UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2018

OR

For the transition period from                      to                     

Commission File Number: 001-38707

LogicBio Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

610 Main Street, 3^rd Floor

Cambridge, MA 02139

(617) 245-0399

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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

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

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.

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

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

As of November 30, 2018, the registrant had 22,176,129 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” or similar expressions, or the negative or plural of these words or expressions. These forward-looking statements include statements concerning the following:

These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in greater detail under the heading “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. You should not rely upon forward-looking statements as predictions of future events.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements in this Quarterly Report on Form 10-Q, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q.

Unless the context otherwise requires, the terms “LogicBio,” “LogicBio Therapeutics Inc.,” the “Company,” “we,” “us,” “our” and similar references in this Quarterly Report on Form 10-Q refer to LogicBio Therapeutics Inc. and its subsidiaries.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

LogicBio Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

See notes to consolidated financial statements.

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LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

(Unaudited)

See notes to consolidated financial statements.

5

LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)

See notes to consolidated financial statements.

6

LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit

(In thousands, except share data)

(Unaudited)

See notes to consolidated financial statements.

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LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

See notes to consolidated financial statements.

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LogicBio Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share data)

(Unaudited).

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

LogicBio Therapeutics, Inc. (“LogicBio” or the “Company”) was incorporated in 2014 as a Delaware corporation. Its principal offices are in Cambridge, Massachusetts. The Company is a genome editing company focused on developing medicines to durably treat rare diseases in patients with significant unmet medical need, using GeneRide, its proprietary technology platform. GeneRide technology is designed to precisely and stably integrate corrective genes into a patient’s genome to provide a durable therapeutic effect. The Company has demonstrated proof of concept of its therapeutic platform in animal models for a number of diseases and is focusing on its lead product candidate, LB-001, for the treatment of Methylmalonic Acidemia, a life-threatening disease that presents at birth.

Since its inception, the Company has devoted the majority of its efforts to business planning, research and development, developing markets, raising capital, recruiting management and technical staff. The Company is subject to a number of risks similar to those of other companies conducting high-risk, early-stage research and development of product candidates. Principal among these risks are a dependency on key individuals and intellectual property, competition from other products and companies, and the technical risks associated with the successful research, development and clinical manufacturing of its product candidates. The Company’s success is dependent upon its ability to continue to raise additional capital in order to fund ongoing research and development, meet its obligations and, ultimately, obtain regulatory approval of its products, successfully commercialize its products, generate revenue and, attain profitable operations.

Through September 30, 2018, the Company had funded its operations primarily with proceeds from the sale of convertible preferred stock (see Note 6). On October 23, 2018, the Company completed an initial public offering (“IPO”) in which the Company issued and sold 8,050,000 shares of its common stock, including 1,050,000 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $10.00 per share, for aggregate gross proceeds of $80,500. The Company received approximately $72,400 in net proceeds after deducting underwriting discounts and commissions and offering costs.

In connection with the IPO, the Company effected a one-for-1.90993 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for the Company’s convertible preferred stock. The reverse stock split became effective on October 8, 2018. Accordingly, all share and per share amounts of common stock for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect this reverse stock split and adjustment of the preferred stock conversion ratios.

Upon the closing of the IPO, all of the outstanding shares of convertible preferred stock automatically converted into 11,789,775 shares of common stock at the applicable conversion ratio then in effect. Subsequent to the closing of the IPO, there were no shares of convertible preferred stock outstanding. The financial statements as of September 30, 2018, including share and per share amounts, do not give effect to the IPO, as it closed subsequent to September 30, 2018.

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Management believes that the Company’s existing cash and cash equivalents, together with the net proceeds from the IPO, will allow the Company to continue its operations through 2020. In the absence of a significant source of recurring revenue, the continued viability of the Company beyond that point is dependent on its ability to continue to raise additional capital to finance its operations. There can be no assurance that the Company will be able to obtain sufficient capital to cover its costs on acceptable terms, if at all.

The accompanying unaudited condensed consolidated financial statements as of September 30, 2018 and for the three and nine months ended September 30, 2018 and 2017 have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2017 included in the Company’s final prospectus that forms a part of the Company’s Registration Statement on Form S-1 (Reg. No. 333-227523), filed with the SEC pursuant to Rule 424(b)(4) on October 22, 2018 (the “Prospectus”).

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments which are necessary for a fair statement of the Company’s financial position as of September 30, 2018, consolidated results of operations for the three and nine months ended September 30, 2018 and 2017 and cash flows for the nine months ended September 30, 2018 and 2017. Such adjustments are of a normal and recurring nature. The results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2018.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2017 and the notes thereto, which are included in the Company’s Prospectus. Since the date of those financial statements, there have been no material changes to its significant accounting policies.

Principles of Consolidation

In January 2016, the Company formed LogicBio Research, a wholly owned Israeli subsidiary, for the purpose of conducting research and development activities on the Company’s behalf. As of September 30, 2018, all operations had ceased for LogicBio Research. In April 2018, the Company formed LogicBio Australia Pty Limited (“LogicBio Australia”), a wholly owned Australian subsidiary, for the purpose of conducting research and development activities on the Company’s behalf. As of September 30, 2018, no activity had commenced for LogicBio Australia. The accompanying condensed consolidated financial statements include the accounts of the Company and LogicBio Research. All intercompany accounts and transactions have been eliminated in consolidation.

Deferred Offering Costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded in stockholders’ (deficit) equity as a reduction of proceeds generated as a result of the offering.

