Adverum Biotechnologies, Inc. [ADVM] Filings

10-Q 1 advm-20220930.htm 10-Q advm-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

___________________________________________________________________

FORM 10-Q

___________________________________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36579

___________________________________________________________________

Adverum Biotechnologies, Inc.

(Exact name of registrant as specified in its charter)

___________________________________________________________________


Delaware						20-5258327
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

100 Cardinal Way

Redwood City, CA

(Address of principal executive offices)

94063

(Zip Code)

(650) 656-9323

(Registrant’s telephone number, including area code)

___________________________________________________________________

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


Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, $0.0001 par value	ADVM	The Nasdaq Global Market

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 x 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 x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See 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

☐

Accelerated filer

☐

Non-accelerated filer

Smaller reporting company

Emerging growth company

☐

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 x

As of November 4, 2022, there were 99,729,025 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

Table of Contents

Adverum Biotechnologies, Inc.

TABLE OF CONTENTS


			Page

PART I—FINANCIAL INFORMATION			5

Item 1. Financial Statements			5
Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (unaudited)			5
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2022 and 2021 (unaudited)			6
Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended S e ptember 30, 2022 and 2021 (unaudited)			7
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited)			9
Notes to Condensed Consolidated Financial Statements (unaudited)			10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
Item 3. Quantitative and Qualitative Disclosures About Market Risk			22
Item 4. Controls and Procedures			22

PART II—OTHER INFORMATION			24

Item 1. Legal Proceedings			24
Item 1A. Risk Factors			24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			65
Item 3. Defaults Upon Senior Securities			65
Item 4. Mine Safety Disclosures			65
Item 5. Other Information			65
Item 6. Exhibits			66

SIGNATURES			67

Table of Contents

RISK FACTORS SUMMARY

Investing in common stock involves numerous risks, including the risks described in “Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q. Below are some of these risks, any one of which could materially adversely affect our business, financial condition, results of operations, and prospects.

•We have incurred significant operating losses since inception, and we expect to incur significant losses for the foreseeable future. We may never become profitable or, if achieved, be able to sustain profitability.

•We expect that our cash, cash equivalents, and short-term investments will be sufficient to fund our lead gene therapy programs for at least twelve months from the date of this filing. If this expectation proves to be wrong, we may be forced to delay, limit or terminate certain of our development efforts before then.

•We will need to raise additional funding, which may not be available on acceptable terms, or at all. If we fail to obtain additional capital necessary to fund our operations, we will be unable to successfully develop and commercialize our product candidates.

•We may not be able to comply with Nasdaq’s continued listing standards.

•Our business will depend substantially on the success of one or more of our product candidates. If we are unable to develop, obtain regulatory approval for, or successfully commercialize, any or all of our product candidates, our business will be materially harmed.

•Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of development, including after commencement of any of our clinical trials or any clinical trials using our proprietary viral vectors.

•The occurrence of serious complications or side effects that outweigh the therapeutic benefit in connection with or during use of our product candidates, either in nonclinical studies or clinical trials or post-approval, could lead to discontinuation of our clinical development program, refusal of regulatory authorities to approve our product candidates or, post-approval, revocation of marketing authorizations or refusal to approve new indications, which could severely harm our business prospects, financial condition and results of operations.

•The results of nonclinical studies and early clinical trials are not always predictive of future results. Any product candidate we or any of our future development partners advance into clinical trials may not have favorable results in later clinical trials, if any, or receive regulatory approval.

•If we are unable to successfully develop and maintain robust and reliable manufacturing processes for our product candidates, we may be unable to advance clinical trials or licensure applications and may be forced to delay or terminate a program.

•If we are unable to produce sufficient quantities of our products at acceptable costs, we may be unable to meet clinical or potential commercial demand, lose potential revenue, have reduced margins, or be forced to terminate a program.

•We and our contractors are subject to significant regulation with respect to manufacturing and testing our product candidates. We have a limited number of vendors on which we rely, including, in some cases, single source vendors, and the contract vendors on which we rely may not continue to meet regulatory requirements, may have limited capacity, or may have other factors limiting their ability to comply with their contracts with us.

•We are subject to many manufacturing and distribution risks, any of which could substantially increase our costs and limit supply of our product candidates.

•We have relied, and expect to continue to rely, on third parties to conduct some or all aspects of our vector production, process development, assay development, product manufacturing, product testing, protocol development, and research, and these third parties may not perform satisfactorily.

•We will rely on third parties to conduct some nonclinical testing and all of our planned clinical trials. If these third parties do not meet our deadlines or otherwise fail to conduct the trials as required, our clinical development programs could be delayed or unsuccessful and we may not be able to obtain regulatory approval for or commercialize our product candidates when expected or at all.

•Our success depends on our ability to protect our intellectual property and our proprietary technologies.

•Claims by third parties that we infringe their proprietary rights may result in liability for damages or prevent or delay our developmental and commercialization efforts.

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

•Our rights to develop and commercialize our product candidates are subject in part to the terms and conditions of licenses granted to us by other companies and universities.

•The patent protection and patent prosecution for some of our product candidates are dependent on third parties.

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

•Third party patent rights could delay or otherwise adversely affect our planned development and sale of product candidates of our programs.

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

Table of Contents

•Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

•If we do not obtain patent term extensions for patents covering our product candidates, our business may be materially harmed.

•Any suspension of, or delays in the commencement or completion of, clinical trials for our product candidates could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.

•Final marketing approval for our product candidates by the FDA or other regulatory authorities outside the U.S. for commercial use may be delayed, limited or denied, any of which would adversely affect our ability to generate operating revenue.

•Even if we receive regulatory approval, we still may not be able to successfully commercialize any of our product candidates, and the revenue that we generate from its sales, if any, could be limited.

•If our competitors develop treatments for the target indications of our product candidates that are approved, marketed more successfully, or demonstrated to be safer or more effective or easier to administer than our product candidates, our commercial opportunity will be reduced or eliminated.

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

•Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us to sell our product candidates profitably.

•Negative public opinion and increased regulatory scrutiny of gene therapy and genetic research may damage public perception of our product candidates or adversely affect our ability to conduct our business or obtain marketing approvals for our product candidates.

•We are dependent on the services of our key executives and clinical and scientific staff, and if we are not able to retain these members of our management or recruit additional management, clinical and scientific personnel, our business will suffer.

•We may encounter difficulties in managing our growth and expanding our operations successfully.

•The coronavirus (“COVID-19”) pandemic has impacted our business practices and the effects of its continued impact on our business, results of operations, and financial condition will depend on future developments, which cannot be predicted.

•The trading price of the shares of our common stock has been and could continue to be highly volatile, and purchasers of our common stock could incur substantial losses.

•If we sell shares of our common stock or securities convertible into or exercisable for shares of our common stock in future financings, stockholders may experience immediate dilution and, as a result, our stock price may decline.

•Our failure or perceived failure to comply with existing or future laws, regulations, contracts, self-regulatory schemes, standards, and other obligations related to privacy, data protection, and data security (including security incidents) could harm our business. Our compliance or the actual or perceived failure to comply with such obligations could increase the costs of our services, limit their use or adoption, and otherwise negatively affect our operating results and business.

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Adverum Biotechnologies, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)


	September 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	84,430	$	34,195
Short-term investments	118,834		270,993
Lease incentive receivables	—		5,709
Prepaid expenses and other current assets	9,979		6,248
Total current assets	213,243		317,145
Operating lease right-of-use assets	79,882		86,000
Property and equipment, net	36,579		33,060

Restricted cash	2,503		2,503
Deferred rent receivable	—		769
Deposit and other long-term assets	155		250
Total assets	$	332,362	$	439,727
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	846	$	1,387
Accrued expenses and other current liabilities	16,539		18,047
Lease liability, current portion	11,236		1,886

Total current liabilities	28,621		21,320

Lease liability, net of current portion	94,464		101,108
Other non-current liabilities	940		1,114
Total liabilities	124,025		123,542

Stockholders’ equity:
Preferred stock	—		—
Common stock	10		10
Additional paid-in capital	980,156		964,965
Accumulated other comprehensive loss	(1,953)		(714)
Accumulated deficit	(769,876)		(648,076)
Total stockholders’ equity	208,337		316,185
Total liabilities and stockholders' equity	$	332,362	$	439,727

See accompanying notes to condensed consolidated financial statements

Table of Contents

Adverum Biotechnologies, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share data)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
License revenue	$	—	$	—	$	—	$	7,500

Operating expenses:
Research and development	23,849		24,069		77,078		66,657
General and administrative	17,188		14,453		46,117		52,546

Total operating expenses	41,037		38,522		123,195		119,203
Operating loss	(41,037)		(38,522)		(123,195)		(111,703)
Other income, net	923		160		1,450		572
Net loss before income taxes	(40,114)		(38,362)		(121,745)		(111,131)
Income tax provision	(17)		—		(55)		—
Net loss	(40,131)		(38,362)		(121,800)		(111,131)
Other comprehensive loss:
Net unrealized loss on marketable securities	(127)		(55)		(1,189)		(139)
Foreign currency translation adjustment	(30)		(51)		(50)		(123)
Comprehensive loss	$	(40,288)	$	(38,468)	$	(123,039)	$	(111,393)
Net loss per share — basic and diluted	$	(0.40)	$	(0.39)	$	(1.23)	$	(1.13)
Weighted-average common shares used to compute net loss per share - basic and diluted	99,475		98,126		99,027		97,966

See accompanying notes to condensed consolidated financial statements

Table of Contents

Adverum Biotechnologies, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss)/Income		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at December 31, 2021	98,381	$	10	$	964,965	$	(714)	$	(648,076)	$	316,185
Stock-based compensation expense	—	—		5,381		—		—		5,381
Common stock issued upon exercise of stock options	15	—		3		—		—		3
Common stock issued upon release of restricted stock units	371	—		—		—		—		—

Foreign currency translation adjustments	—	—		—		14		—		14
Unrealized loss on marketable securities, net	—	—		—		(723)		—		(723)
Net loss	—	—		—		—		(37,908)		(37,908)
Balance at March 31, 2022	98,767	10		970,349		(1,423)		(685,984)		282,952
Stock-based compensation expense	—	—		4,942		—		—		4,942
Common stock issued upon release of restricted stock units	5	—		—		—		—		—
Common stock issued under employee stock purchase plan	499	—		362		—		—		362
Foreign currency translation adjustments	—	—		—		(34)		—		(34)
Unrealized loss on marketable securities, net	—	—		—		(339)		—		(339)
Net loss	—	—		—		—		(43,761)		(43,761)
Balance at June 30, 2022	99,271	10		975,653		(1,796)		(729,745)		244,122
Stock-based compensation expense	—	—		4,503		—		—		4,503
Common stock issued upon release of restricted stock units	457	—		—		—		—		—
Foreign currency translation adjustments	—	—		—		(30)		—		(30)
Unrealized loss on marketable securities, net	—	—		—		(127)		—		(127)
Net loss	—	—		—		—		(40,131)		(40,131)
Balance at September 30, 2022	99,728	$	10	$	980,156	$	(1,953)	$	(769,876)	$	208,337

Table of Contents

Adverum Biotechnologies, Inc.

