range of the wild-type, vehicle-treated mice. A representative example of ABR recovery from this preclinical study is shown in the figure below. Here, we observed that AK-OTOF restored the ABR threshold in a treated mouse to the same level observed in a wild-type mouse receiving a vehicle control. Each panel in this image shows the ABR wave form in response to click stimuli at given intensity levels in dB SPL. A knock-out mouse receiving a vehicle control had an ABR threshold of approximately 45 dB SPL, shown as a bold black line on the left panel of the figure below. An OTOF knock-out mouse treated with vehicle control had no ABR, as can be seen by the absence of any peaks in the red lines in the middle panel. As shown in the bold aqua line on the right panel, when the OTOF knock-out mouse was treated with AK-OTOF, we observed a recovery of ABR at the same threshold level of approximately 45 dB SPL as that of the wild-type mouse on the left.

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A Single Dose of AK-OTOF Restored Cochlear Function in Mature Mice Lacking Otoferlin

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Safety

              We performed a non-GLP, pilot toxicology study of AK-OTOF in non-human primates, as well as vectors containing either the individual 3' or 5' fragments of OTOF, delivered into the cochlea. The aim of this study was to assess both local and systemic effects of AK-OTOF and the individual component vectors in order to inform the design of IND-enabling studies with respect to time points, in-life assessments, and post-mortem assessments. The pilot study provided longer-term (six month) safety information, in addition to both acute (one month) and chronic (three month) safety information, individual vector safety data, and biodistribution and shedding data for the intracochlear route of administration. The animals received baseline and follow-on hearing or cochlear function tests, including bilateral ABR and OAE testing. Standard in-life toxicology assessments, such as daily clinical observations, body weight, body condition scoring, and clinical pathology, were also conducted at baseline and following study periods. AK-OTOF and the surgical administration procedure were generally well tolerated, and all animals in the study completed assessments through their scheduled necropsy date.

              Based on input received in our September 2019 pre-IND meeting with the FDA, we are currently conducting a GLP toxicology study in cynomolgus monkeys using AK-OTOF.

Dose Selection

              The AK-OTOF doses currently under evaluation in our ongoing GLP toxicology study, which encompass and exceed the equivalent doses planned for our proposed Phase 1/2 clinical trial, are scaled based on relative cochlear volumes of mice, cynomolgus monkeys, and humans. The vector concentrations were selected based on efficacy data from the OTOF knock-out mouse dose range finding study. This dose translation scheme is consistent with dose scaling for other therapeutics administered into anatomical compartments where compartment volumes and concentration of a therapeutic are used to normalize between species. In our September 2019 pre-IND meeting, the FDA agreed with our proposal to use cochlear volume for dose extrapolation from animals to humans.

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Planned Clinical Development

              We plan to initiate a natural history study in individuals with OTOF-mediated hearing loss in                        . For enrollment in this study, participants will need to have confirmed mutations in the OTOF gene and clinical presentation of bilateral sensorineural hearing loss. The participants will undergo repeated physiologic and behavioral testing of the auditory system, such as OAE testing and ABR testing, as well as other standard assessments such as age-appropriate pure tone audiometry, behavioral audiometry, and auditory questionnaires. Retrospective data will be collected, and, once enrolled, participants may be followed for up to five years. The objectives of this study are to provide additional information on the natural course of OTOF-mediated hearing loss, better define the potentially addressable patient landscape for our planned Phase 1/2 clinical trial, create inner ear genetic medicine-specific clinical centers of excellence, and familiarize potential centers and participants with participation in our clinical trials and the testing procedures within this patient population.

              We intend to initiate a proposed Phase 1/2 clinical trial for AK-OTOF for the treatment of individuals with OTOF-mediated hearing loss, subject to FDA acceptance of an IND. This trial will be conducted in two parts. The first part will be an adaptive dose escalation phase to assess the safety, tolerability, and bioactivity of escalating doses of AK-OTOF administered to trial participants through a single unilateral intracochlear injection. The second part will be a cohort expansion phase to assess both continued safety as well as effectiveness. We expect eligibility with respect to age for this Phase 1/2 clinical trial to be based on both published data and data from our forthcoming natural history study. Additionally, based on our pre-IND meeting with the FDA in September 2019, we anticipate that our Phase 1/2 clinical trial may enroll children as young as one year old in the expansion phase. Outcome assessments will include objective and clinically relevant ABR testing and age appropriate behavioral audiometry.

              Based on our discussions with representatives of the FDA's Center for Biologics Evaluation and Research, or CBER, and Center for Devices and Radiological Health, or CDRH, in our pre-IND meeting, we intend to file the delivery device along with the investigational product in an IND application as a combination product. Prior to seeking a marketing application for AK-OTOF, or for another of our product candidates, with the CBER, but following demonstration that the probable benefits of delivery of therapeutic agents to the cochlea outweigh the potential risks, we may pursue the de novo pathway for our delivery device with the CDRH. While technically a combination product given anticipated cross-labeling of the biologic to our specific delivery device, we may choose to submit separate applications for the constituent parts of a combination product.

              We intend to request orphan drug designation for AK-OTOF for the treatment of patients with OTOF-mediated hearing loss. We are not aware of any pharmacologic therapy approved for use in this condition, or for use in any genetic form of sensorineural hearing loss. An orphan drug designation applies to conditions that affect fewer than 200,000 persons in the United States.

              At the time of an orphan drug designation request, we also intend to seek rare pediatric disease designation. In addition to meeting the definition for a rare disease, OTOF-mediated hearing loss is a serious condition in which the serious manifestations, specifically hearing loss that substantially limits day-to-day functioning, primarily and disproportionately affect individuals aged from birth to 18 years.

              Given the seriousness of the condition, and the potential sustained effect on cells or tissues, we also plan to seek regenerative medicine advanced therapy designation for AK-OTOF if preliminary clinical evidence indicates the potential to address an unmet need for patients with OTOF-mediated hearing loss.

              For further information regarding potential regulatory pathways, see "—Government Regulation."

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Additional Pipeline Programs

Hair Cell Targets

              In addition to AK-OTOF, we are developing our pipeline to focus on other monogenic gene mutations of hair cells.