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Should a planned equity financing be abandoned, the deferred offering costs would be expensed immediately as a charge to operating expenses in the condensed consolidated statement of operations. The Company recorded deferred offering costs, related to the IPO, of $1,882 as of September 30, 2018 and are included in other assets. Upon closing the IPO in October 2018, deferred offering costs were derecognized and recorded against the IPO proceeds as a debit to additional paid-in capital.

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606) (ASU No. 2014-09),” which modifies how all entities recognize revenue, and consolidates into one ASC (ASC Topic 606, Revenue from Contracts with Customers) the current guidance found in ASC Topic 605, and various other revenue accounting standards for specialized transactions and industries. ASU No. 2014-09 outlines a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 may be applied using either a full retrospective approach, under which all years included in the financial statements will be presented under the revised guidance, or a modified retrospective approach, under which financial statements will be prepared under the revised guidance for the year of adoption, but not for prior years. Under the latter method, entities will recognize a cumulative catch-up adjustment to the opening balance of retained earnings at the effective date for contracts that still require performance by the entity at the date of adoption.

In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date (ASU No. 2015-14),” which defers the effective date of ASU No. 2014-09 by one year. The guidance will be effective for the Company for annual reporting period beginning after December 15, 2018. To date, the Company has not had any arrangements that are within the scope of ASU No. 2014-09, or its predecessor, ASC Topic 605. Adoption of ASU No. 2014-09 did not have any impact on the Company’s financial statements.

In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,” which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The standard is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The implementation of ASU 2017-09 did not have a material effect on the Company’s consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” These amendments expand the scope of Topic 718, Compensation—Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, Equity—Equity-Based Payments to Non-Employees. This standard is effective for public companies for annual periods beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted as long as ASU No. 2014-09 has been adopted by the Company. Adoption of ASU No. 2018-07 did not have a material impact on the Company’s financial statements.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. The ASU will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently in the process of evaluating the impact of the adoption of ASU No. 2016-02 on the Company’s financial statements.

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In December 2016, the FASB issued ASU No. 2016-18, ”Statement of Cash Flows (Topic 230): Restricted Cash.” ASU No. 2016-18 provides guidance on the classification and presentation of changes in restricted cash and cash equivalents in the statement of cash flows. ASU No. 2016-18 is effective for fiscal years beginning in 2019 with early adoption permitted. The Company does not expect the adoption of ASU No. 2016-18 to have a significant impact on its statements of cash flows because the Company does not have restricted cash.

3. FAIR VALUE MEASUREMENTS

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

There have been no transfers between fair value measure levels during the three and nine months ended September 30, 2018.

4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities at September 30, 2018 and December 31, 2017 consisted of the following:

Accrued compensation and benefits consists primarily of accrued bonuses, accrued commissions, and accrued vacation. Accrued professional services consists primarily of consulting services and legal services.

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5. SIGNIFICANT AGREEMENTS

Research Agreement

In August 2018, the Company entered into a new research agreement with a contract research organization to pay for services related to certain research and development activities relevant to its programs to be identified in supplements to the research agreement. In September 2018, two supplements to the research agreement were entered into. The Company recorded $258 as deferred research and development expenses related to this agreement as of September 30, 2018, included in prepaid expenses and other current assets.

6. CONVERTIBLE PREFERRED STOCK

Series A Preferred Stock and Series B convertible preferred stock (“Series B Preferred Stock”) is collectively referred to as “Preferred Stock.” As of September 30, 2018 and December 31, 2017, Preferred Stock consisted of the following:

On October 23, 2018, upon the closing of the Company’s IPO, all outstanding shares of Preferred Stock converted into 11,789,775 shares of the Company’s common stock.

The following is a summary of the rights and privileges of the preferred stockholders as of September 30, 2018.

Conversion: Each share of Preferred Stock was convertible, at the option of the holder, at any time, into shares of common stock on a one-for-1.90993 basis. The conversion ratio was determined by dividing the original issue price of $1.4933 by the conversion price of $0.78186. The Preferred Stock would automatically convert into shares of common stock at the closing a Qualified IPO (as defined in the Company’s Amended and Restated Certificate of incorporation, as amended from time to time) or in a non-Qualified IPO, upon the approval of at least 60% of the Preferred Stockholders.

Liquidation Preference: In the event of any liquidation or “Deemed Liquidation Event,” defined below, the preferred stockholders would have been entitled to the greater of (i) the original issue price of the Preferred Stock plus any accrued dividends not yet paid plus any other dividends declared and unpaid or (ii) the amount payable had all classes of shares been converted to common stock. In the event of a Deemed Liquidation Event, accrued dividends would not exceed 40% of the original issue price. After payments of all preferential amounts are made to the Preferred Stockholders, any remaining assets would be distributed to the common stockholders on a pro rata basis. A Deemed Liquidation Event was defined as a merger, consolidation, reorganization or similar transaction; the sale transfer, exclusive license of all or substantially all of the Company’s assets/intellectual property; or the sale or transfer of shares to any person (or group of related or affiliated persons), directly or indirectly, representing a greater than 50% of the voting power of the voting securities of the Company.

Dividends: Dividends accrued at a rate of 8.0% of the original issue price per year, per share, on the anniversary of the issuance date. Dividends were cumulative; however, accrued dividends would be payable only if and when declared by the board of directors. Dividends on other classes of the Company’s stock (other than dividends on shares of common stock payable in shares of common stock) were not to be declared or paid unless the Preferred Stockholders were first paid (i) all dividends accrued and not yet paid plus (ii) the product of (a) dividends declared on an as converted basis and (b) Preferred Stock on an as converted basis. No dividends had been declared through September 30, 2018.