Condensed Consolidated Statements of Stockholders’ Equity - continued

(In thousands)

(Unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss)/Income		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at December 31, 2020	97,549	$	10	$	937,134	$	(261)	$	(502,536)	$	434,347
Stock-based compensation expense	—	—		7,224		—		—		7,224
Issuance of common stock, net of issuance costs of $5	121	—		1,689		—		—		1,689
Common stock issued upon exercise of stock options	9	—		51		—		—		51
Common stock issued upon release of restricted stock units	248	—		—		—		—		—

Foreign currency translation adjustments	—	—		—		(33)		—		(33)
Unrealized loss on marketable securities, net	—	—		—		(22)		—		(22)
Net loss	—	—		—				(28,436)		(28,436)
Balance at March 31, 2021	97,927	10		946,098		(316)		(530,972)		414,820
Stock-based compensation expense	—	—		8,234		—		—		8,234
Issuance of common stock, additional issuance costs	—	—		(4)		—		—		(4)
Common stock issued upon release of restricted stock units	17	—		—		—		—		—
Common stock issued under employee stock purchase plan	176	—		526		—		—		526
Foreign currency translation adjustments	—	—		—		(39)		—		(39)
Unrealized loss on marketable securities, net	—	—		—		(62)		—		(62)
Net loss	—	—		—		—		(44,333)		(44,333)
Balance at June 30, 2021	98,120	10		954,854		(417)		(575,305)		379,142
Stock-based compensation expense	—	—		5,326		—		—		5,326
Common stock issued upon release of restricted stock units	23	—		—		—		—		—
Foreign currency translation adjustments	—	—		—		(51)		—		(51)
Unrealized loss on marketable securities, net	—	—		—		(55)		—		(55)
Net loss	—	—		—		—		(38,362)		(38,362)
Balance at September 30, 2021	98,143	$	10	$	960,180	$	(523)	$	(613,667)	$	346,000

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Adverum Biotechnologies, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(121,800)	$	(111,131)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	4,816		3,323
Stock-based compensation expense	14,826		20,784

Amortization of premium and accrued interest on marketable securities	(277)		2,273
Loss on disposal of property and equipment	101		—
Impairment of long-lived assets	2,011		1,072
Other	(1,526)		(132)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(3,468)		(3,493)
Other assets	864		(109)
Operating lease right-of-use asset	3,092		2,825
Accounts payable	(543)		(587)
Accrued expenses and other current liabilities	(272)		3,253
Other non-current liabilities	55		—

Lease liability and lease incentive receivable	12,505		(94)

Net cash used in operating activities	(89,616)		(82,016)
Cash flows from investing activities:
Purchases of marketable securities	(81,782)		(328,275)
Maturities of marketable securities	232,899		384,882
Sales of marketable securities	—		8,990
Purchases of property and equipment	(11,631)		(10,771)
Net cash provided by investing activities	139,486		54,826
Cash flows from financing activities:
Proceeds from offerings of common stock, net of issuance costs	—		1,685

Proceeds from issuance of common stock pursuant to option exercises	3		51

Proceeds from employee stock purchase plan	362		526

Repayment of loan	—		(240)
Net cash provided by financing activities	365		2,022
Net increase (decrease) in cash and cash equivalents and restricted cash	50,235		(25,168)
Cash and cash equivalents and restricted cash at beginning of period	36,698		63,423
Cash and cash equivalents and restricted cash at end of period	$	86,933	$	38,255
Cash and cash equivalents	84,430		32,971
Restricted cash	2,503		5,284
Cash and cash equivalents and restricted cash at end of period	$	86,933	$	38,255
Supplemental schedule of noncash investing and financing information
Right-of-use assets obtained in exchange for lease liability	$	—	$	84,005
Remeasurement of operating right-of-use assets	$	2,842	$	—
Fixed assets in accounts payable, accrued expenses and other current liabilities	$	168	$	2,675

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Adverum Biotechnologies, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Basis of Presentation

Adverum Biotechnologies, Inc. (the “Company” or “Adverum”) was incorporated in Delaware on July 17, 2006 and is headquartered in Redwood City, California. The Company is a clinical-stage company that aims to establish gene therapy as a new standard of care for a number of highly prevalent ocular diseases. The Company develops gene therapy product candidates intended to provide durable efficacy by inducing sustained expression of a therapeutic protein.

The Company has not generated any revenue from the sale of products since its inception. The Company has experienced net losses since its inception and had an accumulated deficit of $769.9 million as of September 30, 2022. The Company expects to incur losses and have negative net cash flows from operating activities as it engages in further research and development activities. As of September 30, 2022, the Company had cash, cash equivalents and short-term investments of $203.3 million, which the Company believes will be sufficient to fund its operations for at least twelve months from the date of issuance of these financial statements.

Basis of Presentation — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company’s consolidated financial information. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year or any other future period. The balance sheet as of December 31, 2021 is derived from the audited consolidated financial statements at that date but does not include all of the information required by U.S. GAAP for complete consolidated financial statements.

The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC.

2. Summary of Significant Accounting Policies

Use of Estimates

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities and the reported amounts of expenses in the condensed consolidated financial statements and the accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to clinical trial accruals, fair value of assets and liabilities, impairment of long-lived assets, income taxes, and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“Topic 326”) and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, ASU 2019-05, and ASU 2019-11. The standard requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect collectability. Topic 326 also eliminates the concept of “other-than-temporary” impairment when evaluating available-for-sale debt securities and instead focuses on determining whether any impairment is a result of a credit loss or other factors. An entity will recognize an allowance for credit losses on available-for-sale debt securities rather than an other-than-temporary impairment that reduces the cost basis of the investment. Topic 326 will become effective for the Company on January 1, 2023. Early adoption is permitted. The Company does not expect the effect of adoption to be material.

Table of Contents

3. Fair Value Measurements and Fair Value of Financial Instruments

The authoritative guidance on the fair value hierarchy for disclosure of fair value measurements is as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The fair value of Level 1 securities is determined using quoted prices in active markets for identical assets. Level 1 securities consist of highly liquid money market funds. Financial assets and liabilities are considered Level 2 when their fair values are determined using inputs that are observable in the market or can be derived principally from or corroborated by observable market data such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities. In addition, Level 2 financial instruments are valued using comparisons to like-kind financial instruments and models that use readily observable market data as their basis. U.S. government and agency securities, commercial paper, and corporate bonds are valued primarily using market prices of comparable securities, bid/ask quotes, interest rate yields and prepayment spreads and are included in Level 2.

The following is a summary of the Company’s cash equivalents and short-term investments:


	September 30, 2022
	Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value
	(In thousands)
Level 1:
Money market funds	$	10,074	$	—	$	—	$	10,074
Level 2:
U.S. government and agency securities	81,323		2		(1,165)		80,160
Commercial paper	99,867		—		(294)		99,573
Corporate bonds	2,059		—		(49)		2,010
Total cash equivalents and short-term investments	193,323		2		(1,508)		191,817
Less: cash equivalents	(72,987)		(2)		6		(72,983)
Total short-term investments	$	120,336	$	—	$	(1,502)	$	118,834


	December 31, 2021
	Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value
	(In thousands)
Level 1:
Money market funds	$	10,311	$	—	$	—	$	10,311
Level 2:
U.S. government and agency securities	62,268		—		(218)		62,050
Commercial paper	177,215		1		(61)		177,155
Corporate bonds	47,323		—		(39)		47,284

Total cash equivalents and short-term investments	297,117		1		(318)		296,800
Less: cash equivalents	(25,808)		—		1		(25,807)
Total short-term investments	$	271,309	$	1	$	(317)	$	270,993

Table of Contents

As of September 30, 2022, $9.6 million of marketable securities have a remaining maturity between one and two years. The remainder of the marketable securities have a remaining maturity of less than one year. Management regularly reviews all of the Company’s investments for other-than-temporary declines in estimated fair value. The aggregate fair value of the marketable securities in an unrealized loss position as of September 30, 2022 was $167.9 million, which are highly liquid funds with high credit ratings that have final maturity of less than two years from date of purchase. Management determined that the gross unrealized losses on the Company’s marketable securities as of September 30, 2022 were temporary. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. Management concluded that none of the Company’s marketable securities were other-than-temporarily impaired as of September 30, 2022.

During the nine months ended September 30, 2022, the Company performed an impairment test to measure certain laboratory equipment at fair value. The assets are measured at fair value using Level 3 inputs on a non-recurring basis as a result of the occurrence of certain triggering events indicating the carrying value of the assets may not be recoverable. Refer to Note 4, Balance Sheet Components for additional information.

4. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consists of the following:


	September 30, 2022		December 31, 2021
	(In thousands)
Computer equipment and software	$	1,325	$	1,224
Laboratory equipment	16,368		12,778
Furniture and fixtures	868		1,136
Leasehold improvements	34,336		26,701
Construction in progress	1,076		4,395
Total property and equipment	53,973		46,234
Less accumulated depreciation and amortization	(17,394)		(13,174)
Property and equipment, net	$	36,579	$	33,060

The Company performed an impairment analysis for certain laboratory equipment assets based on the identification of impairment indicators during the nine months ended September 30, 2022. The analysis determined that the fair value of the assets, which was determined using a market approach, was lower than the carrying value. As a result of the evaluation, an impairment charge of $2.0 million was recognized for the nine months ended September 30, 2022. The assets indicated as impaired were written down to their estimated fair value.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:


	September 30, 2022		December 31, 2021
	(In thousands)
Employee compensation	$	8,604	$	9,209
Accrued nonclinical, clinical and process development costs	6,580		4,953
State income tax payable	301		1,318
Accrued professional services	469		550
Other	585		2,017
Total accrued expenses and other current liabilities	$	16,539	$	18,047

Table of Contents

5. Leases

Sublease income for operating leases is recognized on a straight-line basis over the lease term and is classified as a reduction of rent expense in operating expenses. The difference between sublease income recorded and cash received from the subtenant accrues as a deferred rent receivable. In the three months ended September 30, 2022, the Company reassessed the probability of collection of the deferred rent receivable from the subtenant over the remaining term of a sublease. The Company assessed the collectability to be less than probable and recognized an adjustment to eliminate the deferred rent receivable as a current period adjustment to sublease income, resulting in an increase in general and administrative expenses in the three and nine month periods ended September 30, 2022. The deferred rent receivable as of December 31, 2021 and September 30, 2022 was $0.8 million and zero, respectively. As a result of the adjustment to eliminate the deferred rent receivable, sublease income for the three and nine months ended September 30, 2022 was a negative $4.1 million and a negative $0.8 million, respectively.

6. Equity Incentive Awards

Stock Options

The following table summarizes the Company’s option activity and related information:


	Number of Options (in thousands)	Weighted- Average Exercise Price
Balance at December 31, 2021	13,288	$	9.34
Options granted	10,592	1.26
Options exercised	(15)	0.19
Options forfeited	(4,644)	5.42
Balance at September 30, 2022	19,221	$	5.84
Exercisable as of September 30, 2022	5,302	$	11.71

Options granted during the nine months ended September 30, 2022 include 2.5 million shares of performance-based non-qualified options with both performance and service vesting conditions.

Restricted Stock Units (“RSUs”)

The following table summarizes the Company’s RSUs activity and related information:


	Number of Units (in thousands)	Weighted- Average Grant- Date Fair Value
Outstanding at December 31, 2021	2,126	$	3.76
Granted	857	1.43
Vested and released	(833)	3.40
Forfeited	(426)	3.18
Outstanding at September 30, 2022	1,724	$	2.92

RSUs granted during the nine months ended September 30, 2022 include 0.4 million shares of performance units with both performance and service vesting conditions.

Table of Contents

Stock-Based Compensation Expense

The following table presents, by operating expense, the Company’s stock-based compensation expense:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(In thousands)
Research and development	$	1,432	$	2,207	$	5,195	$	7,125
General and administrative	3,071		3,119		9,631		13,659
Total stock-based compensation expense	$	4,503	$	5,326	$	14,826	$	20,784

7. Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period using the treasury stock method. Outstanding stock options, RSUs, rights under the employee stock purchase plan (“ESPP”) and warrants are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.

The following common stock equivalents outstanding at the end of the periods presented were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:


	September 30, 2022	September 30, 2021
	(In thousands)
Stock options	19,221	13,859
Restricted stock units	1,724	2,593
ESPP	760	400

	21,705	16,852

8. Restructuring

In July 2022, the Company implemented a restructuring of operations, including reductions in both headcount and expenses, to prioritize its clinical development of ixoberogene soroparvovec (“Ixo-vec”), formerly referred to as ADVM-022, and focus its pipeline strategy on certain highly prevalent ocular diseases.

Under the restructuring plan, the Company reduced its workforce by 75 employees (approximately 37%) as of July 6, 2022. Below is a summary of restructuring costs during the nine months ended September 30, 2022 and accrued restructuring costs as of September 30, 2022 :


	Severance and Benefits Costs		Stock-Based Compensation		Total
	(In thousands)
Balance at January 1, 2022	$	—	$	—	$	—
Charges	4,632		53		4,685
Cash payments made	(4,539)		—		(4,539)
Non-cash	—		(53)		(53)
Balance at September 30, 2022	$	93	$	—	$	93

In the three and nine months ended September 30, 2022, the Company recorded $4.7 million of restructuring costs, of which $3.7 million was classified as research and development expenses and $1.0 million was classified as general and administrative expenses. Substantially all of the restructuring costs were incurred during the three months ended September 30, 2022, of which $4.5 million were paid. The Company expects the restructuring to be completed in the fourth quarter of 2022.

Table of Contents

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

The interim financial statements included in this Quarterly Report on Form 10-Q and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2021, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K, as filed with the U.S. Securities and Exchange Commission (SEC) on March 29, 2022. In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). 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 Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and 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 forward-looking and other statements are subject to risks and uncertainties, including those discussed in the section titled “Risk Factors,” set forth in Part II – Other Information, Item 1A below and elsewhere in this report that could cause actual results to differ materially from historical results or anticipated results.