              CLRN1.    Inherited mutations in genes expressed in hair cells are also responsible for the hearing loss component of Usher syndrome, which is the most common hereditary deaf-blind disorder, affecting over 40,000 people in the United States and Europe, which includes up to 6% of children who are deaf or hard-of-hearing. Our CLRN1 program is initially focused on the auditory manifestations of Usher syndrome 3A, or USH3A, an autosomal recessive disorder characterized by progressive loss of both hearing and vision, with post-lingual onset typically in the first decade of life. Hearing loss becomes Profound as the disorder progresses. Usher syndrome 3A represents up to 5% of all Usher syndrome cases overall, suggesting a prevalence of up to 2,000 individuals in the United States and Europe in the aggregate. Currently, CIs are the only available intervention for the long-term auditory manifestations of Usher syndrome. Individuals with USH3A have mutations in the CLRN1 gene that reduce the production and localization of CLRN1 protein to the inner hair cell and outer hair cell membranes. Although the specific function of CLRN1 has not been determined, studies suggest that it plays a role in communication between neurons in the inner ear and in the retina and may be important for the development and function of synapses.

              We are developing an AAVAnc80 vector containing a functional version of the CLRN1 gene and have generated preclinical data in collaboration with Case Western Reserve University demonstrating restoration of hearing in an animal model that recapitulates the auditory pathophysiology observed in humans. We believe successful CLRN1 gene transfer could provide an effective treatment of USH3A sensorineural hearing loss. In addition to USH3A, we believe other hereditary deaf-blind disorders could be treated with AAVAnc80-based gene therapies. We anticipate that we will identify a candidate for our CLRN1 program in                        .

              Autosomal Dominant Hearing Disorders Program.    We believe that autosomal dominant mutations can be addressed by AAV-meditated RNA interference or gene editing. There are 48 identified genes associated with autosomal dominant nonsyndromic hearing loss, which gives us the opportunity to develop therapeutic medicines using knockdown or gene editing modalities. We are currently developing AAVAnc80 vectors encoding RNA interference sequences intended to knock down toxic gain-of-function and dominant negative mutations responsible for autosomal dominant hearing loss and we are conducting preclinical studies on several potential targets. We anticipate that we will announce a program target in                         .

Supporting Cell Targets

              We are also leveraging our precision genetic medicine platform to address hearing loss related to genes needed for supporting cell function.

              GJB2.    One of the most common forms of monogenic deafness is caused by a mutation in the gap junction protein beta 2 gene, or GJB2, encoding the connexin 26 gap junction protein, or Cx26, which is expressed in non-sensory cells of the inner ear such as the supporting cells. Cx26 forms gap junctions, or channels, between cells that are essential for maintaining the appropriate distribution of ions in cochlear fluids. For example, Cx26 is believed to be required for maintenance of the endocochlear potential, an electric voltage in the cochlear fluid spaces that is needed for hair cells to convert sound waves into electrical activity. We believe that AAVAnc-mediated delivery of the GJB2 gene could restore gap junctions and subsequently re-establish endocochlear potential, prevent hair cell and neuron degeneration, and restore hearing thresholds. The lack of GJB2 function causes nonsyndromic hearing loss that is usually Severe to Profound and pre-lingual. The prevalence of

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hearing loss resulting from GJB2 mutations is believed to be at least 200,000 individuals in the United States and Europe in the aggregate. Additionally, several published preclinical studies support our belief that AAV vector-mediated delivery of GJB2 has the potential to improve hearing by demonstrating that delivery of GJB2 to Cx26 knock-out mice restored gap junctions and improved hearing. We are currently conducting preclinical studies in collaboration with researchers at University of Michigan and have observed that AAVAnc-mediated delivery of GJB2 to supporting cells partially restored hearing in neonatal mouse models representing the spectrum of hearing loss observed in humans with GJB2-mediated hearing loss. We anticipate that we will identify a candidate for our GJB2 program in                         .

              Regeneration.    Data from multiple independent academic and third-party industry research teams suggest supporting cell development pathways can be altered in order to regenerate hair cells that have been lost due to a wide range of causes, including noise and ototoxic drugs. Many forms of hearing loss, both genetic and environmental, are caused by the loss of hair cells in the inner ear. Because cells of the cochlea are non-dividing, hearing loss due to lost hair cells is considered irreversible. Age-related hearing loss and noise-induced hearing loss affect millions of people in the United States and Europe. The World Health Organization also estimates that 1.1 billion children and adults ages 12 to 35 years old are at risk for hearing loss from recreational noise exposure. Damage often accumulates over several years, manifesting with Mild to Moderate hearing loss by 50 to 70 years of age and deteriorating to Severe to Profound hearing loss by 70 to 80 years of age. We are collaborating with the Bionics Institute to test the ability of AAVAnc to transduce supporting cells that could transdifferentiate into mature, functional hair cells. Our studies in non-human primates have suggested that the AAVAnc80 vector can transduce several supporting cell sub-types that could transdifferentiate into functional hair cells. Currently, we are in the process of evaluating several development leads to identify those with the potential to regenerate mature, functional hair cells in multiple animal models. We believe that AAVAnc gene therapy has the potential to restore hearing in individuals with a wide range of environmental hearing loss by regenerating hair cells from neighboring supporting cells. We anticipate that we will announce a program target in                        .

Secreted Proteins

              In addition to pursuing opportunities that require transduction of specific target cell populations, such as hair cells or supporting cells, we have also identified inner ear disorders that can potentially be treated with secreted proteins. To address these opportunities, we intend to use an AAVAnc vector to transduce a range of cell types and enable these cells to secrete a protein with the potential to restore, improve, or preserve hearing. The secreted protein can be one that is normally expressed in the ear, as in the case of a gene transfer approach for a monogenic indication, or it can be an exogenous therapeutic protein, as in the case of a vector-mediated therapeutic protein expression approach for a non-monogenic disorder.