Voting Rights: Preferred Stock and common stock voted together as one class on an as converted basis.

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7. STOCK-BASED COMPENSATION

2014 Plan

On June 25, 2018, the Company increased the number of shares available for future grant under the 2014 Plan. At September 30, 2018, there were 977,522 shares available for future grant under the 2014 Plan.

Total stock-based compensation expense recorded as research and development and general and administrative expenses, respectively, for employees, directors and non-employees for the three and nine months ended September 30, 2018 and 2017 is as follows:

During the nine months ended September 30, 2018, the Company granted options to purchase 596,394 shares of common stock. The Company recorded stock-based compensation expense for options granted of $207 and $292 during the three and nine months ended September 30, 2018, respectively. During the nine months ended September 30, 2018, the Company granted 107,054 shares of restricted stock. The Company recorded stock-based compensation expense for restricted stock granted of $80 and $228 during the three and nine months ended September 30, 2018, respectively.

As of September 30, 2018, there were 2,009,671 options outstanding. The weighted-average grant date fair value per share of options granted during the nine months ended September 30, 2018 was $4.20. As of September 30, 2018, there was $2,583 of unrecognized stock-based compensation expense related to unvested stock options. The unrecognized stock-based compensation expense is estimated to be recognized over a period of 2.4 years at September 30, 2018.

As of September 30, 2018, there were 1,045,050 shares of unvested restricted stock outstanding. The weighted-average grant date fair value per share of restricted stock granted during the nine months ended September 30, 2018 was $4.02. As of September 30, 2018, there was $604 of unrecognized stock-based compensation expense related to unvested restricted stock. The unrecognized stock-based compensation expense is estimated to be recognized over a period of 1.1 years at September 30, 2018.

8. INCOME TAXES

During the nine months ended September 30, 2018 and year ended December 31, 2017, the Company recorded a full valuation allowance on federal and state deferred tax assets since management does not forecast the Company to be in a profitable position in the near future.

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9. LOSS PER SHARE

Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding:

The Company’s potential dilutive securities, which included Preferred Stock, restricted stock, and stock options, were excluded from the computation of diluted net loss per share as the effect would be anti-dilutive. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares, presented based on the amounts into which the outstanding shares will convert at September 30, 2018 and 2017, respectively, from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect:

10. SUBSEQUENT EVENTS

In November 2018, LogicBio Australia entered into a collaboration and license agreement (the “CMRI Agreement”) with Children’s Medical Research Institute (“CMRI”), a private research institution, pursuant to which LogicBio Australia and CMRI will work together to develop new viral vectors over a two-year period from the effective date of the CMRI Agreement (“Research Term”). Pursuant to the CMRI Agreement, LogicBio Australia obtained an exclusive, worldwide license to make, have made, use, import, offer to sell and sell products covered by certain patent rights to the new viral vectors. As consideration for the license, LogicBio Australia will pay to CMRI royalties in the low single digits and certain milestone payments. In addition to the consideration for the license, LogicBio Australia will pay research funds to CMRI during the Research Term of $2.0 million over the term of the CMRI Agreement.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited consolidated financial information and the notes thereto included in this Quarterly Report on Form 10-Q and the audited consolidated financial information and the notes thereto included in the prospectus that forms a part of our Registration Statement on Form S-1 (File No. 333-227523), which was filed with the Securities and Exchange Commission, or SEC, pursuant to Rule 424(b)(4) on October 22, 2018, or the Prospectus.

This discussion contains certain forward-looking statements that involve risks and uncertainties. Forward-looking statements are identified by words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the “Risk Factors” section in this Quarterly Report on Form 10-Q. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this Quarterly Report on Form 10-Q, speak only as of their date, and except as required by law, we undertake no obligation to update or revise these statements in light of future developments. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.

Overview

We are a genome editing company focused on developing medicines to durably treat rare diseases in patients with significant unmet medical need using GeneRide, our proprietary technology platform. Our GeneRide technology is designed to precisely integrate corrective genes into a patient’s genome to provide a stable therapeutic effect. Because GeneRide is designed to have this durable therapeutic effect, we are initially targeting rare liver disorders in pediatric patients where it is critical to provide treatment early in a patient’s life before irreversible disease pathology can occur. We have demonstrated proof of concept of our therapeutic platform in animal models for a number of diseases and are focusing on development of our lead product candidate, LB-001, for the treatment of Methylmalonic Acidemia, or MMA, a life-threatening disease that presents at birth.

Based on our GeneRide technology, we are developing our lead product candidate, LB-001, to treat MMA. We expect to file an IND for LB-001 in late-2019 and initiate a Phase 1/2 trial in patients with MMA shortly thereafter. We believe that achieving clinical proof of concept in an inherited liver disease such as MMA will validate our platform technology, including its potential application to other organs and diseases. In addition to MMA, we have demonstrated proof of concept of our platform in hemophilia B, alpha-1-antitrypsin deficiency, or A1ATD, and Crigler-Najjar syndrome animal disease models. We expect to select future product candidates from these genetic diseases or others addressed by targeting the liver initially, and later by targeting the CNS and muscle.

Since our inception in 2014, we have devoted all of our efforts to business planning, research and development, developing and protecting our intellectual property, raising capital, recruiting management and technical staff. We do not have any products approved for sale and have not generated any revenue. As of September 30, 2018, we funded our operations solely from the sale of our convertible preferred stock. We have received net cash proceeds of $33.1 million from sales of our convertible preferred stock.