Overview

Adverum is a clinical-stage company that aims to establish gene therapy as a new standard of care for a number of highly prevalent ocular diseases. We develop gene therapy product candidates intended to provide durable efficacy by inducing sustained expression of a therapeutic protein. Our core capabilities include novel vector discovery, nonclinical and clinical development, and pre-commercial planning. In addition, we have in-house manufacturing expertise, specifically in scalable process development, assay development, and current Good Manufacturing Practices (“GMP”) quality control.

Ixo-vec (ADVM-022)

Our lead product candidate, ixoberogene soroparvovec (“Ixo-vec”), which we previously referred to as ADVM-022, is a single, in-office intravitreal (“IVT”) injection gene therapy product designed to deliver long-term durable therapeutic levels of aflibercept associated with a robust, sustained treatment response, reducing the treatment burden and fluctuations in macular fluid associated with frequent bolus anti-vascular endothelial growth factor (“VEGF”) IVT injections. Ixo-vec utilizes an engineered, proprietary vector capsid, AAV.7m8, carrying an aflibercept coding sequence under the control of a proprietary expression cassette capable of transducing retinal cells after a single in-office IVT injection. This product is intended to improve both real-world vision and quality of life outcomes for patients. Ixo-vec is currently being developed for the treatment of patients with wet age-related macular degeneration (“wet AMD”) who are responsive to anti-VEGF therapy.

Wet AMD is a leading cause of blindness in patients over 65 years of age, with a prevalence of approximately 20 million individuals worldwide living with wet AMD. Age-related macular degeneration (“AMD”) is expected to impact 288 million people worldwide by 2040, with wet AMD accounting for approximately ten percent of those cases. In recognition of the need for new treatment options for wet AMD, the U.S. Food and Drug Administration (“FDA”) granted Fast Track designation for Ixo-vec for the treatment of wet AMD.

In November 2018, we initiated the OPTIC trial, designed as a multi-center, open-label, dose-ranging, safety and efficacy trial of Ixo-vec in patients with wet AMD who have demonstrated responsiveness to anti-VEGF treatment. Patients in OPTIC are treatment experienced, and previously required frequent anti-VEGF injections to manage their wet AMD and to maintain functional vision. We completed enrollment for OPTIC in July 2020 and continue to regularly present updated efficacy, aflibercept protein levels and safety data from the trial out to two years and have initiated an extension study to continue to follow our patients for an additional three years for a total of five years. To date, we have seen strong signals of therapeutic efficacy in OPTIC in both the 6 x 10^11 vg/eye (“6E11”) and 2 x 10^11 vg/eye (“2E11”) doses, including continuous stable aflibercept protein levels from 10 weeks to three years, maintenance to improvement in best-corrected visual acuity and central subfield thickness (“CST”), a measure of fluid in and beneath the retina, as well as a reduction in CST fluctuations. Ixo-vec has been generally well tolerated, with the most common adverse events being dose-dependent adeno-associated virus (“AAV”) associated ocular inflammation that has been responsive to topical corticosteroid therapy.

Nonclinical studies have indicated that a 6 x 10^10 vg/eye (“6E10”) dose has the potential to achieve therapeutic levels of aflibercept. In April 2022, we announced having received feedback via a Type C meeting written response from the FDA related to our planned Phase 2 trial of Ixo-vec in wet AMD. We requested the FDA’s feedback to ensure alignment with the regulatory agency ahead of filing the Investigational New Drug (“IND”) amendment for our Phase 2 trial, which IND amendment was submitted on May 26, 2022.

In September 2022, we dosed the first subject in our Phase 2 LUNA (“LUNA”) trial of Ixo-vec. The LUNA trial is a multicenter, double-masked, randomized, parallel-group Phase 2 trial evaluating two doses of Ixo-vec, including 2E11 and a new, lower 6E10 dose, in up to 72 subjects with wet AMD. The LUNA trial will assess four new enhanced prophylactic steroid

Table of Contents

regimens, including local steroids and combinations of local and systemic steroids to test the relative contribution of local versus systemic AAV exposure on ocular inflammation. Specific regimens include topical difluprednate (“Durezol®”), dexamethasone intravitreal implant (“Ozurdex®”), or a combination of either topical Durezol® or IVT Ozurdex® with oral prednisone.

The trial will randomize the participants equally between the 2E11 and 6E10 Ixo-vec doses across four prophylactic steroid regimens and will be conducted at approximately 40 sites in the U.S. and Europe. The primary endpoints will be similar to the OPTIC trial and focus on mean change in best-corrected visual acuity and central subfield thickness (“CST”) from baseline to one year, and incidence and severity of adverse events. Other data points will include protein expression of aflibercept starting at 10 weeks and an interim analysis at 26 weeks, including fluctuations in CST. The study will also evaluate the effectiveness and tolerability of the prophylactic steroid regimens.

In June 2022, we announced that the European Medicines Agency (“EMA”) has granted Ixo-vec Priority Medicines (“PRIME”) designation. PRIME is a program launched by the EMA to enhance support for research on and development of medicines that have demonstrated preliminary safety and efficacy and thus the potential to target a significant unmet medical need. This regulatory program offers developers of promising medicines enhanced interaction and early dialogue and is designed to optimize development plans and speed evaluation ensuring these medicines reach patients as early as possible.

In May 2020, we initiated the INFINITY trial, a multi-center, Phase 2, randomized, double-masked, active comparator-controlled study evaluating a single IVT injection of Ixo-vec in patients with diabetic macular edema (“DME”). A dose limiting toxicity at the 6E11 dose in this diabetic population was identified in April of 2021. Consequently, we are no longer pursuing Ixo-vec for DME, nor are we evaluating the 6E11 dose in wet AMD. We have not seen similar patient safety concerns in any of our patients at either the 2E11 dose in the INFINITY or OPTIC trials or the 6E11 dose in the OPTIC trial.

Immunogenicity to AAV therapy has been broadly reported to be associated both with systemic and ocular gene therapies. Based on an extensive evaluation of data from all of our subjects treated with Ixo-vec and all of our nonclinical data by internal and external experts, we believe new enhanced prophylactic steroid regimens, which includes local steroids and a combination of local and systemic steroids, will allow us to minimize post-prophylaxis inflammation in our trial subjects going forward.

As we advance Ixo-vec for wet AMD, we are continuing to develop our manufacturing expertise for ongoing supply. We maintain control of key aspects of the manufacturing process, specifically in scalable process development, assay development, and GMP quality controls.

ADVM-062

Our second product candidate, ADVM-062 (AAV.7m8-L-opsin), is a novel gene therapy product candidate being developed to deliver a functional copy of the OPN1LW gene to the foveal cones of patients suffering from blue cone monochromacy (“BCM”) via a single IVT injection. ADVM-062 utilizes Adverum’s propriety vector capsid, AAV.7m8. In January 2022, we announced that the FDA granted Orphan Drug Designation to ADVM-062.

BCM affects approximately 1 to 9 in 100,000 males, worldwide. This X-linked recessive hereditary condition is caused by mutations in either the L or the M opsin gene(s) and can manifest in loss of visual acuity, photosensitivity, myopia and infantile nystagmus that can persist into adulthood. Consequently, individuals with BCM have visual impairments to important aspects of daily living such as facial recognition, learning, reading, and daylight vision. Currently, there is no cure for BCM and to our knowledge, no other therapies to treat BCM are in development. We are collaborating with the families of patients affected with BCM to help advance our therapies.

Recent Restructuring

In July 2022, we announced we had taken measures to restructure our operations, including reductions in both headcount and expenses to prioritize Ixo-vec’s clinical development, and focus our pipeline strategy on certain highly prevalent ocular diseases. We expect these restructuring measures will be sufficient to fully support our Ixo-vec development plan and extend our expected cash runway into 2025. We expect the restructuring to be completed in the fourth quarter of 2022.

Impact of COVID-19

Our results of operations and financial condition for the three and nine months ended September 30, 2022 were not significantly impacted by the COVID-19 pandemic. However, the full extent to which the COVID-19 pandemic will directly or indirectly impact these areas in the future is unknown at this time and will depend on future developments that are unpredictable. We are actively monitoring and managing our response and assessing actual and potential impacts to these areas. Please refer to the “Risk Factors” section for further discussion of the risks we face as a result of the COVID-19 pandemic.

Table of Contents

Impact on Operations

We are continuously evaluating and addressing potential impacts of the COVID-19 pandemic on our operations. To date, we have experienced limited impact due to COVID-19 on our operations.

We are committed to the health and safety of our employees and their families and to doing our part to slow the spread of COVID-19. We have reopened our offices to allow our employees more flexibility to mix virtual and in-person work and to advance our culture and corporate goals. We believe this will also enable greater balance and well-being of our employees. We continue to update our policies and implement new practices to align with the current guidance from state and federal governments and health authorities. We believe these measures and others have allowed us to mitigate, but not eliminate, the effects and risks on our on-site operations posed by the COVID-19 pandemic.

Impact on Clinical Trials

The ultimate impact of the COVID-19 pandemic on our ongoing and planned clinical trials is uncertain and subject to change. To date, we believe we have experienced limited impact due to COVID-19 on our ongoing clinical programs, including the OPTIC and LUNA clinical trials. We are working closely with our clinical trial sites to monitor and attempt to address or limit the potential negative impacts of the evolving COVID-19 outbreak and the emergence of COVID-19 variants on patient safety, trial enrollment, continued participation and follow-up of patients already enrolled in our clinical studies, protocol compliance, data quality, and overall study integrity. Despite these efforts, we are unsure as to whether the COVID-19 pandemic will significantly impact future trial enrollment or completion of our current or planned clinical studies.

Impact on Supply Chain and Manufacturing

While we have not yet experienced significant disruptions to our supply chain and manufacturing as a result of the COVID-19 pandemic, we cannot be certain that this trend will continue. Based on current information, we believe that our partners in our supply chain have been and will continue to serve us continuously during the COVID-19 pandemic. The COVID-19 pandemic and other factors have also adversely impacted the global supply chain for other supplies and materials which could impact our future operations. To mitigate against future potential delays in supplies and materials we use in our operations, including product supply, we are continuously implementing additional measures to address potential risks as we identify them, including securing additional supplies and manufacturing capacity reserve, which have resulted in additional expenses and may result in other additional expenses in the future. Given the uncertainty regarding the impact delays and disruption in the global supply chain may have on our operations, we are unable to quantify the ultimate impact on our future results at this time.

Financial Overview

Summary

We have not generated positive cash flow or net income from operations since our inception and, as of September 30, 2022, we had an accumulated deficit of $769.9 million. We expect to incur substantial expenses and continuing losses from operations in the foreseeable future as we conduct our research and development efforts, advance our product candidates through nonclinical and clinical development, manufacture clinical study materials, seek regulatory approval, and prepare for and, if approved, proceed to commercialization. We are at an early stage of development and may never be successful in developing or commercializing our product candidates.

While we may in the future generate revenue from a variety of sources, including license fees, milestone and research and development payments in connection with strategic partnerships, and potentially revenue from product sales if any of our product candidates are approved, to date we have not generated any revenue from product sales.

We currently have no operational clinical or commercial manufacturing facilities, and all of our clinical manufacturing activities are currently contracted out to third parties. Additionally, we use third-party contract research organizations (“CRO”) to carry out our clinical development and we do not have a sales organization.

We expect to incur substantial expenditures in the foreseeable future for the development and potential commercialization of our product candidates. We will need substantial additional funding in the future to support our operating activities as we advance our product candidates through nonclinical and clinical development, seek regulatory approval and prepare for and, if approved, proceed to commercialization. Adequate funding may not be available to us on acceptable terms, or at all. If we are unable to raise capital, or to do so on acceptable terms, when needed, or to form additional collaboration partnerships to support our efforts, we could be forced to delay, reduce or eliminate our research and development programs or potential commercialization efforts.

As of September 30, 2022, we had $203.3 million in cash, cash equivalents and short-term investments.

Table of Contents

Revenue

To date we have not generated any revenue from the sale of our products. We have generated revenue through research, collaboration and license arrangements with strategic partners. Our ability to generate product revenue and become profitable depends upon our ability to successfully develop and commercialize our product candidates. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the amount or timing of product revenue. Even if we are able to generate revenue from the sale of our products, our sales may not be sufficient to generate cash from operations, in which case we may be unable to continue our operations at planned levels and be forced to reduce our operations.

Research and Development Expenses

Conducting a significant amount of research and development is central to our business model. Research and development expenses primarily include personnel-related costs, stock-based compensation expenses, laboratory supplies, consulting costs, external contract research and development expenses, including expenses incurred under agreements with CROs, the cost of acquiring, developing and manufacturing clinical study materials, and overhead expenses, such as rent, equipment depreciation, insurance and utilities.