              AK-antiVEGF.    Our preclinical AK-antiVEGF program is focused on vestibular schwannomas, an inner ear disorder of complex etiology. Vestibular schwannomas are among the most common intracranial tumors. In the United States, over 3,000 new vestibular schwannoma cases are diagnosed each year. Vestibular schwannomas manifest in a variety of symptoms including hearing loss, tinnitus, headaches, an impaired ability to coordinate voluntary movements, mental confusion, and, in rare cases, death. The current standard of care consists of surgical removal or radiation, both of which typically result in lost hearing and can be associated with significant morbidity. Investigators at Massachusetts General Hospital and Massachusetts Eye and Ear Infirmary have published results from clinical trials showing that systemic anti-VEGF therapy can reduce schwannoma volume and improve hearing in some participants. We believe an AAVAnc80 vector containing the gene that encodes a secreted anti-VEGF protein, delivered to the inner ear in the same manner as other programs in our pipeline,

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has the potential to stabilize tumor size and preserve hearing, while avoiding the systemic side effects of high dose intravenous VEGF inhibitor infusion and removing or reducing the need for radiation.

              We have completed preclinical studies involving direct intracochlear administration of AAVAnc80 expressing anti-VEGF protein to wild-type mice to assess tolerability, and to determine secreted levels of anti-VEGF protein in the cerebrospinal fluid. Protein expression results from this mouse study supported further evaluation of AK-antiVEGF in non-human primates to understand the measurable levels of anti-VEGF in cochlear fluids and tissues after intracochlear administration. We recently completed a pilot non-human primate tolerability study and are preparing to request a pre-IND meeting with the FDA in                        .

Other Discovery Programs

              We are evaluating additional hearing or deaf-blind disorders, and we intend to continue to identify areas with high unmet need where our precision genetic medicine platform could restore, improve, and preserve hearing.

Our Manufacturing Approach

              We are building advanced internal scientific AAV process development and manufacturing capabilities and we are investing in an internal cGMP manufacturing facility to support our clinical development programs. As a result of the size of the ear, the volume of product candidate necessary for administration is low, particularly in contrast to AAV gene therapies that have been developed to treat disorders that are systemic or present in larger organs. We believe we will only need to deliver a small volume and low doses of vector for near-complete transduction of target cells in the cochlea by the transgene. We are developing scalable manufacturing capabilities for both gene therapy and gene editing. We view the development of internal manufacturing capacity and expertise as a key competitive advantage as it may allow for better control over process development timelines, costs, and intellectual property.

              Our process development and manufacturing strategy is to leverage our scalable precision genetic medicine platform to facilitate rapid progress to clinical development. Our expertise covers development from vector design through drug product manufacture, and we are able to leverage expertise and learnings across multiple product candidates.

              Our production process utilizes a well-characterized system and commonly used host cell for many clinical stage AAV vector products. Additionally, these cells are familiar to regulatory authorities and commercial raw materials and reagents are readily available. We have established a relationship with Lonza, which has performed toxicology manufacturing supply for our AK-OTOF program and will conduct cGMP manufacturing to support clinical development.

              We have and plan to continue to partner with a contract manufacturing organization, or CMO, for production of GLP and cGMP material for our lead product candidate, AK-OTOF. We have performed production runs at various scales, including those at which we intend to produce future clinical and commercial vectors, and we believe we have produced enough materials to perform all planned IND enabling activities. We intend to initiate cGMP activities for the AK-OTOF program with the CMO in the first half of                        .

              We are in the planning stages of building a cGMP manufacturing facility that will have capability to process gene therapy batches to support activities through Phase 1/2 clinical trials for our product candidates beyond AK-OTOF. Our manufacturing facility will leverage single use, disposable, closed system operations aligned to our precision genetic medicine platform to promote both flexibility and cost-effectiveness. Our manufacturing facility is expected to be available for cGMP manufacturing

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for Phase 1/2 clinical development of our product candidates in                        at commercial scale for our product candidates beyond AK-OTOF.

              We currently rely, and expect to continue to rely, on a third-party CMO for the manufacture of our delivery device.

Commercialization

              We intend to directly market and commercialize our lead product candidate, AK-OTOF, if approved in the United States and the European Union, by developing our own sales and marketing force, targeting ear, nose, and throat specialists and audiologists. Outside the United States and the European Union and for any other product candidates that may be approved, we intend to establish marketing and commercialization strategies for each as we approach potential approval and expect to be able to leverage our then-existing sales and marketing force.

Competition

              We face competition from a wide array of companies in the pharmaceutical, biotechnology, and medical device industries. These include both small companies and large companies with much greater financial and technical resources and far longer operating histories than our own. We also compete with the intellectual property, technology, and product development efforts of academic, governmental, and private research institutions.

              Our competitors may have significantly greater financial resources, established presence in the market, expertise in research and development, manufacturing, preclinical and clinical testing, obtaining regulatory approvals and reimbursement, and marketing approved products than we do. These competitors also compete with us in recruiting and retaining qualified scientific, sales, marketing, and management personnel, establishing clinical trial sites and patient registration for clinical trials, and potentially acquiring technologies complementary to, or necessary for, our programs. Smaller or earlier-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

              The key competitive factors affecting the success of any product candidates that we develop, if approved, are likely to be their efficacy, safety, convenience, price, and the availability of reimbursement from government and other third-party payors. Our commercial opportunity for any of our product candidates could be reduced or eliminated if our competitors develop and commercialize products that are more effective, have fewer or less severe side effects, are more convenient, or are less expensive than any products that we may develop. Our competitors also may obtain approval from the FDA or other regulators for their products before we may obtain approval for ours and may commercialize products before we are able to.

              While many companies focus on gene therapies targeting blood, eye, muscle, and neurologic disorders, we are aware of certain companies with active development programs in the hearing space. Decibel Therapeutics, Inc. is focused on hearing and balance disorders. Decibel's lead therapeutic candidate is being investigated for the prevention of ototoxicity associated with cisplatin chemotherapy. Decibel has announced a potential gene therapy for OTOF congenital deafness. In 2017, Decibel announced that it would include one of its product candidates in its strategic collaboration with Regeneron Pharmaceuticals, Inc. whereby Decibel retains worldwide development and commercial rights.