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We have incurred significant operating losses since our inception. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and commercialization of one or more of our product candidates. Our net losses were $4.7 million and $1.0 million for the three months ended September 30, 2018 and 2017, respectively, and $10.6 million and $2.8 million for the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018, we had an accumulated deficit of $20.2 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future in connection with our ongoing activities.

Furthermore, we now incur additional costs associated with operating as a public company that we did not previously incur or had previously incurred at lower rates as a private company, including significant legal, accounting, investor relations and other expenses.

Initial Public Offering

On October 23, 2018, we completed an initial public offering, or IPO, of our common stock, in which we issued and sold 8,050,000 shares of common stock, including 1,050,000 shares sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $10.00 per share. The aggregate net proceeds to us from the IPO were approximately $72.4 million after deducting underwriting discounts and commissions and offering expenses. The shares began trading on The Nasdaq Global Market on October 19, 2018. Upon completion of the IPO, all of our outstanding shares of convertible preferred stock, converted into 11,789,775 shares of our common stock.

Recent Developments

Announced Partnership with Children’s Medical Research Institute to Develop Next Generation Viral Vectors

In November 2018, we announced the launch of a partnership to develop new viral vectors with Children’s Medical Research Institute of Australia. This partnership will focus on developing next-generation synthetic adeno-associated virus capsids capable of overcoming many of the current limitations of existing viral vectors. We will hold exclusive worldwide commercial rights to vectors developed under the partnership.

Components of Results of Operations

Revenue

Since inception through September 30, 2018, we have not generated any revenue. We do not expect to generate any revenue from the sale of products in the near future. If our development efforts for LB-001, or other product candidates that we may develop in the future, are successful and result in regulatory approval or collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from collaboration or license agreements.

Operating Expenses

Research and Development Expenses

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

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We expense research and development costs as incurred. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses.

Research and development activities are central to our business model. We expect that our research and development expenses will continue to increase for the foreseeable future as we initiate clinical trials for our product candidate LB-001 and continue to discover and develop additional product candidates. If any of our product candidates enter into later stages of clinical development, they will 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.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions. General and administrative expenses also include professional fees for legal, patent, accounting, auditing, tax and consulting services, travel expenses, and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expect that our general and administrative expenses will increase in the future as we increase our general and administrative headcount to support our continued research and development and potential commercialization of our product candidates. We also expect to incur increased expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax compliance services, director and officer insurance costs; and investor and public relations costs.

Other (Expense) Income, Net

Interest income (expense), net consists primarily of interest on our cash and cash equivalents. Other (expense) income, net consists primarily of foreign exchange gains and losses.

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Results of Operations

Three Months Ended September 30, 2018 and 2017

The following table summarizes our results of operations for the three months ended September 30, 2018 and 2017:

Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended September 30, 2018 and 2017:

Research and development expenses for the three months ended September 30, 2018 were $2.4 million, compared to $0.6 million for the three months ended September 30, 2017. The increase of approximately $1.9 million was primarily due to an increase of approximately $0.7 million in other research and development expenses as we increased our overall research and development activities, $0.5 million in personnel-related costs related to an increase in headcount, and $0.7 million related to manufacturing expenses for our lead product candidate LB-001. Personnel-related costs for the three months ended September 30, 2018 included stock-based compensation expense of $51,000, compared to $41,000 for the three months ended September 30, 2017.

General and Administrative Expenses

General and administrative expenses were $2.1 million for the three months ended September 30, 2018, compared to $0.5 million for the three months ended September 30, 2017. The increase of approximately $1.6 million was primarily due to legal and professional fees and personnel-related costs, including salaries, stock-based compensation and bonuses. The increase in professional fees was primarily due to the increase in legal, auditing and consulting services provided. The increase in personnel-related costs was primarily due to an increase in headcount of executive level employees. Stock-based compensation expense included in general and administrative expenses was $0.2 million and $7,000 for the three months ended September 30, 2018 and 2017, respectively.

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Other (Expense) Income, Net

Other (expense) income, net was ($80,000) for the three months ended September 30, 2018, compared to other (expense) income, net of $35,000 for the three months ended September 30, 2017. The change was primarily related to the loss on the sale of property and equipment.

Nine Months Ended September 30, 2018 and 2017

The following table summarizes our results of operations for the nine months ended September 30, 2018 and 2017:

Research and Development Expenses

The following table summarizes our research and development expenses for the nine months ended September 30, 2018 and 2017:

Research and development expenses for the nine months ended September 30, 2018 were $6.1 million, compared to $1.5 million for the nine months ended September 30, 2017. The increase of approximately $4.6 million was primarily due to an increase of approximately $1.6 million in other research and development expenses as we increased our overall research and development activities, $1.0 million in personnel-related costs related to an increase in headcount, and $2.0 million related to manufacturing expenses for our lead product candidate LB-001. Personnel-related costs for the nine months ended September 30, 2018 and 2017 each included stock-based compensation expense of $0.1 million.

General and Administrative Expenses

General and administrative expenses were $4.5 million for the nine months ended September 30, 2018, compared to $1.3 million for the nine months ended September 30, 2017. The increase of approximately $3.2 million was primarily due to legal and professional fees and personnel-related costs, including salaries, stock-based compensation and bonuses. The increase in professional fees was primarily due to the

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increase of costs related to preparation for our IPO. The increase in personnel-related costs was primarily due to an increase in headcount of executive level employees. Stock-based compensation expense included in general and administrative expenses was $0.4 million and $30,000 for the nine months ended September 30, 2018 and 2017, respectively.