We expense research and development costs as incurred. We defer and expense advance payments for goods or services for future research and development activities as the goods are delivered or the related services are performed.

We estimate nonclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and CROs that conduct and manage nonclinical studies and clinical trials on our behalf. 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. We estimate the amounts incurred through communications with third party service providers and our estimates of accrued expenses as of each balance sheet date are based on information available at the time. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly.

At this time, we cannot reasonably estimate the nature, timing or aggregate costs of the efforts that will be necessary to complete the development of any of our product candidates. The successful development and commercialization of a product candidate is highly uncertain, and clinical development timelines, the probability of success, and development and commercialization costs can differ materially from expectations.

General and Administrative Expenses

General and administrative expenses primarily include personnel-related costs, stock-based compensation, professional fees for legal, consulting, audit and tax services, overhead expenses, such as rent, equipment depreciation, insurance and utilities, and other general operating expenses not otherwise included in research and development expenses. Our general and administrative expenses may increase in future periods if and to the extent we elect to increase our investment in infrastructure to support continued research and development activities and potential commercialization of our product candidates. We will continue to evaluate the need for such investment in conjunction with our ongoing consideration of our pipeline of product candidates. We may require increased expenses related to audit, legal and regulatory functions, as well as director and officer insurance premiums and investor relations costs.

In July 2022, we implemented a restructuring of operations, including reductions in both headcount and expenses, to prioritize our clinical development of Ixo-vec and focus our pipeline strategy on certain highly prevalent ocular diseases, which included a reduction in our workforce by approximately 37%. Substantially all of the restructuring costs were incurred and recorded in the operating expenses in the Condensed Statements of Operations during the three months ended September 30, 2022. We expect the restructuring to be completed in the fourth quarter of 2022.

Other Income (Expense), Net

Other income (expense), net primarily comprises interest income on our cash equivalents and investments in marketable securities.

Table of Contents

Critical Accounting Judgments and Estimates

Our management’s discussion and analysis of financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, we evaluate our critical accounting judgments and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable in 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. Actual results may differ from these estimates under different assumptions and conditions. Except as noted below, there have been no significant changes in our critical accounting judgments and estimates during the nine months ended September 30, 2022 as compared to the critical accounting judgments and estimates disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our most recent Annual Report on Form 10-K filed with the SEC on March 29, 2022.

Leases

We account for leases under Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) effective January 1, 2019. For our long-term operating leases, we recognize a right-of-use asset and a lease liability on our consolidated balance sheets. The lease liability is determined as the present value of future lease payments reduced by lease incentives, if any, using an estimated rate of interest that we would pay to borrow equivalent funds on a collateralized basis at the lease commencement date. In order to determine the incremental borrowing rate, we estimate our credit rating, adjust the credit rating for the nature of the collateral, and benchmark the borrowing rate against observable yields on comparable securities with a similar term. We base the right-of-use lease asset on the lease liability adjusted for any prepaid or deferred rent. We determine the lease term at the commencement date by considering whether renewal options and termination options are reasonably assured of exercise.

Rent expense for operating leases is recognized on a straight-line basis over the lease term and is included in operating expenses on the statements of operations and comprehensive loss. Variable lease payments include lease operating expenses.

Sublease income for operating leases is recognized on a straight-line basis over the lease term and is classified as a reduction of rent expense in operating expenses. The difference between sublease income recorded and cash received from the subtenant accrues as a deferred rent receivable. In the three months ended September 30, 2022, management reassessed the probability of collection of the deferred rent receivable from the subtenant over the remaining term of a sublease. Management assessed the collectability to be less than probable and we recognized an adjustment to eliminate the deferred rent receivable as a current period adjustment to sublease income, resulting in an increase in general and administrative expenses in the three and nine month periods ended September 30, 2022. The deferred rent receivable as of June 30, 2022 and September 30, 2022 was $4.1 million and zero, respectively.

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2022 and 2021


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Change		2022		2021		Change
	(In thousands)
License revenue	$	—	$	—	$	—	$	—	$	7,500	$	(7,500)
Operating expenses:
Research and development	23,849		24,069		(220)		77,078		66,657		10,421
General and administrative	17,188		14,453		2,735		46,117		52,546		(6,429)

Total operating expenses	41,037		38,522		2,515		123,195		119,203		3,992
Operating loss	(41,037)		(38,522)		(2,515)		(123,195)		(111,703)		(11,492)
Other income, net	923		160		763		1,450		572		878
Net loss before income taxes	(40,114)		(38,362)		(1,752)		(121,745)		(111,131)		(10,614)
Income tax provision	(17)		—		(17)		(55)		—		(55)
Net loss	$	(40,131)	$	(38,362)	$	(1,769)	$	(121,800)	$	(111,131)	$	(10,669)

Table of Contents

Revenue

The $7.5 million license revenue for the nine months ended September 30, 2021 was related to an upfront payment received in January 2021 upon execution of a license agreement entered with Lexeo Therapeutics, Inc (“Lexeo”).

Research and Development Expense

Research and development expense decreased $0.2 million to $23.8 million for the three months ended September 30, 2022 from $24.1 million for the three months ended September 30, 2021. The overall decrease was primarily due to a $2.0 million decrease in facilities related expenses and a $1.5 million decrease in salaries due to lower headcount following the restructuring, $1.0 million lower consultant costs and $0.8 million lower laboratory expenses; partially offset by $3.7 million of restructuring costs and a $1.1 million increase in clinical trial-related expenses in preparation for the Phase 2 LUNA trial. Stock-based compensation expense included in research and development expenses was $1.4 million for the three months ended September 30, 2022, compared to $2.2 million for the three months ended September 30, 2021.

Research and development expense increased $10.4 million to $77.1 million for the nine months ended September 30, 2022 from $66.7 million for the nine months ended September 30, 2021. The overall increase was primarily related to a $4.4 million increase in clinical trial-related expenses as we prepared to initiate our LUNA trial; $3.7 million in restructuring costs; $2.1 million recognition of impairment costs associated with certain laboratory equipment; a $2.0 million increase in license costs arising from amounts due under a sublicense agreement; and $1.8 million in personnel-associated costs including higher salaries and bonuses as a result of higher average number of employees during 2022 in the period prior to the restructuring compared to same period last year as well as retention efforts for continuing employees. These increases were partially offset by a $1.6 million decrease in material production and bioanalytical expenses; $1.3 million decrease in outside research and development services driven by nonclinical research; and $1.3 million in lower laboratory expenses. Stock-based compensation expense included in research and development expenses was $5.2 million for the nine months ended September 30, 2022, compared to $7.1 million for the nine months ended September 30, 2021.

For the periods presented, our research and development expenses were attributable to our wet AMD, DME, and rare disease programs, as well as earlier-stage research programs. We expect that research and development expenses will decrease in future periods as we focus on advancing our gene therapy product candidate Ixo-vec for the treatment of wet AMD.

General and Administrative Expense

General and administrative expense increased $2.7 million to $17.2 million for the three months ended September 30, 2022 from $14.5 million for the three months ended September 30, 2021, primarily related to a $4.1 million reversal of sublease income and $1.0 million in restructuring costs. These increases were partially offset by a $0.8 million decrease in personnel-associated costs driven by lower headcount; and a $0.9 million decrease in facilities related expenses. Stock-based compensation expense included in general and administrative expenses was $3.1 million for the three months ended September 30, 2022, compared to $3.1 million for the three months ended September 30, 2021.

General and administrative expense decreased $6.4 million to $46.1 million for the nine months ended September 30, 2022 from $52.5 million for the nine months ended September 30, 2021, primarily related to decreases of a $5.7 million in personnel-associated costs driven by lower headcount and lower fair value of equity related awards and forfeiture of equity awards as part of the restructuring and $5.2 million in professional services mainly related to investor relations and legal fees incurred in connection with the prior year's proxy contest. These decreases were partially offset by $4.6 million in facilities related expenses, $1.0 million in restructuring costs and $0.8 million reversal of sublease income. Stock-based compensation expense included in general and administrative expenses was $9.6 million for the nine months ended September 30, 2022, compared to $13.7 million for the nine months ended September 30, 2021.

We expect that general and administrative expenses will decrease in future periods as we streamline our operations. We anticipate decreased expenses related to the human resources, legal, and finance functions brought about by the restructuring measures.

Other Income, Net

Other income, net were $0.9 million and $1.5 million for the three and nine months ended September 30, 2022, respectively and $0.2 million and $0.6 million for the three and nine months ended September 30, 2021, respectively. The increases are from higher average yields in investments and unrealized foreign currency gain.

Income Tax Provision

We recognized an income tax provision of $17,000 and $55,000 for the three and nine months ended September 30, 2022, respectively, related to foreign operations.

Table of Contents

We recognized no income tax provision for the three and nine months ended September 30, 2021.

Liquidity and Capital Resources

We have not generated positive cash flow or net income from operations since our inception and as of September 30, 2022, we had an accumulated deficit of $769.9 million. As of September 30, 2022, we had $203.3 million in cash, cash equivalents and short-term investments compared to $305.2 million as of December 31, 2021. We believe that our existing cash and cash equivalents and short-term investments as of September 30, 2022 will be sufficient to fund our operations and meet our existing contractual obligations and other cash requirements into 2025.

We expect to incur substantial expenditures in the foreseeable future for the development and potential commercialization of our product candidates and ongoing internal research and development programs. At this time, we cannot reasonably estimate the nature, timing or aggregate amount of costs for our development, potential commercialization, and internal research and development programs. However, in order to complete our planned nonclinical trials and current and future clinical trials, and to complete the process of obtaining regulatory approval for our product candidates, as well as to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we will require substantial additional funding in the future.

If and when we seek additional funding, we will do so through equity or debt financings, collaborative or other arrangements with corporate sources or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. Our failure to raise capital in the future could have a negative impact on our financial condition and our ability to pursue our business strategies. To complete development and commercialization of any of our product candidates, we anticipate that we will need to raise substantial additional capital, the requirements of which will depend on many factors, including:

•the initiation, progress, timing, costs and results of nonclinical studies and any clinical trials for our product candidates;

•the outcome, timing of and costs involved in, seeking and obtaining approvals from the FDA and other regulatory authorities, including the potential for the FDA and other regulatory authorities to require that we perform more studies than those that we currently expect;

•the ability of our product candidates to progress through clinical development activities successfully;

•our need to expand our research and development activities;

•the rate of progress and cost of our commercialization of our products;

•the cost of preparing to manufacture our products on a larger scale;

•the costs of commercialization activities including product sales, marketing, manufacturing and distribution;

•the degree and rate of market acceptance of any products launched by us or future partners;

•the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

•our need to implement additional infrastructure and internal systems;

•our ability to hire additional personnel;

•our ability to enter into additional collaboration, licensing, commercialization or other arrangements and the terms and timing of such arrangements;

•the emergence of competing technologies or other adverse market developments; and

•the effects of the COVID-19 pandemic on our business, results of operations, and financial condition.

If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials. We may also be required to sell or license other technologies or clinical product candidates or programs that we would prefer to develop and commercialize ourselves.

Table of Contents

Cash Flows


	Nine Months Ended September 30,
	2022		2021
	(in thousands)
Net cash used in operating activities	$	(89,616)	$	(82,016)
Net cash provided by investing activities	139,486		54,826
Net cash provided by financing activities	365		2,022
Net increase (decrease) in cash and cash equivalents and restricted cash	$	50,235	$	(25,168)

Cash Used in Operating Activities

During the nine months ended September 30, 2022, net cash used in operating activities was $89.6 million, primarily as a result of net loss of $121.8 million due to the continued activities developing our product candidates partially offset by $20.0 million of non-cash charges mainly related to $14.8 million of stock-based compensation expense, $4.8 million of depreciation and amortization expenses, and $2.0 million of impairment of long-lived assets and by $12.2 million of change in operating assets and liabilities, which fluctuate due to timing of expenses and payments.

During the nine months ended September 30, 2021, net cash used in operating activities was $82.0 million, primarily as a result of net loss of $111.1 million due to the continued activities developing our product candidates and $1.8 million of net decrease in operating assets and liabilities, partially offset by $27.3 million of non-cash charges mainly related to $20.8 million of stock-based compensation expense, $3.3 million of depreciation and amortization expenses, $2.3 million of amortization of premium (discount) and accrued interest on marketable securities, and $1.1 million of impairment of long-lived assets.

Cash Provided by Investing Activities

Net cash provided by investing activities for the nine months ended September 30, 2022 consisted of $151.1 million of net maturities from our marketable securities, partially offset by $11.6 million of purchases of property and equipment primarily related to laboratory equipment and facility construction.