              Frequency Therapeutics, Inc. is developing small-molecule therapeutics to selectively activate progenitor cells. Frequency's lead program is focused on regenerating hair cells through activation of progenitor cells for sensorineural hearing loss and is currently in Phase 2 trials. In 2019, Frequency announced a partnership with AstellasPharma Inc. under which Astellas agreed to oversee development

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and commercialization of its lead program worldwide, except the United States, where Frequency will assume those responsibilities.

              Otonomy, Inc. and Applied Genetic Technologies Corporation have entered into a strategic collaboration to co-develop and co-commercialize an AAV-based gene therapy to restore hearing in individuals with sensorineural hearing loss caused by a mutation in the GJB2 gene. This program is in preclinical development.

              Sensorion SA is focused on developing potential therapies for inner ear disorders. Sensorion has announced a collaboration with Institut Pasteur in gene therapy programs targeting hearing loss. The company has two preclinical gene therapy programs targeting the Usher Syndrome Type I and OTOF-deficiency.

Intellectual Property

              We strive to protect and enhance the proprietary technology, inventions, and improvements that are commercially important to the development of our business, including by seeking, maintaining, and defending patent rights, whether developed internally or licensed from third parties. We also rely on trade secrets, know-how, continuing technological innovation, and in-licensing opportunities to develop, strengthen and maintain our proprietary position in our field. Additionally, we intend to rely on regulatory protection afforded through rare 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 in our intellectual property rights, in particular our patents rights; preserve the confidentiality of our trade secrets; and operate without infringing, misappropriating, or violating the valid and enforceable patents and proprietary rights of third parties. Our ability to stop third parties from making, using, selling, offering to sell, or importing our products may depend on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.

              The patent positions of biotechnology and pharmaceutical companies like ours are generally uncertain and can involve complex legal, scientific, and factual issues. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protection from competitors. We also cannot ensure that patents will issue with respect to any patent applications that we or our licensors may file in the future, nor can we ensure that any of our owned or licensed patents or future patents will be commercially useful in protecting our product candidates and methods of manufacturing the same. In addition, the coverage claimed in a patent application may be significantly reduced before a patent is issued, and its scope can be reinterpreted and even challenged after issuance. As a result, we cannot guarantee that any of our products will be protected or remain protectable by enforceable patents. Moreover, any patents that we hold may be challenged, circumvented, or invalidated by third parties. See "Risk Factors—Risks Related to Our Intellectual Property" for a more comprehensive description of risks related to our intellectual property.

              We generally file patent applications directed to our key programs in an effort to secure our intellectual property positions vis-a-vis these programs. Additionally, we file patent applications and in-license patents and patent applications directed to our genetic medicine platform, which includes AAVs and related technology, delivery devices and methods, and other related technologies. As of March 31, 2020, we owned one U.S. pending non-provisional patent application, six foreign pending patent applications, six pending Patent Cooperation Treaty, or PCT, applications and seven pending U.S. provisional patent applications and we had licenses to 10 granted or allowed U.S and foreign patents and 21 pending U.S. and foreign patent applications covering our key programs and pipeline.

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              For any individual patent, the term depends on the applicable law in the country in which the patent is granted. In most countries where we have filed patent applications or in-licensed patents and patent applications, patents have a term of 20 years from the application filing date or earliest claimed nonprovisional priority date. In the United States, the patent term is 20 years but may be shortened if a patent is terminally disclaimed over another patent that expires earlier. The term of a U.S. patent may also be lengthened by a patent term adjustment in order to address administrative delays by the U.S. Patent and Trademark Office in granting a patent.

              In the United States, the term of a patent that covers an FDA-approved drug or biologic may be eligible for patent term extension in order to restore the period of a patent term lost during the premarket FDA regulatory review process. The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the natural expiration of the patent. The patent term restoration period is generally equal to the regulatory review period for the approved product which period occurs after the date the patent issued, subject to certain exceptions. Only one patent may be extended for a regulatory review period for any product, and the application for the extension must be submitted prior to the expiration of the patent. In the future, we may decide to apply for restoration of patent term for one of our currently owned or licensed patents to extend its current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant biologics license application.

              The intellectual property portfolio for our most advanced programs as of March 31, 2020, is summarized below. Prosecution is a lengthy process, during which the scope of the claims initially submitted for examination by the U.S. Patent and Trademark Office may be significantly narrowed before issuance, if issued at all. We expect this may be the case with respect to some of our pending patent applications referred to below.

AK-OTOF

              The patent portfolio for our AK-OTOF program is based upon our owned and in-licensed patent portfolio, which includes patents and patent applications directed generally to compositions of matter, pharmaceutical compositions, and methods of delivering and using the same to treat hearing loss. The in-licensed patents and patent applications are subject to license agreements with the Massachusetts Eye and Ear Infirmary and The Schepens Eye Research Institute, Inc., which we refer to collectively as MEE, and Lonza, as described herein. As of March 31, 2020, we owned or in-licensed four U.S. patents, four foreign patents, and 25 pending U.S., PCT, and foreign patent applications covering our product candidate AK-OTOF, including methods of treatment of hearing loss. While we believe that the specific and generic claims contained in our pending applications provide protection for the composition of matter and the method of using AK-OTOF to treat hearing loss, third parties may nevertheless challenge such claims in our patents. If any such claims are invalidated or rendered unenforceable for any reason, we will lose valuable intellectual property rights, and our ability to prevent others from competing with us would be impaired. Any U.S. or ex-U.S. patents that may issue from pending applications that we control, if any, for our hearing program, including our lead product candidate AK-OTOF, are projected to have a statutory expiration date in between 2034 and 2041, excluding any additional term for patent term adjustments or patent term extensions, if applicable.

AK-antiVEGF

              The patent portfolio for our AK-antiVEGF program is based upon our owned and in-licensed patent portfolio that includes patents and patent applications directed generally to compositions of matter, pharmaceutical compositions, and methods of delivering and using the same to treat vestibular schwannoma. The in-licensed patents and patent applications are subject to license agreements with MEE and Lonza described herein. As of March 31, 2020, we owned or in-licensed four U.S. patents, four foreign patents, and 17 pending U.S., PCT, and foreign patent applications covering our vestibular

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schwannoma product candidate, including methods of treatment of vestibular schwannoma. While we believe that the specific and generic claims contained in our pending applications provide protection for the composition of matter and the method of using our vestibular schwannoma candidate, third parties may nevertheless challenge such claims in our patents. If any such claims are invalidated or rendered unenforceable for any reason, we will lose valuable intellectual property rights, and our ability to prevent others from competing with us would be impaired. Any U.S. or ex-U.S. patents that may issue from pending applications that we control, if any, for our hearing program, including our product candidate for vestibular schwannoma, are projected to have a statutory expiration date in between 2034 and 2038, excluding any additional term for patent term adjustments or patent term extensions, if applicable.