Other (Expense) Income, Net

Other (expense) income, net was $44,000 for the nine months ended September 30, 2018, compared to other (expense) income, net of $36,000 for the nine months ended September 30, 2017. The change was primarily related to an increase in interest income offset by the loss on the sale of property and equipment.

Liquidity and Capital Resources

Overview

Since our inception and through September 30, 2018, we have not generated any revenue and have incurred significant losses and negative cash flows from our operations.

Cash Flows

The following table summarized our cash flows for each of the nine months ended September 30, 2018 and 2017:

Operating Activities

During the nine months ended September 30, 2018, operating activities used $10.6 million of cash, primarily from our net loss of $10.6 million and net cash used by changes in our operating assets and liabilities of $0.8 million, partially offset by non-cash charges of $0.7 million, which were primarily related to stock-based compensation expense and loss on disposal of property and equipment. Changes in net cash in our operating assets and liabilities for the nine months ended September 30, 2018 consisted primarily of a $0.6 million decrease in accounts payable and a $0.6 decrease to prepaid expenses and other current assets, partially offset by a $0.2 million increase in accrued expenses and other liabilities and a $0.2 million increase to other non-current assets.

During the nine months ended September 30, 2017, operating activities used $3.0 million of cash, primarily from our net loss of $2.8 million and net cash used by changes in our operating assets and liabilities of $0.4 million, partially offset by non-cash charges of $0.2 million, which were primarily related to stock-based compensation expense. Changes in net cash in our operating assets and liabilities for the nine months ended September 30, 2017 consisted primarily of a $0.3 decrease to prepaid expenses and other current assets and a $0.2 million decrease to accrued expenses, partially offset by a $0.1 million increase to accounts payable.

Investing Activities

During the nine months ended September 30, 2018, net cash used in investing activities was $0.3 million, primarily from the purchase of property and equipment, partially offset by the disposal of property and equipment.

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During the nine months ended September 30, 2017, net cash used in investing activities was $36,000 for the purchase of property and equipment.

Financing Activities

During the nine months ended September 30, 2018, net cash used in financing activities was $0.8 million, primarily for the payment of deferred IPO costs, partially offset by the proceeds from the exercise of stock options.

During the nine months ended September 30, 2017, net cash provided by financing activities was $28.7 million, primarily from net proceeds from the sale of the first tranche of Series B preferred stock in June 2017.

Funding Requirements

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

Because of the numerous risks and uncertainties associated with the development of LB-001 and other product candidates and programs, and because the extent to which we may enter into collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future funding requirements, both near and long-term, will depend on many factors, including:

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A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant trial delays due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development. We may never succeed in obtaining regulatory approval for any of our product candidates.

Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through offerings of securities, private equity financing, debt financings, collaborations, government contracts or other strategic transactions. The terms of financing may adversely affect the holdings or the rights of our stockholders. If we are unable to obtain funding, we may be required to delay, limit, reduce or terminate some or all of our research and product development, product portfolio expansion or future commercialization efforts.

We will also continue to incur costs as a public company that we did not previously incur or have previously incurred at lower rates, including increased fees payable to the non-employee members of our board of directors, increased personnel costs, increased director and officer insurance premiums, audit and legal fees, investor relations fees and expenses for compliance with public company reporting requirements under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and rules implemented by the SEC and Nasdaq.

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Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of September 30, 2018:

We enter into contracts in the normal course of business with CROs, CMOs and other third parties for clinical trials and preclinical research studies and testing. Manufacturing commitments in the preceding table include agreements that are enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. For obligations with cancellation provisions, the amounts included in the preceding table are limited to the non-cancelable portion of the agreement terms or the minimum cancellation fee.

We may incur potential contingent payments upon our achievement of clinical, regulatory and commercial milestones, as applicable, or royalty payments that we may be required to make under license agreements we have entered into with various entities pursuant to which we have in-licensed certain intellectual property. Due to the uncertainty of the achievement and timing of the events requiring payment under these agreements, the amounts to be paid by us are not fixed or determinable at this time and are excluded from the table above.

Critical Accounting Policies and Significant Judgments and Estimates

Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our condensed 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 condensed 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.

There have been no significant changes to our critical accounting policies from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our 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 irrevocably elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.

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Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.

Recently Issued Accounting Pronouncements

Refer to Note 2, in the accompanying notes to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities and foreign currency exchange rate sensitivities.

Interest Rate Sensitivity

As of September 30, 2018, we had cash and cash equivalents of $12.9 million. Our exposure to interest rate sensitivity is impacted by changes in the underlying U.S. bank interest rates. Our surplus cash has been invested in interest-bearing savings accounts from time to time. We have not entered into investments for trading or speculative purposes. Due to the conservative nature of our investment portfolio, which is predicated on capital preservation of investments with short-term maturities, we do not believe an immediate one percentage point change in interest rates would have a material effect on the fair market value of our portfolio, and therefore we do not expect our operating results or cash flows to be significantly affected by changes in market interest rates.

As of September 30, 2018, we had no debt outstanding and are therefore not subject to interest rate risk related to debt.