Net cash provided by investing activities for the nine months ended September 30, 2021 consisted of $65.6 million of net proceeds from marketable securities, partially offset by $10.8 million of purchases of property and equipment primarily related to laboratory equipment and facility construction.

Cash Provided by Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2022 consisted mainly of $0.4 million of proceeds from our employee purchase plan.

Net cash provided by financing activities for the nine months ended September 30, 2021 consisted of $1.7 million of net proceeds from the sale of our common stock pursuant to our then available "at-the-market" sales agreement and $0.5 million proceeds from employee stock purchase plan, partially offset by $0.2 million for repayment of a loan.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Under SEC rules and regulations, as a smaller reporting company, we are not required to provide the information required by this item.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures. Management, including our Chief Executive Officer and Acting 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, 2022. The evaluation of our disclosure controls and procedures included a review of our processes and implementation and the effect on the information generated for use in this Quarterly Report on Form 10-Q. We conduct this type of evaluation quarterly so that our conclusions concerning the effectiveness of these controls can be reported in our periodic reports filed with the SEC. The overall goals of these evaluation activities are to monitor our disclosure controls and procedures and to make modifications as necessary. We intend to maintain these disclosure controls and procedures, modifying them as circumstances warrant.

Table of Contents

During the three-months ended September 30, 2022, we identified a deficiency in the operating effectiveness of controls in our financial statement close process that we considered to be a material weakness. An immaterial non-cash lease accounting error was identified in previously issued financial statements. While the identified error was not material, we considered the potential magnitude of the error(s) that could arise from the operating deficiency as potentially material.

We discussed these matters with our independent registered public accounting firm and our Audit Committee. Our remediation activities are not complete and we continue to seek ways to strengthen the operation of our controls over our financial statement close process, and we may need to continue effective operation of these controls for one or more quarters before we can conclude that the material weakness has been corrected.

As a result of the existence of the material weakness, our Chief Executive Officer and Acting Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2022.

Changes in internal control over financial reporting. There have been no other changes in our internal control over financial reporting during the three months ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and Acting Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Adverum have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but there can be no assurance that such improvements will be sufficient to provide us with effective internal control over financial reporting.

Table of Contents

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Not applicable.

Item 1A. Risk Factors

You should consider carefully the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q. If any of the following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. The risks described below are not the only risks facing us. Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, results of operations and prospects. Further, the current coronavirus (“COVID-19”) pandemic and actions taken to address the pandemic may exacerbate the risks described below.

Risks Related to Our Financial Position and Need for Capital

We have incurred significant operating losses since inception, and we expect to incur significant losses for the foreseeable future. We may never become profitable or, if achieved, be able to sustain profitability.

We have incurred significant operating losses since we were founded in 2006 and expect to incur significant losses for the foreseeable future as we continue development of our product candidates. Losses have resulted principally from costs incurred in our research and development programs and from our general and administrative expenses. In the future, we intend to continue to conduct research and development, regulatory compliance activities and, if any of our product candidates is approved, sales and marketing activities that, together with anticipated general and administrative expenses, will likely result in us incurring significant losses for the next several years or longer.

We currently generate no revenue from sales, and we may never be able to commercialize any of our product candidates. We do not currently have the required approvals to market any of our product candidates, and we may never receive such approvals. We may not be profitable even if we or any of our future development partners succeed in commercializing any of our product candidates. Because of the numerous risks and uncertainties associated with developing and commercializing our product candidates, we are unable to predict the extent of any future losses or when we will become profitable, if at all.

We expect that our cash, cash equivalents, and short-term investments will be sufficient to fund our lead gene therapy programs for at least twelve months from the date of this filing. If this expectation proves to be wrong, we may be forced to delay, limit or terminate certain of our development efforts before then.

We currently expect our cash, cash equivalents and short-term investments to fund our planned operations into 2025. However, this estimate is based on a number of assumptions that may prove to be wrong, including our expectations about the timing of planned clinical trials, forecasted employee attrition, investments into our manufacturing capabilities, continued receipt of rent under our sublease, and changing circumstances beyond our control, that may cause capital to be consumed more rapidly than currently anticipated. As a result, our operating plan may change, and we may need to seek additional funds sooner than planned through collaboration agreements and public or private financings. If we run low on capital and are unable to successfully raise additional funds on terms acceptable to us, we may need to significantly curtail some or all of our development activities.

We will need to raise additional funding, which may not be available on acceptable terms, or at all. If we fail to obtain additional capital necessary to fund our operations, we will be unable to successfully develop and commercialize our product candidates.

We will require substantial future capital in order to complete the nonclinical and clinical development for our product candidates and potentially to commercialize these product candidates. Any future clinical trials or ongoing clinical trials of our product candidates could cause an increase in our spending levels, as would other corporate activities, such as expenses related to manufacturing supply of our product candidates. The amount and timing of any expenditure needed to implement our development and commercialization programs will depend on numerous factors, including:

•the type, number, scope, progress, expansion costs, results of and timing of any future nonclinical studies and clinical trials of any of our product candidates which we are pursuing or may choose to pursue in the future;

Table of Contents

•the need for, and the progress, costs and results of, any additional clinical trials or nonclinical studies of our product candidates we may initiate based on the results of any clinical trials that we may plan or discussions with the U.S. Food and Drug Administration (“FDA”), including any additional clinical trials or nonclinical studies the FDA or other regulatory authorities outside the U.S. may require evaluating the safety of our product candidates;

•the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;

•the costs and timing of obtaining or maintaining manufacturing for our product candidates, including internal and external commercial manufacturing;

•the costs and timing of establishing sales and marketing capabilities and enhanced internal controls over financial reporting;

•the terms and timing of establishing collaborations, license agreements and other partnerships;

•costs associated with any new product candidates that we may develop, in-license or acquire;

•the effect of competing technological and market developments;

•our ability to establish and maintain partnering arrangements for development; and

•the costs associated with being a public company.

Some of these factors are outside of our control. We do not expect our existing capital resources to be sufficient to enable us to fund the completion of our clinical trials and remaining development programs through commercial introduction. We expect that we will need to raise additional funds in the future.

We have no product candidate approved by any regulatory authority, have not sold any products, and we do not expect to sell or derive revenue from any product sales for the foreseeable future. We may seek additional funding through collaboration agreements and public or private financings.

Additional funding may not be available to us on acceptable terms or at all and the terms of any financing may adversely affect the holdings or the rights of our stockholders. General market conditions resulting from rising interest rates, inflation, global supply chain issues, Russia’s invasion of Ukraine, the COVID-19 pandemic, as well as other market conditions, as well as our ability to maintain our Nasdaq listing, may make it difficult for us to obtain adequate additional financing when needed or on attractive terms, or at all. In addition, the issuance of additional shares by us, or the possibility of such issuance, may cause the market price of our shares to decline.

If we are unable to obtain funding on a timely basis, we will be unable to complete any future clinical trials for our product candidates and we may be required to significantly curtail some or all of our activities. We also could be required to seek funds through arrangements with collaborative partners or otherwise that may require us to relinquish rights to our product candidates or some of our technologies or otherwise agree to terms unfavorable to us.

We may not be able to comply with Nasdaq’s continued listing standards.

Our common stock trades on The Nasdaq Global Select Market (“Nasdaq”) under the symbol “ADVM.” There is no guarantee we will be able to perpetually satisfy Nasdaq’s continued listing requirements to maintain our listing on Nasdaq for any periods of time. Among the conditions required for continued listing on Nasdaq, we are required to maintain a minimum closing bid price of over $1.00 per share pursuant to Nasdaq Listing Rule 5550(a)(2). Our closing bid price has been below $1.00 per share every business day from October 7, 2022 to the filing date of this report. Accordingly, we may not be able to maintain a minimum closing bid price over $1.00 per share and could face the risk of our common stock being delisted if the closing bid price for our common stock is below $1.00 per share for 30 consecutive business days and we are unable to regain compliance. In addition, even if we demonstrate compliance with the requirement above, we will have to continue to meet other objective and subjective listing requirements to continue to be listed on Nasdaq, which we may not be able to continue to meet.

Risks Related to the Discovery and Development of Our Product Candidates

Our business will depend substantially on the success of one or more of our product candidates. If we are unable to develop, obtain regulatory approval for, or successfully commercialize, any or all of our product candidates, our business will be materially harmed.

Our product candidates are in the early stages of development and will require substantial nonclinical and/or clinical development and testing, manufacturing process improvement and validation, clinical studies and regulatory approval prior to commercialization. It is critical to our business to successfully develop and ultimately obtain regulatory approval for one or more of these product candidates. Our ability to commercialize our product candidates effectively will depend on several factors, including the following:

•successful completion of nonclinical studies and clinical trials, including the ability to demonstrate safety and efficacy of our product candidates;

Table of Contents

•receipt of marketing approvals for any future products for which we complete clinical trials, including securing regulatory exclusivity to the extent available;

•establishing commercial manufacturing capabilities, for example, by engaging third-party manufacturers or developing our own manufacturing capabilities that can provide products and services to support clinical development and the market demand for our product candidates, if approved;

•successful launch and commercial sales of the product, whether alone or in collaboration with potential partners;

•acceptance of the product as a viable treatment option by patients, the medical community and third-party payers;

•establishing market share while competing with other therapies;

•a continued acceptable safety profile of our products following regulatory approval;

•maintaining compliance with post-approval regulations and other requirements; and

•qualifying for, identifying, registering, maintaining, enforcing and defending intellectual property rights and claims covering our product candidates.

If we or our collaborators do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to commercialize our product candidates, which would materially and adversely affect our business, financial condition, results of operations and prospects.

Of the large number of biologics and drugs in development in the pharmaceutical industry, only a small percentage result in the submission of a biologics license application (“BLA”) to the FDA or marketing authorization application (“MAA”) to the European Medicines Agency (“EMA”) and even fewer are approved for commercialization. Furthermore, even if we do receive regulatory approval to market any of our product candidates, any such approval may be subject to limitations on the indicated uses for which we may market the product, or limitations related to its distribution. Accordingly, even if we are able to obtain the requisite financing to continue to fund our development programs, there can be no assurance that any of our product candidates will be successfully developed or commercialized. If we or any of our future development partners are unable to develop, or obtain regulatory approval, or, if approved, successfully commercialize, any of our product candidates, we may not be able to generate sufficient revenue to continue our business.

Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of development, including after commencement of any of our clinical trials or any clinical trials using our proprietary viral vectors.

Drug development has inherent risk. Our lead product candidate, ixoberogene soroparvovec (“Ixo-vec”) for the treatment of wet age-related macular degeneration (“wet AMD”) uses a proprietary vector, AAV.7m8, which has undergone limited human testing, and may experience unexpected results in clinical trials in the future, such as the dose-limiting toxicity at the 6 x 10^11 vg/eye (“6E11”) dose tested in the INFINITY trial in diabetic macular edema (“DME”) patients. Although we will be bound by the generally applicable laws governing approval, the fact that our product is a gene therapy and the broad patient population that it is intended to treat means that the safety and efficacy of our product and the related clinical data will be under increased scrutiny by competent authorities. There have been several significant adverse side effects in gene therapy treatments in the past, including reported cases of leukemia and death seen in other trials using other genomic therapies. Gene therapy is still a relatively new approach to disease treatment and additional adverse side effects could develop. There also is the potential risk of significantly delayed adverse events following exposure to gene therapy products due to persistent biologic activity of the genetic material or other components of products used to carry the genetic material. Possible adverse side effects that could occur with treatment with gene therapy products include an immunologic reaction early after administration that, while not necessarily adverse to the patient’s health, could substantially limit the effectiveness of the treatment.

We, or any licensee or development partner, will be required to demonstrate through adequate and well-controlled clinical trials that our product candidate or another party’s product candidate containing one of our proprietary viral vectors is safe and effective for use in its target indications before seeking regulatory approvals for commercial sale. Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of development, including after commencement of any of our clinical trials or any clinical trials using our proprietary viral vectors. Any such delay or failure could significantly harm our business prospects, financial condition and results of operations.

Table of Contents

The occurrence of serious complications or side effects that outweigh the therapeutic benefit in connection with or during use of our product candidates, either in nonclinical studies or clinical trials or post-approval, could lead to discontinuation of our clinical development program, refusal of regulatory authorities to approve our product candidates or, post-approval, revocation of marketing authorizations or refusal to approve new indications, which could severely harm our business prospects, financial condition and results of operations.