Trademark Protection

              As of March 31, 2020, we owned two trademark applications for AKOUOS, INC. with the U.S. Patent and Trademark Office. We plan to register trademarks in connection with our biological products.

Licensed Intellectual Property

Massachusetts Eye and Ear License

              In October 2017, we entered into a License Agreement with MEE, or the MEE License, under which we received an exclusive, non-transferable, sublicensable, worldwide, royalty-bearing license to certain patent rights and know-how, including rights related to AAVAnc, including AAVAnc80, to research, develop, make, have made, manufacture, use, sell, offer to sell, import, export, market, promote, distribute, register and otherwise commercially exploit licensed products in the treatment, diagnosis, prevention, and palliation of any and all balance disorders or diseases pertaining to the inner ear and/or any and all hearing diseases or disorders, in each case, with a total prevalence in the United States of less than 3,000 patients, and an exclusive, non-transferable, sublicensable, worldwide, royalty-bearing license under MEE's rights, title and interest in certain patents co-owned by MEE and Children's Medical Center Corporation, or BCH, to research, develop, make, have made, manufacture, use, sell, offer to sell, import, export, market, promote, distribute, register and otherwise commercially exploit licensed products in the treatment, diagnosis, prevention, and palliation of any and all balance disorders or diseases pertaining to the inner ear and/or any and all hearing diseases or disorders, including, but not limited to, those with a total prevalence in the United States of less than 3,000 patients. We are obligated to use commercially reasonable efforts to develop and commercialize the MEE licensed products, including filing an IND or Investigational Medicinal Product Dossier in any country in the European Union or an equivalent application in any country within 18 months of completion of GLP toxicology studies for a licensed product. Under certain circumstances, we may be obligated to pursue a program directed to a gene target in order to retain our rights under the agreement to such gene target. MEE is responsible for the prosecution and maintenance of licensed patent rights. If MEE elects not to file, continue to prosecute or maintain such licensed patent rights in our field of use, MEE must notify us within a specified period before any applicable deadline. We would then have the right, but not the obligation, to file, continue to prosecute, or maintain the licensed patent rights. MEE has the first right, but not the duty, to enforce the licensed patents against use by a third party. If MEE does not initiate enforcement of the patents within a specified period after learning of an infringement, then we have the right, but not the duty, to initiate such enforcement efforts within our field of use of the MEE License. If a third party brings an infringement action regarding the patents within our field of use, we have the right, with respect to certain intellectual property rights in the MEE License, to defend at our own cost and expense. MEE has the right to intervene and assume control of such a defense at its own expense.

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              Upon entering into the MEE License, we issued shares of our common stock to MEE. We are also subject to development, regulatory, and sales milestone payment obligations in amounts corresponding to achievements denoted in the MEE License, totaling approximately $17.7 million. We are additionally obligated to pay certain royalties on a licensed product-by-licensed product and country-by-country basis, beginning after the first commercial sale of an MEE licensed product in a given country and lasting until the later of (i) the expiration of the last valid claim in the licensed patents or (ii) ten years after the first commercial sale of such MEE licensed product or products commercialized using BCH's patent rights, or the MEE Royalty Term. Such royalties shall be based on the portion of annual worldwide net sales within certain royalty tiers at percentages in the mid to high single digits denoted in the MEE License. The mere manufacture of an MEE licensed product or a product commercialized using BCH's patent rights without a sale or other transfer does not give rise to a royalty claim under the MEE License.

              The MEE License remains in effect until the last expiration date of the last to expire MEE Royalty Term, unless terminated earlier. We have the right to terminate the MEE License at will, in its entirety or with respect to specific intellectual property rights licensed to us under the MEE License and with or without cause, by 90 days' advance written notice to MEE, or upon MEE's material breach of the MEE License, provided that MEE does not cure such material breach within a specified period. MEE has the right to terminate the MEE License in its entirety if (i) we fail to make any payment due within a specified period after MEE notifies us of such failure, (ii) we or our affiliates challenge the validity of the licensed patent rights, (iii) we fail to maintain required insurance, or (iv) we become insolvent or bankrupt. MEE also has the right to terminate our rights to specific intellectual property rights it has licensed to us under the MEE License if we materially breach certain diligence obligations and do not cure within a specified period after written notice from MEE.

Lonza Houston, Inc. Sublicense

              In October 2017, we entered into a Sublicense Agreement with Lonza, or the Lonza Sublicense, as amended on December 11, 2018, under which we received an exclusive, non-transferable, sublicensable, worldwide, royalty-bearing sublicense to certain MEE patent rights and know-how related to AAV ancestral technology, including AAVAnc80, to research, develop, make, have made, manufacture, use, sell, offer to sell, import, export, market, promote, distribute, register and otherwise commercially exploit licensed products for the treatment, diagnosis, prevention, and palliation of any and all balance disorders or diseases pertaining to the inner ear and/or any and all hearing diseases or disorders, but excluding all such disorders or diseases with a total prevalence in the United States of less than 3,000 patients. We are obligated to use commercially reasonable efforts to develop and commercialize the Lonza sublicensed products, including filing an IND or Investigational Medicinal Product Dossier in any country in the European Union or an equivalent application in any country within 18 months of completion of GLP toxicology studies for a licensed product. Under certain circumstances, we may be obligated to pursue a program directed to a gene target in order to retain our rights under the agreement to such gene target. MEE is responsible for the prosecution and maintenance of patent rights licensed to Lonza and sublicensed by Lonza to us. If MEE elects not to file, continue to prosecute, or maintain the patent rights in the field of use sublicensed to us, MEE must notify us within a specified period before any applicable deadline. We would then have the right, but not the obligation, to file, continue to prosecute or maintain the patent rights within our field of use of the Lonza Sublicense. If we assume responsibility for the prosecution or maintenance of the patent rights in our field of use and elect not to continue prosecution or maintenance of such rights, we must notify Lonza in writing within a specified period before any applicable deadline. MEE has the first right, but not the duty, to enforce the patents against use by a third party. If MEE does not initiate enforcement of the patents within a specified period after learning of an infringement, then we shall have the right, but not the duty, to initiate such enforcement efforts within our field of use of the Lonza Sublicense. If we do not initiate efforts to cease an infringement within a specified period from