Foreign Currency Exchange Risk

The functional currency of our wholly owned foreign subsidiary, LogicBio Research, is in the Israeli new shekel. Assets and liabilities of LogicBio Research are translated into United States dollars at the exchange rate in effect on the consolidated balance sheet date. Income items and expenses are translated at the average exchange rate in effect during the period. Stockholders’ equity (deficit) amounts are translated based on historical exchange rates as of the date of each transaction. Unrealized translation gains and losses are recorded as a foreign currency translation adjustment, which is included in the consolidated statements of convertible preferred stock and stockholder’s deficit as a component of accumulated other comprehensive loss. Adjustments that arise from exchange rate changes on transactions denominated in a currency other than the local currency are included in other (expense) income, net in the consolidated statements of operations as incurred. As of September 30, 2018, all operations had ceased for LogicBio Research.

We do not currently engage in currency hedging activities in order to reduce our currency exposure, but we may begin to do so in the future. Instruments that may be used to hedge future risks include foreign currency forward and swap contracts. These instruments may be used to selectively manage risks, but there can be no assurance that we will be fully protected against material foreign currency fluctuations.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of September 30, 2018. Our disclosure controls and procedures are designed to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of September 30, 2018 were not effective due to the material weakness identified in fiscal year 2017 in our internal control over financial reporting process which included an ineffective control environment, including a lack of sufficient accounting personnel and personnel with financial reporting expertise, ineffective controls procedures, including those related to recognition in the appropriate period for certain transactions, ineffective risk assessment controls, including those policies and practices that would identify changes in our business practices, which could significantly impact our consolidated financial statements and system of internal controls, and ineffective monitoring of controls related to the financial close and reporting process.

Remediation Plan

We are committed and are taking steps necessary to remediate the control deficiencies that constituted the above material weakness by implementing changes to our internal control over financial reporting. Our management has performed additional analyses, reconciliations, and other post-closing procedures.

Changes in Internal Control over Financial Reporting.

Except for the remediation efforts of the previously identified material weakness as described above, there were no changes in our internal control over financial reporting that occurred during the three months ended September 30, 2018 that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in legal proceedings and claims arising in the ordinary course of our business. Although the results of litigation and claims cannot be predicted with certainty, as of the end of the period covered by this Quarterly Report on Form 10-Q, we did not believe we were party to any claim or litigation, the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors.

The following risk factors and other information included in this Quarterly Report on Form 10-Q should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected.

Risks Related to Our Financial Position and Need for Additional Capital

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

We are a preclinical-stage genome editing company with a limited operating history. We have incurred net losses in each year since our inception, including a net loss of $10.6 million for the nine months ended September 30, 2018. As of September 30, 2018, we had an accumulated deficit of approximately $20.2 million. In addition, we have not commercialized any products and have never generated any revenue from product sales. We have devoted most of our financial resources to research and development, including our preclinical development activities. We expect to continue to incur significant additional operating losses for the foreseeable future as we seek to advance LB-001, our lead product candidate, through preclinical and clinical development, expand our research and development capabilities and activities, develop new product candidates, initiate and complete clinical trials, seek regulatory approval and, if we receive approval from the U.S. Food and Drug Administration, or FDA, commercialize our product candidates. Our net losses may fluctuate significantly from quarter to quarter and year to year. Because of the numerous risks and uncertainties associated with genetic medicine product development, we are unable to accurately predict the timing or amount of increased expenses, when, if ever, we will generate revenue from the commercialization of products or whether we will achieve or maintain profitability. We anticipate that our expenses will also increase substantially if and as we:

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Furthermore, our ability to successfully develop, commercialize and license our product candidates and potentially generate product revenue is subject to substantial additional risks and uncertainties. Each program and any product candidate we develop, will require additional preclinical and clinical development, potential regulatory approval in one or more jurisdictions, securing manufacturing supply, capacity and expertise, building of a commercial organization, substantial investment and significant marketing efforts before we generate any revenue from product sales. See “Risks Related to Discovery, Development, Clinical Testing, Manufacturing and Regulatory Approval” and “Risks Related to Commercialization.”

As a result of all of the above, as well as other potential factors, we expect to continue to incur net losses and negative cash flows for the foreseeable future. These net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital. The amount of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. If we are unable to develop and commercialize one or more product candidates either alone or with collaborators, or if revenue from any product candidate that receives marketing approval is insufficient, we will not achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability.

We will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization of any product candidates.

We expect to spend substantial amounts to complete the development of, seek regulatory approvals for and commercialize LB-001 and any other product candidate we may identify and develop. We will require additional capital, which we may seek to raise through equity offerings, debt financings, marketing and distribution arrangements, collaborations, strategic alliances, licensing arrangements or other sources, to enable us to complete the development and potential commercialization of LB-001 and any other product candidate. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative effect on our financial condition and our ability to pursue our business strategy. In addition, attempting to secure additional financing may divert the time and attention of our management from day-to-day activities and harm our product candidate development efforts.

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Based upon our current operating plan, we believe that our cash and cash equivalents as of September 30, 2018, together with the net proceeds from our IPO, will enable us to fund our operating expenses and capital expenditure requirements through 2020. We anticipate that we may need additional funding in order to complete the Phase 1/2 clinical trial of LB-001. This estimate is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances could cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more than currently expected because of circumstances beyond our control. Because the length of time and activities associated with successful development of LB-001 and any other product candidates is highly uncertain, we are unable to estimate the actual funds we will require for development and, if applicable, any approved marketing and commercialization activities. Our future funding requirements, both near and long-term, will depend on many factors, including:

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, even if we successfully identify and develop product candidates and one or more are approved, we may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of medicines that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. We cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of LB-001 or any other product candidates or potentially discontinue operations.