During the conduct of nonclinical studies and clinical trials, animal models and patients may experience changes in their health, including illnesses, injuries and discomforts. Often, it is not possible to determine whether or not the product candidate being studied caused these conditions. In addition, patients may not comply with the requirements of the study, such as missing physician visits or not taking eye drops as prescribed, which may result in changes to their health or vision that are then attributed to the product candidate. Various illnesses, injuries, and discomfort may be reported from time-to-time in clinical trials of our product candidates. For example, a dose-limiting toxicity at the 6E11 dose tested in our INFINITY trial in DME patients resulted in our announcement on July 22, 2021 that we were discontinuing development of Ixo-vec for the DME indication. It is possible that as we test Ixo-vec and other product candidates, in current and future clinical programs, or as use of these product candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomfort and other adverse events that were observed in earlier trials, including the dose-limiting toxicity at the 6E11 dose tested in the INFINITY trial, as well as conditions that did not occur or went undetected in previous trials, will be reported by patients. Many times, side effects are only detectable after investigational products are tested in large-scale, Phase 3 clinical trials or later stage clinical trials, or, in some cases, after they are made available to patients on a commercial scale after approval. If additional clinical experience indicates that one or more of our product candidates causes serious or life-threatening side effects, or side effects that outweigh the therapeutic benefit of the product candidate, the development of one or more of our product candidates may fail or be delayed, or, if one or more of our product candidates has received regulatory approval, such approval may be revoked, which would severely harm our business prospects, financial condition and results of operations.

When a patient experiences a negative health event during a clinical trial, we must determine if it is related to our product candidate in order to understand the safety of our product candidates. The patients we enroll in our clinical trials for our current product candidates are generally less healthy than the general population, which increases the likelihood that a negative health event, unrelated to our product candidate, may occur. These health events may be misattributed to our product candidate, either by us, our investigators, or by regulators. Such misattribution could cause regulatory approval of our product candidates to be denied or delayed. For example, the patients enrolled in our wet AMD trials are often geriatric and have other health conditions unrelated to wet AMD. We cannot assure you that we will be able to accurately determine whether or not a negative health event experienced by a patient in any of these or subsequent trials was related to Ixo-vec, nor can we assure you that the FDA or other regulatory authorities outside the U.S. responsible for reviewing the safety of Ixo-vec will agree with our determination. If a patient in one of our clinical trials experiences a negative health event, and that event is misattributed to Ixo-vec, the trial and other trials of Ixo-vec may be placed on clinical hold, and regulatory approval of Ixo-vec may be delayed or denied.

In addition, if a patient enrolled in one of our clinical trials experiences a negative health event, they may be forced to withdraw from our trial, or may become temporarily unavailable for follow-up visits, which may impact the amount or quality of data we obtain from our trial, which in turn may delay or prevent regulatory approval of our product candidate. Because patients we enroll in our clinical trials for any of our product candidates are likely to be less healthy than the general population, and particularly in trials like OPTIC that enroll a small number of patients, this risk is increased.

Table of Contents

Our product candidates built on adeno-associated viral vector (“AAV”) vectors have similar risks to other gene therapy vectors, including inflammation, cytotoxic T-cell responses, anti-AAV antibodies and immune response to the transgene product, such as T-cell responses and/or antibodies against the expressed protein. For example, based on our current clinical experience, dose-related ocular inflammation is a known side effect of Ixo-vec administration, but the duration of inflammation caused by Ixo-vec, our ability to prevent or manage that inflammation using steroids or other anti-inflammatory or immunomodulatory treatments, and any potential clinical sequelae of that inflammation and treatments used to manage inflammation are not fully understood. The primary purpose of our LUNA trial is to identify the best combination of a prophylactic steroid regimen and dose of Ixo-vec that minimizes post-prophylactic inflammation while at the same time providing efficacy. If we are unable to manage this inflammation appropriately, we may not be able to further develop Ixo-vec and the FDA or other regulatory authorities outside the U.S. may not approve Ixo-vec. Even if we achieve marketing approval, doctors may not prescribe, and patients may not use, Ixo-vec or our other product candidates if they deem the levels or risk of inflammation to be unacceptable. Further, patients treated with Ixo-vec could develop antibodies against AAV.7m8 capsid and/or aflibercept protein. These antibodies could preclude these patients from receiving other AAV-based gene therapies in the future. In addition, patients previously treated with or exposed to other AAV-based gene therapies could develop antibodies against AAV.7m8 and/or the aflibercept protein, which could reduce or eliminate the effectiveness of Ixo-vec or could cause unanticipated adverse reactions to Ixo-vec. Studies have also found that intravenous delivery of certain AAV vectors at high doses may result in adverse events and have prompted the recommendation that studies involving high doses of AAV vectors should be monitored carefully for such adverse events. In addition, patients given infusions of any protein or injection of gene therapies that express a therapeutic protein may develop severe hypersensitivity reactions, infusion reactions, or serious side effects including transaminitis. With respect to our product candidates that are being or may be studied in diseases of the eye, there are additional potential serious complications related to intravitreal injection, such as retinal detachment, endophthalmitis, ocular inflammation, cataract formation, glaucoma, damage to the retina or cornea, and bleeding in the eye. Serious complications or serious, unexpected side effects in connection with the use of our product candidates could materially harm our business prospects, financial condition and results of operations.

Additionally, our lead product candidate, Ixo-vec, is designed for long-term, sustained expression of an exogenous protein, aflibercept. Even though EYLEA® (aflibercept) has been approved by several regulatory authorities, including the FDA, for the treatment of wet AMD, there may be side effects associated with aflibercept being expressed as a gene therapy treatment modality. If such side effects are serious or life threatening, the development of our product candidate and future product candidates may fail or be delayed, or, if such product candidate(s) have received regulatory approval, such approval may be revoked, which would severely harm our business prospects, financial condition and results of operation.

The results of nonclinical studies and early clinical trials are not always predictive of future results. Any product candidate we or any of our future development partners advance into clinical trials may not have favorable results in later clinical trials, if any, or receive regulatory approval.

If our product candidates are not shown to be safe and effective, we may not realize the value of our investment in our technology. Promising nonclinical results generated with a product candidate in animal models do not guarantee similar results when the candidate is tested in humans. For example, the levels of protein expression achieved from a vector in a nonclinical model, including non-human primate models, may be significantly higher than the level of protein expression achieved in humans. Similarly, human subjects administered our product candidates may develop side effects that were not observed in animal models and/or are more severe than those observed in animal models. In addition, even industry-accepted animal models may not accurately replicate human disease. Success in nonclinical studies or in early clinical trials does not mean that later clinical trials will be successful, because product candidates in later-stage clinical trials may fail to demonstrate sufficient safety or efficacy despite having progressed through nonclinical and initial clinical testing. Further, safety and/or efficacy issues with a product candidate may only become apparent when the candidate is tested in human patients suffering from the relevant disease. Furthermore, the initiation of future trials for a product candidate will be dependent upon demonstrating sufficient safety and efficacy to the relevant regulatory authorities in preceding or other ongoing trials using the same product candidate. We will still need to conduct Phase 3 pivotal trials in which Ixo-vec will need to be compared to available therapies and utilize longer term endpoints in order to support submission and approval of a BLA. Companies frequently suffer significant setbacks in advanced clinical trials, even after earlier clinical trials have shown promising results. In addition, only a small percentage of products under development result in the submission of a marketing application and even fewer are approved for commercialization. Even if our clinical trials successfully meet their endpoints for safety and efficacy, the FDA and/or other regulatory authorities outside the U.S. may still conclude that the product candidate has not demonstrated a beneficial risk/benefit profile or otherwise does not meet the relevant standard for approval.

We cannot guarantee that results from any clinical trials that we plan will be successful, and any safety or efficacy concerns observed in any one of our clinical trials in our targeted indications could limit the prospects for regulatory approval of our product candidates in those and other indications.

Table of Contents

Our gene therapy platform is based on a novel technology, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval.

We have concentrated our research and development efforts on our gene therapy platform and our future success depends on the successful development of product candidates based on this platform. There can be no assurance that any development problems we have experienced or may experience in the future related to our platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays in developing a sustainable, reproducible, and scalable manufacturing process or transferring that process to external commercial manufacturing sites, which may prevent us from completing our clinical trials or commercializing our product candidates on a timely or profitable basis, if at all.

In addition, the clinical trial requirements of the FDA, EMA and other regulatory authorities outside the U.S. and the criteria these regulators may use to determine the quality, 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 gene therapy products such as ours can be more expensive and take longer than for other product types, which are better known or more extensively studied to date. The FDA only recently approved the first in vivo gene therapies, LUXTURNA® and ZOLGENSMA®, and FDA approvals of gene therapy products to date have been generally for rare diseases with limited treatment options. Because we are targeting a broad population of patients with wet AMD, the benefit-risk profile of Ixo-vec may be subject to greater scrutiny by regulatory authorities. Regulatory approaches and requirements for gene therapy products continue to evolve, and any changes could create significant delay and unpredictability for product development and approval as compared to technologies with which regulatory authorities have more substantial experience.

Also, before a clinical trial can begin to enroll at a site, each clinical site's Institutional Review Board (“IRB”) and its Institutional Biosafety Committee will have to review the proposed clinical trial to assess appropriateness to conduct the clinical trial at that site. In addition, adverse events in clinical trials of gene therapy products conducted by others may cause the FDA or other regulatory authorities outside the U.S. to change the requirements for human research on or for approval of any of our product candidates.

These regulatory review committees and advisory groups, and the guidelines they promulgate, may lengthen our regulatory review process, require us to perform additional studies, increase our development costs, increase or otherwise change chemistry, manufacturing, and controls requirements, lead to changes in our regulatory positions and interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will usually be required to consult with these, and potentially other, regulatory and advisory groups and comply with applicable guidelines or recommendations. If we fail to do so or the consultations take longer than we expect, we may be required to delay or discontinue development of our product candidates. Delay or failure to obtain, or unexpected costs incurred 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.

If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

Identifying and qualifying patients to participate in our clinical trials will be critical to our success. The timing of current and future clinical trials will depend on the speed at which we can recruit patients to participate in future testing of these product candidates.

Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials, clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating and patient’s safety concerns over participating in a clinical trial, including during a pandemic. We will be required to identify and enroll a sufficient number of patients for any clinical trial for our product candidates. Potential patients may not be adequately diagnosed or identified with the diseases which we are targeting or may not meet the entry criteria for our trials. Additionally, some patients may have neutralizing antibodies at titer levels that would prevent them from being enrolled in a clinical trial for any of our product candidates, or may meet other exclusion criteria. As a consequence, enrollment in our clinical trials may be limited or slowed. We also may encounter difficulties in identifying and enrolling patients with a stage of disease appropriate for such future clinical trials. We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics to achieve diversity in a trial.

In the case of rare diseases, a relatively small number of individuals in the U.S. (fewer than 200,000) are impacted, and therefore, there is a limited patient pool from which to draw for clinical trials. Enrollment of eligible patients with rare or orphan diseases may be limited or slower than we anticipate in light of the small patient populations involved.

Table of Contents

We plan to seek initial marketing approval of our product candidates in the U.S. and/or Europe and we may not be able to successfully conduct clinical trials if we cannot enroll a sufficient number of eligible patients to participate in the clinical trials required by the FDA or the EMA or other regulatory authorities outside the U.S. In addition, the process of finding and diagnosing patients may prove costly.

Further, if patients and investigators are unwilling to participate in our gene therapy studies because of the dose-limiting toxicity at the 6E11 dose tested in the INFINITY trial, or because of negative publicity from other adverse events in the biotechnology or gene therapy industries or inadequate results in our nonclinical studies or clinical trials or for other reasons, including competitive clinical trials for similar patient populations or available approved therapies, our recruitment of patients, or conduct of clinical trials and ability to obtain regulatory approval of our product candidates may be hindered.

Trials using early versions of retroviral vectors, which integrate into, and thereby alter, the host cell’s DNA, have led to several well-publicized adverse events. Our product candidates use an AAV delivery system, with which host integration has been less of a concern. Nonetheless, if patients negatively associate our product candidates with the adverse events caused by previous gene therapy products, they may choose not to enroll in our clinical trials, which would have a material adverse effect on our business and operations.

If we have difficulty enrolling a sufficient number of patients to conduct clinical trials on our product candidates as planned, we may need to delay, limit or terminate future clinical trials, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our product candidates are subject to extensive regulation, compliance with which is costly and time consuming, and such regulation may cause unanticipated delays or prevent the receipt of the required approvals to commercialize our product candidates.