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which we gained the right to, then Lonza shall have the right, but not the duty, to initiate enforcement efforts. If a third party brings an infringement action regarding the patents within our field of use, we shall have the right, with respect to certain intellectual property rights in the Lonza Sublicense, to defend at our own cost and expense. MEE and/or Lonza shall have the right to intervene and assume control of such a defense at its own expense.

              Upon entering into the Lonza Sublicense, we issued shares of our common stock to Lonza. We are also subject to development, regulatory, and sales milestone payment obligations in amounts corresponding to achievements denoted in the Lonza Sublicense, totaling approximately $18.5 million. We are additionally obligated to pay certain royalties beginning after the first commercial sale of a Lonza sublicensed product and lasting until the later of (i) the expiration of the last valid claim in the patent or (ii) ten years after the first commercial sale of such Lonza sublicensed product, or the Lonza Royalty Term. Such royalties shall be based on the portion of annual worldwide net sales within certain royalty tiers at percentages in the mid to high-single digits denoted in the Lonza Sublicense. The mere manufacture of a Lonza sublicensed product without a sale or other transfer does not give rise to a royalty claim under the Lonza Sublicense.

              The Lonza Sublicense remains in effect until the last expiration date of the last to expire Lonza Royalty Term, unless terminated earlier. We have the right to terminate the Lonza Sublicense at will, in its entirety or with respect to specific intellectual property rights sublicensed to us under the Lonza Sublicense and with or without cause, by 90 days' advance written notice to Lonza, or upon Lonza's material breach of the Lonza Sublicense, provided that Lonza does not cure such material breach within a specified period. Lonza has the right to terminate the Lonza Sublicense in its entirety if (i) we fail to make any payment due within a specified period after Lonza notifies us of such failure, (ii) we or our affiliates challenge the validity of the sublicensed patent rights, (iii) we fail to maintain required insurance, or (iv) we become insolvent or bankrupt. Lonza also has the right to terminate our rights to specific intellectual property rights it has sublicensed to us under the Lonza Sublicense if we materially breach certain diligence obligations and do not cure within a specified period after written notice from Lonza.

              In October 2017, we entered into a Letter Agreement Regarding Sublicense of Ancestral Technology, or the Letter Agreement, with MEE regarding the Lonza Sublicense. The purpose of the Letter Agreement was to confirm the understanding between MEE and us regarding the patent rights and know-how sublicensed to us in the Lonza Sublicense.

              MEE consented to the execution, delivery, and performance of the Lonza Sublicense and agreed to abide by the terms and conditions of the Lonza Sublicense which are expressly applicable to each of them to the same extent as if they were each a party to the Lonza Sublicense. To the extent that any terms of the Lonza Sublicense conflict with the terms of the license agreement Lonza entered into in August 2016 with MEE, or the Lonza License, the terms of the Lonza Sublicense shall control. MEE also agreed to waive and release any and all rights to enforce terms, conditions, and provisions of the Lonza License which conflict with the Lonza Sublicense. Between the MEE License and the Lonza Sublicense, we have the license rights to any and all balance disorders or diseases pertaining to the inner ear and/or any and all hearing diseases or disorders described above at all prevalence levels.

Government Regulation

              Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing, manufacture, pricing, reimbursement, sales, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical products, including biological products. The processes for obtaining marketing approvals in the United States and in

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foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.

Licensure and Regulation of Biologics in the United States

              In the United States, our product candidates would be regulated as biological products, or biologics, under the Public Health Service Act, or PHSA, and the FDCA and its implementing regulations and guidances. The failure to comply with the applicable U.S. requirements at any time during the product development process, including preclinical testing, clinical testing, the approval process, or post-approval process, may subject an applicant to delays in the conduct of the study, regulatory review, and approval, and/or administrative or judicial sanctions. These sanctions may include, but are not limited to, the FDA's refusal to allow an applicant to proceed with clinical testing, refusal to approve pending applications, license suspension, or revocation, withdrawal of an approval, warning letters, adverse publicity, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, and civil or criminal investigations, and penalties brought by the FDA or the Department of Justice, or DOJ, and other governmental entities, including state agencies.

              An applicant seeking approval to market and distribute a new biologic in the United States generally must satisfactorily complete each of the following steps:

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Preclinical Studies and Investigational New Drug Application

              Before testing any biologic product candidate in humans, including a gene therapy product candidate, the product candidate must undergo preclinical testing. Preclinical tests include laboratory evaluations of product chemistry, formulation and stability, as well as studies to evaluate the potential for efficacy and toxicity in animal studies. The conduct of the preclinical tests and formulation of the compounds for testing must comply with federal regulations and requirements. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND application.

              An IND is an exemption from the FDCA that allows an unapproved product candidate to be shipped in interstate commerce for use in an investigational clinical trial and a request for FDA authorization to administer such investigational product to humans. The IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions about the product or conduct of the proposed clinical trial, including concerns that human research subjects will be exposed to unreasonable health risks. In that case, the IND sponsor and the FDA must resolve any outstanding FDA concerns before the clinical trials can begin or recommence.

              As a result, submission of the IND may result in the FDA not allowing the trials to commence or allowing the trial to commence on the terms originally specified by the sponsor in the IND. If the FDA raises concerns or questions either during this initial 30-day period, or at any time during the IND process, it may choose to impose a partial or complete clinical hold. Clinical holds are imposed by the FDA whenever there is concern for patient safety and may be a result of new data, findings, or developments in clinical, preclinical, and/or chemistry, manufacturing, and controls. This order issued by the FDA would delay either a proposed clinical trial or cause suspension of an ongoing trial, until all outstanding concerns have been adequately addressed and the FDA has notified the company that investigations may proceed. This could cause significant delays or difficulties in completing our planned clinical trial or future clinical trials in a timely manner.