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Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. In addition, debt financing would result in increased fixed payment obligations. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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

Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or with collaborative partners, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize, product candidates we may identify for development. To date, we have not generated any revenue from our programs or any product candidate and do not anticipate generating revenues from product sales for the foreseeable future. Our ability to generate future revenues from product sales depends heavily on our, or our collaborators’, ability to successfully:

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Additionally, because our technology involves genome editing, we are subject to additional challenges and risks that gene therapy companies face, including:

Risks Related to Discovery, Development, Clinical Testing, Manufacturing and Regulatory Approval

We intend to identify and develop product candidates based on our novel GeneRide technology platform, which makes it difficult to predict the time and cost of product candidate development. No genome editing product has been approved in the United States or in Europe. There have only been a limited number of human clinical trials involving a gene editing product candidate and none of those trials has involved our nuclease-free genome editing technology.

We have concentrated our research and development efforts on product candidates utilizing our GeneRide technology. Our future success depends on the successful development of this novel therapeutic approach. To date, no product that utilizes our GeneRide technology has been approved. There have been a limited number of clinical trials of gene editing technologies, however no product candidates have been approved, and none of these clinical trials involved product candidates that utilize our GeneRide technology. In addition, because our programs are all in the research or preclinical stage, we have not yet been able to assess safety in humans, and there may be long-term effects from treatment with any of our future product candidates that we cannot predict at this time. Any product candidates we may develop will act at the level of DNA, and, because animal DNA differs from human DNA, results of tests of our product candidates in

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animal models for either safety or efficacy may not be predictive of results that may be observed in humans. Also, animal models may not exist for some of the diseases we expect to pursue. Our GeneRide genome editing approach harnesses homologous recombination, or HR, a naturally occurring DNA repair process that maintains the fidelity of the genome. The mechanism of action of this technology is still not completely understood. Therefore, it is and will be difficult for us to determine whether any of our product candidates will be able to properly integrate corrective DNA in or deliver gene transfer constructs to enough tissue cells to reach therapeutic levels. We cannot be certain that any of our product candidates will be able to meet safety and efficacy levels needed to be therapeutic in humans or that they will not cause significant adverse events or toxicities. As a result of these factors, it is more difficult for us to predict the time and cost of product candidate development, and we cannot predict whether the application of our GeneRide technology platform, or any similar or competitive gene therapy or gene editing platforms, will result in the identification, development and regulatory approval of any medicines, or that other genetic medicine technologies will not be considered better or more attractive for the development of medicines. Any development problems we experience in the future related to our GeneRide technology platform or any of our research programs may cause significant delays or unanticipated costs, or we may not be able to solve for the issue. We may also experience delays in developing a capable and scalable manufacturing process or transferring that process to commercial partners. Any of these factors may prevent us from completing our preclinical studies or clinical trials that we may initiate or prevent us from commercializing any product candidates we may develop on a timely or profitable basis, if at all.

Because genome editing is novel and the regulatory landscape that governs any product candidates we may develop is uncertain and may change, we cannot predict the time and cost of obtaining regulatory approval, if we receive it at all, for any product candidates we may develop.

Because genome editing is novel, the regulatory requirements governing any genome editing product candidates we develop are uncertain and subject to change. For example, the FDA recently issued several guidance documents regarding gene therapy in July 2018. Moreover, there is substantial, and sometimes uncoordinated, overlap in those responsible for regulation of existing gene therapy products and cell therapy products. For example, in the United States, the FDA has established the Office of Tissues and Advanced 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. Gene therapy clinical trials are also subject to review and oversight by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees basic and clinical research conducted at the institution participating in the clinical trial. Gene therapy clinical trials conducted at institutions that receive funding for recombinant DNA research from the NIH, are also subject to review by the NIH Office of Biotechnology Activities’ Recombinant DNA Advisory Committee. Although the FDA decides whether individual gene therapy protocols may proceed, the review process and determinations of other reviewing bodies can impede or delay the initiation of a clinical trial, even if the FDA has reviewed the trial and approved its initiation. The same applies in the European Union. The EMA’s Committee for Advanced Therapies, or CAT, is responsible for assessing the quality, safety and efficacy of advanced-therapy medicinal products. The role of the CAT is to prepare a draft opinion on an application for marketing authorization for a gene therapy medicinal candidate that is submitted to the EMA. In the European Union, the development and evaluation of a gene therapy medicinal product must be considered in the context of the relevant European Union guidelines. The EMA may issue new guidelines concerning the development and marketing authorization for gene therapy medicinal products and require that we comply with these new guidelines. As a result, the procedures and standards applied to gene therapy products and cell therapy products may be applied to any genome editing product candidates we may develop, but that remains uncertain at this point.

Adverse developments in preclinical studies or clinical trials conducted by others in the field of gene therapy products, cell therapy products or products developed through the application of gene editing technology may cause the FDA, the EMA and other regulatory bodies to revise the requirements for approval of any product candidates we may develop or limit the use of products utilizing genome editing technologies, either of which could materially harm our business. In addition, the clinical trial requirements of the FDA, the EMA and other regulatory authorities and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and