The nonclinical and clinical development, manufacturing, analytical testing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of our product candidates are subject to extensive regulation by the FDA and by comparable regulatory authorities outside the U.S. In the U.S., we are not permitted to market our product candidates until we receive regulatory approval from the FDA. The process of obtaining regulatory approval is expensive, often takes many years and can vary substantially based upon the type, complexity and novelty of the products involved, as well as the target indications and patient population. Approval policies or regulations may change, and the regulatory authorities have substantial discretion in the drug approval process, including the ability to delay, limit or deny approval of a product candidate for many reasons. Despite the time and expense invested in clinical development of product candidates, regulatory approval is never guaranteed.

The FDA or comparable regulatory authorities outside the U.S. can delay, limit or deny approval of a product candidate for many reasons, including:

•such authorities may disagree with the design or implementation of our or any of our future development partners’ clinical trials;

•we or any of our future development partners may be unable to demonstrate to the satisfaction of the FDA or other regulatory authorities outside the U.S. that a product candidate is safe and effective for any indication;

•the FDA or other regulatory authorities outside the U.S. may not accept clinical data from trials which are conducted at multinational clinical facilities or in countries where the standard of care is potentially different from that of the U.S. or the other regulatory authorities outside the U.S.;

•the results of clinical trials may not demonstrate the safety or efficacy required by such authorities for approval;

•we or any of our future development partners may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;

•such authorities may disagree with our interpretation of data from nonclinical studies or clinical trials;

•approval may be granted only for indications that are significantly more limited than what we apply for and/or with other significant restrictions on distribution and use;

•such authorities may find deficiencies in the manufacturing processes, analytical testing, our facilities, or facilities of third-party manufacturers or testing laboratories with which we or any of our future development partners contract for clinical and commercial supplies; or

•the approval policies or regulations of such authorities may significantly change in a manner rendering our or any of our future development partners’ clinical data insufficient for approval.

Table of Contents

With respect to foreign markets, approval procedures vary among countries and, in addition to the aforementioned risks, can involve additional product testing, administrative review periods and agreements with pricing authorities. In addition, events raising questions about the safety of related products, including those already on the market, may result in increased cautiousness by the FDA and comparable regulatory authorities outside the U.S. in reviewing our product candidates based on safety, efficacy or other regulatory considerations and may result in significant delays in obtaining regulatory approvals. Any delay in obtaining, or inability to obtain, applicable regulatory approvals would prevent us or any of our future development partners from commercializing our product candidates.

Preliminary and interim data from our clinical trials that we may announce or publish from time to time may change as each clinical trial progresses.

From time to time, we may announce or publish preliminary or interim data from our clinical trials. Preliminary and interim results of a clinical trial are not necessarily predictive of final results. Preliminary and interim data are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues or further patient follow up occurs and more patient data become available. For example, although we have periodically announced interim data from patients in our OPTIC trial, which showed all Ixo-vec related adverse events as mild to moderate in severity, there is no guarantee that in the future, we will not have more severe drug- or treatment-related adverse events in patients treated with Ixo-vec, such as the dose-limiting toxicity at the 6E11 dose tested in our INFINITY trial. In addition, in certain clinical trials, such as our OPTIC trial, individual cohorts of patients are enrolled with different dosages and other treatment conditions under our protocol. These different doses, populations, and other treatment conditions may affect clinical outcomes, including safety profiles or efficacy, such as the number of supplemental injections required, in each of the cohorts. As a result, preliminary and interim data should be viewed with caution and not relied upon until the final data from a locked database for the entire clinical trial are available. Material changes in the final data compared to preliminary or interim data could significantly harm our business prospects.

Fast Track designation for ADVM‑022 may not lead to a faster development, regulatory review or approval process, and it does not increase the likelihood that ADVM‑022 will receive marketing approval in the United States.

We received Fast Track designation for Ixo-vec in September 2018 for the treatment of wet AMD. The FDA may grant Fast Track designation to a drug that is intended to treat a serious condition and nonclinical or clinical data demonstrate the potential to address unmet medical needs. The FDA provides opportunities for frequent interactions with the review team for a Fast Track product, including pre-investigational new drug application (“IND”) meetings, end-of-phase 1 meetings, and end-of-phase 2 meetings with the FDA to discuss study design, extent of safety data required to support approval, dose-response concerns, and use of biomarkers. A Fast Track product may also be eligible for rolling review, where the FDA reviews portions of a marketing application before the sponsor submits the complete application.

However, Fast Track designation for Ixo-vec may not result in a faster development process, review or approval compared to products considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, the FDA may rescind the Fast Track designation for Ixo-vec if FDA later determines that Ixo-vec no longer meets the qualifying criteria for Fast Track designation.

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

The success of our business depends primarily upon our ability to identify, develop and commercialize products based on our platform technology. Our research programs may fail to identify other potential product candidates for clinical development for a number of reasons. For example, our research methodology may be unsuccessful in identifying potential product candidates or our potential product candidates may be shown to lack efficacy, have harmful side effects, or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval.

If any of these events occur, we may be forced to abandon our development efforts for a program or programs, which could have a material adverse effect on our business, financial condition, results of operations, and prospects. Research programs to identify new product candidates require substantial technical, financial and human resources. We may focus our efforts and resources on potential programs or product candidates that may ultimately prove to be unsuccessful.

Table of Contents

Risks Related to Manufacturing

If we are unable to successfully develop and maintain robust and reliable manufacturing processes for our product candidates, we may be unable to advance clinical trials or licensure applications and may be forced to delay or terminate a program.

The development of commercially viable manufacturing processes typically is very difficult to achieve, is often very expensive and may require extended periods of time. As we develop, seek to optimize, and operate the Ixo-vec manufacturing process, we will likely face technical and scientific challenges, considerable capital costs, and potential difficulty in recruiting and hiring experienced, qualified personnel. There may also be unexpected technical or operational issues during clinical manufacturing campaigns or process validation campaigns. For example, all Good Manufacturing Practices (“GMP”) activities at our Redwood City facility, and external manufacturing, testing, and distribution partners are subject to significant health authority regulation with respect to manufacturing and testing our product candidates. If we are unable to satisfy these regulatory requirements, or if we are unable to solve the technical, scientific, and other challenges described above, we may be unable to manufacture a sufficient supply of our product candidates for our clinical trials and may be forced to delay or terminate our development programs. Additionally, changes in manufacturing processes (including cell lines), equipment or facilities (including moving manufacturing or testing from one of our facilities to another one of our facilities or a third-party facility, or from a third-party facility to one of our facilities) may require us to conduct additional studies to demonstrate comparability in order to receive regulatory approval of any manufacturing modifications. As a result, we could experience manufacturing delays that prevent us from completing our clinical studies in a timely manner, if at all.

We may revise the process that we use to manufacture Ixo-vec for clinical trials. Before we use a revised process in clinical trials, we must submit analytical comparability data to the FDA to demonstrate that the process changes have not altered Ixo-vec in a manner that undermines the applicability of the clinical data from our Phase 1 clinical trial. If the FDA does not find our analytical comparability data sufficient, the FDA could place our IND on clinical hold until we conduct additional nonclinical or clinical comparability studies demonstrating that the Ixo-vec manufactured by our revised process and our previous process are materially equivalent, which could substantially delay the development process. If we make further changes to the manufacturing process, equipment or facilities of Ixo-vec in the future, the FDA may require us to demonstrate comparability between Ixo-vec manufactured before and after the change. For example, the FDA could require comparability studies to demonstrate that Ixo-vec manufactured in its current facilities is comparable to Ixo-vec manufactured at future commercial supply sites.

We do not know whether any required comparability studies will begin as planned, will need to be restructured or will be completed on schedule, or at all. If the results of these comparability studies are not positive or are only modestly positive or if there are safety concerns, we may be delayed in obtaining marketing approval for Ixo-vec or not obtain marketing approval at all. Our product development costs also will increase if we experience delays in testing or regulatory approvals.

If we are unable to produce sufficient quantities of our products at acceptable costs, we may be unable to meet clinical or potential commercial demand, lose potential revenue, have reduced margins, or be forced to terminate a program.

Due to the complexity of manufacturing our products, we may not be able to manufacture sufficient quantities to meet clinical or potential commercial demand. Our inability to produce enough of a product meeting all release acceptance criteria at acceptable costs may cause us to be unable to meet clinical or potential commercial demand, to lose potential revenue, to have reduced margins, or to be forced to discontinue such product.

As we develop, seek to optimize and operate the Ixo-vec manufacturing process, we will likely face technical and scientific challenges, considerable costs, and potential difficulty in recruiting and hiring experienced, qualified personnel. There may also be unexpected technical or operational issues during clinical or commercial manufacturing campaigns. As a result, we could experience manufacturing delays that prevent us from commercializing Ixo-vec, if approved, on a profitable basis, if at all.

In addition, our manufacturing processes will subject us to a variety of U.S. federal, state and local laws and regulations governing the use, generation, manufacture, storage, handling and disposal of hazardous materials and wastes resulting from their use, as well as comparable legislation and regulations outside of the U.S. We will incur significant costs in complying with these laws and regulations.

Gene therapy products are novel and complex and have only in limited cases been manufactured at scales sufficient for pivotal trials and commercialization. Few pharmaceutical contract manufacturers specialize in gene therapy products and those that do are still developing appropriate processes and facilities for large-scale production. If we are unable to secure adequate manufacturing capacity from our contract manufacturing partners, or if our currently contracted slots are cancelled or delayed in order to prioritize other projects, we may be unable to produce sufficient quantities of our product candidates for our development programs.

Table of Contents

We and our contractors are subject to significant regulation with respect to manufacturing and testing our product candidates. We have a limited number of vendors on which we rely, including, in some cases, single source vendors, and the contract vendors on which we rely may not continue to meet regulatory requirements, may have limited capacity, or may have other factors limiting their ability to comply with their contracts with us.

We currently have relationships with a limited number of suppliers for the manufacturing and testing of our vector product candidates. Our suppliers may require licenses to manufacture or test such components if such processes are not owned by the suppliers or in the public domain, and we may be unable to transfer or sublicense the intellectual property rights we may have with respect to such activities, and may be unable to acquire such rights, to the extent that we do not already have them.

All entities involved in the preparation of therapeutics for clinical trials or commercial sale, including our existing contract vendors for our product candidates, are subject to extensive regulation. Components of a finished therapeutic product used in clinical trials or approved for commercial sale must be manufactured and tested in accordance with GMP regulations. These regulations govern manufacturing processes and procedures (including record keeping) and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. Poor control of production processes can lead to the introduction of 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 manufacturers must supply all necessary documentation in support of a BLA on a timely basis and must adhere to the FDA’s GMP regulations enforced by the FDA through its facilities inspection program as well as other regulations enforced by other regulatory authorities outside the U.S. Our contract manufacturers have not produced a commercially-approved AAV product and therefore have not yet demonstrated compliance with GMP regulations to the satisfaction of the FDA or other regulatory authorities outside the U.S. 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. If the facility does not pass a pre-approval plant inspection, the FDA or other regulatory approval of the products will not be granted. In addition, the regulatory authorities may, at any time, audit or inspect any manufacturing facility we may have or those of our third-party contractors involved with the preparation of our product candidates or the associated quality systems for compliance with the regulations applicable to the activities being conducted. Should the FDA or other regulatory authorities outside the U.S. determine that the facility is not in compliance with applicable regulations, the manufacture and release of our product candidates may not be possible, and our business could be harmed.

Changes in laws and governmental policies may have an effect on regulations. For example, on January 31, 2020, the United Kingdom (“UK”) withdrew from the European Union (“EU”), commonly referred to as Brexit. Pursuant to the formal withdrawal arrangements agreed between the UK and the EU, the UK was subject to a transition period until December 31, 2020, or the Transition Period, during which EU rules continued to apply. The UK-EU Trade and Cooperation Agreement, which has applied since the end of the Transition Period, provides for tariff-free trade of goods, but not services, between the UK and the EU, but there may however be additional non-tariff costs which did not exist prior to the end of the Transition Period. Further, should the UK further diverge from the EU from a regulatory perspective in relation to medical products, tariffs could be put into place in the future.

Although the body of the UK-EU Trade and Cooperation Agreement includes general terms which apply to medicinal products, greater detail on sector-specific issues is provided in an Annex to the Agreement. The Annex provides a framework for the recognition of GMP inspections and for the exchange and acceptance of official GMP documents. The regime does not, however, extended to procedures such as batch release certification. Among the changes that will now occur are that Great Britain (England, Scotland and Wales) will be treated as a third country. Northern Ireland will, with regard to EU regulations, continue to follow the EU regulatory rules. As part of the UK-EU Trade and Cooperation Agreement, the EU and the UK will recognize GMP inspections carried out by the other Party and the acceptance of official GMP documents issued by the other Party. The UK-EU Trade and Cooperation Agreement also encourages, although it does not oblige, the parties to consult one another on proposals to introduce significant changes to technical regulations or inspection procedures. Among the areas of absence of mutual recognition are batch testing and batch release. The UK has unilaterally agreed to continue to accept EU batch testing and batch release, two years notice will be provided of any change to such a policy. However, the EU continues to apply EU laws that require batch testing and batch release to take place in the EU territory. This means that medicinal products that are tested and released in the UK must be retested and re-released when entering the EU market for commercial use. As regards marketing authorizations, Great Britain will have a separate regulatory submission process, approval process and a separate national marketing authorization. Northern Ireland will, however, continue to be covered by the marketing authorizations granted by the European Commission (“EC”).

Table of Contents

There are currently delays on cross-border trade between the UK and the EU as businesses and governmental bodies adapt to the arrangements. We and our contract vendors currently rely on other contractors based in the UK. The implementation of new governmental policies associated with Brexit may affect our UK-based contractors’ ability to comply with applicable regulations, including existing EU regulations. If they are unable to return to compliance, or if an acceptable substitute vendor cannot be identified, it may negatively impact our business. Further, to the extent that our UK-based contractors have supply relationships with vendors in the EU, these contractors may experience difficulties, delay or increased costs in receiving materials from their vendors in the EU, which could have a material adverse effect on our UK-based contractors’ ability to provide the services or materials to us.

The regulatory authorities also may, at any time, inspect any manufacturing facility we may have or those of our third-party contractors. If any such inspection or audit identifies a failure to comply with applicable regulations or if we become aware of a violation of our product specifications or applicable regulations, independent of 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 which may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of a facility. Such violations could also result in civil and/or criminal penalties. Any such remedial measures or other civil and/or criminal penalties imposed upon us or third parties with whom we contract could materially harm our business.

If we or our third-party contractors fail to maintain regulatory compliance, the FDA or other regulatory authorities outside the U.S. can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new biologic product, revocation of a pre-existing approval, injunction, seizure of product, or other civil or criminal penalties or closing one or more manufacturing or testing facilities. As a result, our business, financial condition and results of operations may be materially harmed.

Additionally, if the service provided by an approved manufacturing or testing contractor is interrupted, there could be a significant disruption in commercial supply. Alternative contractors could need to be qualified through a BLA supplement which could result in further delay. The regulatory authorities may also require additional studies showing comparability between approved product or testing, and product or testing provided after a contractor change, if a new manufacturing or testing contractor is relied upon for commercial production. Changing contractors 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, causing us to incur higher costs, and preventing us from commercializing our product candidates 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 are subject to many manufacturing and distribution risks, any of which could substantially increase our costs and limit supply of our product candidates.

The process of manufacturing our product candidates is complex, highly regulated and subject to several risks, including:

•Due to the complexity of manufacturing our product candidates, we may not be able to manufacture sufficient quantities to support our clinical trials. Delays in manufacture and supply by our contract manufacturing partners, including as a result of the COVID-19 pandemic, may also cause delays in their ability to supply the amount of our product that we have ordered and on which we have based our expected development timelines. Our inability to produce enough of a product candidate at acceptable costs may result in the delay or termination of development programs.

•The manufacturing and distribution of biologics is extremely susceptible to product loss due to contamination, equipment failure, improper installation or operation of equipment, vendor or operator error, or transportation or storage conditions of the product. Even minor deviations from prescribed manufacturing processes could result in reduced production yields, product defects, and other supply disruptions. If microbial, viral, or other contaminations are discovered in our product candidates or in the manufacturing facility in which our product candidates are made, such manufacturing facility may need to be closed for an extended period of time to investigate and remedy the contamination.

•The manufacturing facilities in which our product candidates are made could be adversely affected by equipment failures, labor shortages, contaminants, raw materials shortages, natural disasters, power failures, and numerous other factors.

Table of Contents

•We and our contract manufacturers must comply with the FDA’s GMP regulations and guidelines. We and our contract manufacturers may encounter difficulties in achieving quality control and quality assurance and may experience shortages in qualified personnel. We and our contract manufacturers are subject to inspections by the FDA and comparable regulatory authorities in other jurisdictions to confirm compliance with applicable regulatory requirements. Any failure to follow GMP or other regulatory requirements or any delay, interruption, or other issues that arise in the manufacture, fill-finish, packaging, storage, or distribution of our product candidates as a result of a failure of our facilities, or the facilities or operations of third parties, to comply with regulatory requirements or pass any regulatory authority inspection could significantly impair our ability to develop and commercialize our product candidates. This may lead to significant delays in the availability of sufficient supply of the product candidate substance for our clinical trials or the termination or hold on a clinical trial, or the delay or prevention of a filing or approval of marketing applications for our product candidates.

•Significant noncompliance could also result in the imposition of sanctions, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approvals for our product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions, and criminal prosecutions, any of which could be costly and damage our reputation. If we are not able to maintain regulatory compliance, we may not be permitted to market our product candidates, if approved, and/or may be subject to product recalls, seizures, injunctions or criminal prosecution.

•Our product candidates are biologics and require processing steps that are more complex than those required for most chemical pharmaceuticals. Moreover, unlike chemical pharmaceuticals, the physical and chemical properties of a biologic such as our product candidates generally cannot be adequately characterized prior to manufacturing the final product. As a result, an assay of the finished product is not sufficient to ensure that the product will perform in the intended manner. Accordingly, we expect to employ multiple steps to attempt to control our manufacturing process and assure that the product or product candidate is made strictly and consistently in compliance with the process.

•We continue to develop the manufacturing process for late-stage clinical product, and our current process has not been fully characterized and therefore is open to potential variations that could lead to defective product substance that does not meet specification.

•Problems with the manufacturing, storage or distribution of our product candidates, including even minor deviations from our established parameters, could result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims and insufficient inventory.

•Some of the raw materials required in our manufacturing process are derived from biological sources. Such raw materials are difficult to procure and may also be subject to contamination or recall. A material shortage, contamination, recall or restriction on the use of biologically derived substances in the manufacture of our product candidates could adversely impact or disrupt commercialization.

Any adverse developments affecting manufacturing operations for our product candidates may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls, or other interruptions in the supply of our product candidates. We may also have to take inventory write-offs and incur other charges and expenses for product that fails to meet specifications, undertake costly remediation efforts, or seek more costly manufacturing alternatives. We may encounter problems manufacturing sufficient research-, clinical-, or commercial-grade materials that meet FDA, EMA or other applicable standards or specifications with consistent and acceptable production yields and costs.

Risks Related to Our Reliance on Third Parties

We have relied, and expect to continue to rely, on third parties to conduct some or all aspects of our vector production, process development, assay development, product manufacturing, product testing, protocol development, and research, and these third parties may not perform satisfactorily.

We do not expect to independently conduct all aspects of our vector production, product manufacturing, product testing, protocol development, protocol performance, and research. We currently rely, and expect to continue to rely, on third parties with respect to these items. We may not be able to enter into agreements with these third parties and if we do enter into agreements with these third parties, any of these third parties may not be successful at fulfilling their contractual obligations or may choose to 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 vector production, process development, assay development, product manufacturing, product testing, protocol development, protocol performance, and research activities will reduce our control over these activities but will not relieve us of our responsibility to ensure compliance with all required regulations. If any of these third parties on which we rely do not perform satisfactorily, we will remain responsible for ensuring that:

Table of Contents

•each of our nonclinical studies and clinical trials are conducted in accordance with the study plan and protocols and applicable regulatory requirements;

•vector production, product manufacturing, and product testing are conducted in accordance with applicable GMP requirements and other applicable regulatory requirements; and

•other research, process development, and assay development are conducted in accordance with applicable industry and regulatory standards and norms

any of which we may not be able to do.

We will continue to rely on third-party manufacturers, which entails risks, including:

•the inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;

•reduced control as a result of using third-party manufacturers for some or all aspects of manufacturing activities;

•termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us; and

•disruptions to the operations of our third-party manufacturers or suppliers caused by conditions unrelated to our business or operations, including the acquisition, change in control, or bankruptcy of the manufacturer or supplier, or their commitments to COVID-19 vaccine and therapeutics production projects that may reduce available manufacturing capacity.

Any of these events could lead to clinical trial delays, failure to obtain regulatory approval, or impact our ability to successfully commercialize future products.

We will rely on third parties to conduct some nonclinical testing and all of our planned clinical trials. If these third parties do not meet our deadlines or otherwise fail to conduct the trials as required, our clinical development programs could be delayed or unsuccessful and we may not be able to obtain regulatory approval for or commercialize our product candidates when expected or at all.

We do not have the ability to conduct all aspects of our nonclinical testing, clinical testing, or clinical trials ourselves. We are dependent on third parties to conduct nonclinical studies and clinical trials for our product candidates, and, therefore, the timing of the initiation and completion of these studies or trials is controlled in part by these third parties and may occur at times substantially different from our estimates. Specifically, we use and rely on medical institutions, clinical investigators, contract research organizations (“CROs”) and consultants to conduct our trials in accordance with our clinical protocols and regulatory requirements. Our CROs, investigators and other third parties play a significant role in the conduct of these trials and subsequent collection and analysis of data.

There is no guarantee that any CROs, investigators or other third parties on which we rely for administration and conduct of our clinical trials will devote adequate time and resources to such trials or perform as contractually required. If any of these third parties fails to meet expected deadlines, fails to adhere to our clinical protocols, fails to meet regulatory requirements, or otherwise performs in a substandard manner, our clinical trials may be extended, delayed or terminated. If any of our clinical trial sites terminates for any reason, we may experience the loss of follow-up information on patients enrolled in our ongoing clinical trials unless we are able to transfer those patients to another qualified clinical trial site.

In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and may receive compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, the utility of certain data from the clinical trial may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection of any IND or BLA we submit to the FDA, or equivalent submissions to other regulatory authorities outside the U.S. Any such delay or rejection could prevent us from commercializing our product candidates.

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

Because we rely on third parties to conduct research and to develop and manufacture our product candidates, we must, at times, share 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, consulting agreements or other similar agreements containing confidentiality provisions with our advisors, employees, third-party contractors 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, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that they become known

Table of Contents

by our competitors, are purposefully or inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Public disclosure of our confidential information also prevents us from seeking patent protection for that or related discoveries. Given that our proprietary position is based, in part, on our know-how and trade secrets, the unauthorized use or disclosure of our trade secrets would impair our competitive position and may have a material adverse effect on our business, financial conditions, results of operations and prospects.

In addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data potentially relating to our confidential information and trade secrets, although our agreements may contain certain limited publication rights. For example, academic institution that we collaborate with often require rights to publish data arising out of such collaboration, provided that we are notified in advance and given the opportunity to delay publication for a limited time period in order for us to secure patent protection of intellectual property rights arising from the collaboration, in addition to the opportunity to remove confidential information or trade secrets from any such publication. However, we may fail to recognize or identify to our collaborator such confidential information or trade secrets during the appropriate timeframe prior to publication, and they may be publicly disclosed without us filing for patent or other protection. In the future we may also conduct joint research and development programs that may require us to share trade secrets under the terms of our research and development or similar agreements.

Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, or publication of information by any of our third-party collaborators. A competitor’s discovery of our trade secrets could impair our competitive position and have an adverse impact on our business, financial condition, results of operations and prospects.

Adverum Biotechnologies, Inc. [ADVM] Filings
10-Q	[2022-11-10]
10-Q	[2022-08-11]
10-Q	[2022-05-12]
10-K	[2022-03-29]
10-Q	[2021-11-04]
10-Q	[2021-08-05]
10-Q	[2021-05-06]
10-K	[2021-03-01]
10-Q	[2020-11-05]
10-Q	[2020-08-10]
10-Q	[2020-05-28]
10-K	[2020-03-12]
10-Q	[2019-11-07]
10-Q	[2019-08-08]
10-Q	[2019-05-08]
10-K	[2019-03-06]
10-Q	[2018-11-08]
10-Q	[2018-08-08]
10-Q	[2018-05-09]
10-K	[2018-03-06]
10-Q	[2017-11-08]
10-Q	[2017-08-08]
10-Q	[2017-05-09]
10-K	[2017-03-09]
10-Q	[2016-11-08]
10-Q	[2016-08-09]
10-Q	[2016-05-06]
10-K	[2016-03-04]
10-Q	[2015-11-09]
10-Q	[2015-08-13]
10-Q	[2015-05-13]
10-K	[2015-03-05]
S-1	[2014-12-18]
10-Q	[2014-11-12]
10-Q	[2014-09-12]
S-1	[2014-06-30]