              Additionally, gene therapy clinical trials conducted at institutions that receive funding for recombinant DNA research from the U.S. National Institutes of Health, or the NIH, also are potentially subject to review by a committee within the NIH's Office of Science Policy called the Novel and Exceptional Technology and Research Advisory, or the NExTRAC. As of 2019, the charter of this review group has evolved to focus public review on clinical trials that cannot be evaluated by standard oversight bodies and pose unusual risks. With certain gene therapy protocols, FDA review of or clearance to allow the IND to proceed could be delayed if the NExTRAC decides that full public review of the protocol is warranted. 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.

Expanded Access to an Investigational Drug for Treatment Use

              Expanded access, sometimes called "compassionate use," is the use of investigational products outside of clinical trials to treat patients with serious or immediately life-threatening diseases or conditions when there are no comparable or satisfactory alternative treatment options. The rules and regulations related to expanded access are intended to improve access to investigational products for

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patients who may benefit from investigational therapies. FDA regulations allow access to investigational products under an IND by the company or the treating physician for treatment purposes on a case-by-case basis for: individual patients (single-patient IND applications for treatment in emergency settings and non-emergency settings); intermediate-size patient populations; and larger populations for use of the investigational product under a treatment protocol or treatment IND application.

              When considering an IND application for expanded access to an investigational product with the purpose of treating a patient or a group of patients, the sponsor and treating physicians or investigators will determine suitability when all of the following criteria apply: patient(s) have a serious or immediately life-threatening disease or condition, and there is no comparable or satisfactory alternative therapy to diagnose, monitor, or treat the disease or condition; the potential patient benefit justifies the potential risks of the treatment and the potential risks are not unreasonable in the context or condition to be treated; and the expanded use of the investigational drug for the requested treatment will not interfere initiation, conduct, or completion of clinical investigations that could support marketing approval of the product or otherwise compromise the potential development of the product.

              There is no obligation for a sponsor to make its drug products available for expanded access; however, as required by the 21st Century Cures Act, or Cures Act, passed in 2016, if a sponsor has a policy regarding how it responds to expanded access requests, it must make that policy publicly available. Although these requirements were rolled out over time, they have now come into full effect. This provision requires drug and biologic companies to make publicly available their policies for expanded access for individual patient access to products intended for serious diseases. Sponsors are required to make such policies publicly available upon the earlier of initiation of a Phase 2 or Phase 3 trial; or 15 days after the investigational drug or biologic receives designation as a breakthrough therapy, fast track product, or regenerative medicine advanced therapy.

              In addition, on May 30, 2018, the Right to Try Act was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational products that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for a manufacturer to make its investigational products available to eligible patients as a result of the Right to Try Act.

Human Clinical Trials in Support of a BLA

              Clinical trials involve the administration of the investigational product candidate to healthy volunteers or patients with the disease or condition to be treated under the supervision of a qualified principal investigator in accordance with GCP requirements. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, inclusion and exclusion criteria, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND.

              A sponsor who wishes to conduct a clinical trial outside the United States may, but need not, obtain FDA authorization to conduct the clinical trial under an IND. When a foreign clinical trial is conducted under an IND, all FDA IND requirements must be met unless waived. When a foreign clinical trial is not conducted under an IND, the sponsor must ensure that the trial complies with certain regulatory requirements of the FDA in order to use the trial as support for an IND or application for marketing approval. Specifically, the FDA requires that such trials be conducted in accordance with GCP, including review and approval by an independent ethics committee and informed consent from participants. The GCP requirements encompass both ethical and data integrity standards for clinical trials. The FDA's regulations are intended to help ensure the protection of human subjects enrolled in non-IND foreign clinical trials, as well as the quality and integrity of the resulting data. They further help ensure that non-IND foreign trials are conducted in a manner comparable to that required for clinical trials in the United States.

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              Further, each clinical trial must be reviewed and approved by an IRB either centrally or individually at each institution at which the clinical trial will be conducted. The IRB will consider, among other things, clinical trial design, patient informed consent, ethical factors, the safety of human subjects, and the possible liability of the institution. An IRB must operate in compliance with FDA regulations. The FDA, IRB, or the clinical trial sponsor may suspend or discontinue a clinical trial at any time for various reasons, including a finding that the clinical trial is not being conducted in accordance with FDA requirements or that the participants are being exposed to an unacceptable health risk. Clinical testing also must satisfy extensive GCP rules and the requirements for informed consent.

              Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board, or DSMB. This group may recommend continuation of the trial as planned, changes in trial conduct, or cessation of the trial at designated check points based on certain available data from the trial to which only the DSMB has access. Finally, research activities involving infectious agents, hazardous chemicals, recombinant DNA, and genetically altered organisms and agents may be subject to review and approval of an Institutional Biosafety Committee, or IBC, in accordance with NIH Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules.

              Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. Additional studies may be required after approval.

              In some cases, the FDA may approve a BLA for a product but require the sponsor to conduct additional clinical trials to further assess the product's safety and effectiveness after approval. Such post-approval trials are typically referred to as Phase 4 clinical trials. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication and to document a clinical benefit in the case of biologics approved under accelerated approval regulations. If the FDA approves a product while a company has ongoing clinical trials that were not necessary for approval, a company may be able to use the data from these clinical trials to meet all or part of any Phase 4 clinical trial requirement or to request a change in the product labeling. Failure to exhibit due diligence with regard to conducting Phase 4 clinical trials could result in withdrawal of approval for products.

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              Under the Pediatric Research Equity Act of 2003, a BLA or supplement thereto must contain data that are adequate to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. Sponsors must also submit pediatric study plans prior to the assessment data. Those plans must contain an outline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral or waiver requests, and other information required by regulation. The applicant, the FDA, and the FDA's internal review committee must then review the information submitted, consult with each other, and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time.

              For products intended to treat a serious or life-threatening disease or condition, the FDA must, upon the request of an applicant, meet to discuss preparation of the initial pediatric study plan or to discuss deferral or waiver of pediatric assessments. In addition, FDA will meet early in the development process to discuss pediatric study plans with sponsors and FDA must meet with sponsors by no later than the end-of-phase 1 meeting for serious or life-threatening diseases and by no later than 90 days after FDA's receipt of the study plan.

              The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Additional requirements and procedures relating to deferral requests and requests for extension of deferrals are contained in the Food and Drug Administration Safety and Innovation Act. Unless otherwise required by regulation, the pediatric data requirements do not apply to products with orphan designation.

              Information about applicable clinical trials must be submitted within specific timeframes to the NIH for public dissemination on its ClinicalTrials.gov website.

Special Regulations and Guidance Governing Gene Therapy Products

              We expect that the procedures and standards applied to gene therapy products will be applied to any product candidates we may develop. The FDA has defined a gene therapy product as one that seeks to modify or manipulate the expression of a gene or to alter the biological properties of living cells for therapeutic use. The products may be used to modify cells in vivo or transferred to cells ex vivo prior to administration to the recipient.

              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 Tissues and Advanced Therapies, and the FDA has established the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its reviews. The NIH, including NExTRAC, also advises the FDA on gene therapy issues and other issues related to emerging biotechnologies. The FDA and the NIH have published guidance documents with respect to the development and submission of gene therapy protocols.

              The FDA has issued various guidance documents regarding gene therapies, including recent final guidance documents released in January 2020 relating to chemistry, manufacturing, and controls information for gene therapy INDs, long-term follow-up after the administration of gene therapy products, gene therapies for rare diseases and gene therapies for retinal disorders. Although the FDA has indicated that these and other guidance documents it previously issued are not legally binding, compliance with them is likely necessary to gain approval for any gene therapy product candidate. The guidance documents provide 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 chemistry, manufacturing, and control 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 for potential delayed adverse effects in participants who have received

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investigational gene therapies with the duration of follow-up based on the potential for risk of such effects. For AAV vectors specifically, the FDA typically recommends that sponsors continue to monitor participants for potential gene therapy-related adverse events for up to a five-year period.

              Until 2019, most gene therapy clinical trials in the United States required pre-review by the predecessor of NExTRAC before being approved by the IRBs and any local biosafety boards or being allowed to proceed by FDA. In 2019, the NIH substantially eliminated the pre-review process and going forward, the review of gene therapy clinical trial protocols would be largely handled by local IRBs and IBCs, in addition to FDA. Furthermore, in 2019, the NIH removed from public access the Genetic Modification Clinical Research Information System database, which previously contained substantial amounts of safety and other participant information regarding human gene therapy trials performed up to that time.

Compliance with cGMP Requirements

              Before approving a BLA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. The PHSA emphasizes the importance of manufacturing control for products like biologics whose attributes cannot be precisely defined.

              Manufacturers and others involved in the manufacture and distribution of products must also 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. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded under the FDCA. Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMPs and other laws. Inspections must follow a "risk-based schedule" that may result in certain establishments being inspected more frequently. Manufacturers may also have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection by the FDA may lead to a product being deemed to be adulterated.

Review and Approval of a BLA

              The results of product candidate development, preclinical testing, and clinical trials, including negative or ambiguous results as well as positive findings, are submitted to the FDA as part of a BLA requesting license to market the product. The BLA must contain extensive manufacturing information and detailed information on the composition of the product and proposed labeling as well as payment of a user fee. Under federal law, the submission of most BLAs is subject to an application user fee, which for federal fiscal year 2020 is $2,942,965 for an application requiring clinical data. The sponsor of a licensed BLA is also subject to an annual program fee, which for fiscal year 2020 is $325,424. Certain exceptions and waivers are available for some of these fees, such as an exception from the application fee for products with orphan designation and a waiver for certain small businesses.

              The FDA has 60 days after submission of the application to conduct an initial review to determine whether it is sufficient to accept for filing based on the agency's threshold determination that it is sufficiently complete to permit substantive review. Once the submission has been accepted for filing, the FDA begins an in-depth review of the application. Under the goals and policies agreed to by the FDA under the PDUFA, the FDA has ten months in which to complete its initial review of a standard application and respond to the applicant, and six months for a priority review of the application. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs. The review process may often be significantly extended by FDA requests for additional information or

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clarification. The review process and the PDUFA goal date may be extended by three months if the FDA requests or if the applicant otherwise provides additional information or clarification regarding information already provided in the submission within the last three months before the PDUFA goal date.

              Under the PHSA, the FDA may approve a BLA if it determines that the product is safe, pure, and potent, and the facility where the product will be manufactured meets standards designed to ensure that it continues to be safe, pure, and potent. On the basis of the FDA's evaluation of the application and accompanying information, including the results of the inspection of the manufacturing facilities and any FDA audits of preclinical and clinical trial sites to assure compliance with GCPs, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. If the application is not approved, the FDA will issue a complete response letter, which will contain the conditions that must be met in order to secure final approval of the application, and when possible will outline recommended actions the sponsor might take to obtain approval of the application. Sponsors that receive a complete response letter may submit to the FDA information that represents a complete response to the issues identified by the FDA. Such resubmissions are classified under PDUFA as either Class 1 or Class 2. The classification of a resubmission is based on the information submitted by an applicant in response to an action letter. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has two months to review a Class 1 resubmission and six months to review a Class 2 resubmission. The FDA will not approve an application until issues identified in the complete response letter have been addressed.

              The FDA may also refer the application to an advisory committee for review, evaluation, and recommendation as to whether the application should be approved. In particular, 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, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates, and provides 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.

              If the FDA approves a new product, it may limit the approved indication(s) for use of the product. It may also require that contraindications, warnings, or precautions be included in the product labeling. In addition, the FDA may call for post-approval studies, including Phase 4 clinical trials, to further assess the product's efficacy and/or safety after approval. The agency may also require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, including REMS, to help ensure that the benefits of the product outweigh the potential risks. REMS can include medication guides, communication plans for healthcare professionals, and elements to assure safe use, or ETASU. ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patent registries. The FDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. After approval, many types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.

Fast Track, Breakthrough Therapy, Priority Review, and Regenerative Medicine Advanced Therap