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market of the potential products. The regulatory approval process for product candidates such as ours can be more expensive and take longer than for other, better known or more extensively studied pharmaceutical or other product candidates. Furthermore, during the regulatory review process, we will need to identify success criteria and endpoints such that the FDA, the EMA or other regulatory authorities will be able to determine the clinical efficacy and safety profile of any product candidates we may develop. As we are initially seeking to identify and develop product candidates to treat diseases in which there is little clinical experience using new technologies, there is heightened risk that the FDA, the EMA or other regulatory authorities may not consider the clinical trial endpoints that we propose to provide clinically meaningful results (reflecting a tangible benefit to patients). In addition, the resulting clinical data and results may be difficult to analyze. Even if the FDA does find our success criteria to be sufficiently validated and clinically meaningful, we may not achieve the pre-specified endpoints to a degree of statistical significance. This may be a particularly significant risk for many of the genetically defined diseases for which we plan to develop product candidates because many of these diseases have small patient populations, and designing and executing a rigorous clinical trial with appropriate statistical power is more difficult than with diseases that have larger patient populations. Further, even if we do achieve the pre-specified criteria, we may produce results that are unpredictable or inconsistent with the results of the non-primary endpoints or other relevant data. The FDA also weighs the benefits of a product against its risks, and the FDA may view the efficacy results in the context of safety as not being supportive of regulatory approval. Other regulatory authorities in the European Union and other countries, such as the CAT, may make similar comments with respect to these endpoints and data. Any product candidates we may develop will be based on a novel technology that makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval. No genome editing product has been approved in the United States or in Europe.

Regulatory agencies administering existing or future regulations or legislation may not allow production and marketing of products utilizing genome editing technology in a timely manner or under technically or commercially feasible conditions. In addition, regulatory action or private litigation could result in expenses, delays or other impediments to our research and development programs or the commercialization of resulting products.

The regulatory review committees and advisory groups described above and the new guidelines they promulgate may lengthen the regulatory review process, increase the scope of process development, require us to perform additional preclinical studies or clinical trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of these treatment candidates, or lead to significant post-approval limitations or restrictions. As we advance our research programs and develop future product candidates, we will be required to consult with these regulatory and advisory groups and to comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue development of any product candidates we identify and develop.

We have no history of conducting clinical trials or commercializing genetic medicine product candidates and we may encounter difficulties transitioning from a research-stage to clinical-stage company to ultimately a commercial-stage company, which may make it difficult to evaluate the prospects for our future viability.

We are an early-stage company. We were founded in 2014 and began operations in 2015. Our operations to date have been limited to financing and staffing our company, developing our technology, identifying and developing LB-001, undertaking preclinical studies, business planning and raising capital. All of our research programs are still in the preclinical or research stage of development, and the risk of failure in the biopharmaceutical industry for programs or products candidates at such stage of development is high. We have not yet demonstrated an ability to successfully initiate, conduct or complete any clinical trials, including large-scale, pivotal clinical trials, obtain marketing approval, manufacture a clinical or commercial scale product or arrange for a third party to do so on our behalf or conduct sales and marketing activities necessary for successful product commercialization. Typically, it takes about six to ten years to develop a new drug from the time it enters Phase 1 clinical trials to when it is approved for treating patients, but in many cases it may take longer. Consequently, 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 product candidates.

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In addition, as a business with a limited operating history, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will eventually need to transition from a company with a research focus to a company capable of supporting clinical and, if any of our product candidates are approved, commercial activities. We may not be successful in such a transition.

Preclinical drug development is uncertain. Some or all of our preclinical programs may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approvals or commercialize these product candidates on a timely basis or at all, which would have an adverse effect on our business.

In order to obtain FDA approval to market a new product, we must demonstrate proof of safety, purity and potency or efficacy in humans. To satisfy these requirements, we will have to conduct adequate and well-controlled clinical trials. Before we can commence clinical trials for a product candidate, we must complete extensive preclinical testing and studies that support our planned IND in the United States. We cannot be certain of the timely completion or outcome of our preclinical testing and studies, and we cannot predict if the FDA will accept our proposed clinical programs, if any, or if the outcome of our preclinical testing and studies will ultimately support the further development of any of our product candidates. As a result, we cannot be sure that we will be able to submit INDs or similar applications for any preclinical programs on the timelines we expect, if at all, and we cannot be sure that submission of INDs or similar applications will result in the FDA or other regulatory authorities allowing clinical trials to begin.

Conducting preclinical testing is a lengthy, time-consuming and expensive process. The length of time may vary substantially according to the type, complexity, novelty and intended use of the product candidate, and often can be several years or more per product candidate. Delays associated with product candidates for which we are conducting preclinical testing and studies ourselves may cause us to incur additional operating expenses. Moreover, we may be affected by delays associated with the preclinical testing and studies of certain product candidates conducted by our potential partners over which we have no control. The commencement and rate of completion of preclinical studies and initiation of clinical trials for a product candidate may be delayed by many factors, including, for example:

Moreover, even if we obtain positive results from preclinical studies or initial clinical trials, we may not achieve the same success in future trials.

Clinical trials are expensive, difficult to design and implement, time-consuming and involve an uncertain outcome.

Before obtaining marketing approval from regulatory authorities for the sale of any product candidates we may identify and develop, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy in humans of any such product candidates. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process, and there is a high failure rate for product candidates proceeding through clinical trials. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. A number of companies in the biotechnology and genetic medicine industries have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Even if our future clinical trials are completed as planned, we cannot be certain that their results will support the safety and effectiveness of LB-001 for MMA or any other potential indication. Our future clinical trial results may not be successful.

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Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses. 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 product candidates.

To date, we have not completed any clinical trials required for the approval of LB-001. Although we plan to initiate a Phase 1/2 clinical trial shortly after submitting our IND in late-2019, we may experience delays in conducting any clinical trials, and we do not know whether planned clinical trials will begin on time, need to be redesigned to address clinical holds imposed by regulatory authorities or for other reasons, recruit and enroll patients on time or be completed on schedule, or at all. Clinical trials can be delayed or terminated for a variety of reasons, including delays or failures related to: