UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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~~March 3031, ~~2017~~2018

☐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: 001-37693

AveXis, Inc.

(Exact name of registrant as specified in its charter)

Delaware	90-1038273
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2275 Half Day Rd, Suite 200

Bannockburn, Illinois 60015

(Address of principal executive offices, including zip code)

(847) 572-8280

(Registrant’s telephone number, including area code)

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

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

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

Large accelerated filer ☐☒ Accelerated filer ☐ Non-accelerated filer ☒☐ (Do not check if a smaller reporting company) 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 ☒

As of ~~November~~May 83, ~~2017~~2018, there were 3136,~~976~~816,~~418~~476 shares of the registrant’s common stock outstanding.

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AveXis, Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended ~~September~~March 3031, ~~2017~~2018

INDEX

PART 1.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1615
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3127
Item 4.	Controls and Procedures	3127
PART II.	OTHER INFORMATION	3327
Item 1.	Legal Proceedings	3327
Item 1A.	Risk Factors	3328
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3429
Item 3.	Default Upon Senior Securities	3429
Item 4.	Mine Safety Disclosures	3429
Item 5.	Other Information	3429
Item 6.	Exhibits	3429
EXHIBIT INDEX		3530
SIGNATURES		3631

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PART 1.FINANCIAL INFORMATION

Item 1.Financial Statements

AveXis, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except ~~share and~~ per share data)

	September 30,		December 31,
	March 31,		December 31,
	2017		2016
	2018		2017
Assets
Current assets:
Cash and cash equivalents	$	~~374~~586,~~211~~808	$	~~240~~324,~~430~~117
Prepaid expenses and other current assets		911,~~092~~636		48,~~750~~321
Total current assets		~~383~~598,~~303~~444		~~245~~332,~~180~~438
Property and equipment, net		4662,~~332~~864		2456,~~201~~174
Other long-term assets		2,422		1,194
Restricted cash		2,830		—
Total assets	$	432,057	$	270,575
Other long-term assets		3,115		2,966
Total assets	$	667,253	$	391,578
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	914,~~399~~118	$	310,~~196~~587
Accrued expenses and other current liabilities		1529,~~276~~566		1644,~~794~~938
Accrued indemnification obligation		2,784		4,453
Short-term licensing fees payable		27,508		—
Total current liabilities		27,459		24,443
Accrued indemnification obligation		1,635		2,788
Long-term liabilities		548		—
Total current liabilities		72,827		58,313
Total liabilities	$	28,007	$	24,443
Long-term liabilities		25,100		525
Total liabilities	$	97,927	$	58,838
Commitments and contingencies
Common stock; par value $0.0001 per share, 100,000,000 shares authorized, 31,972,377 shares issued and outstanding at September 30, 2017; 27,700,054 shares issued and outstanding at December 31, 2016		3		3
Preferred stock, par value $0.0001 per share, 10,000 shares authorized, none issued		—		—
Additional paid-in capital		681,995		387,691
Common stock; par value $0.0001 per share, 100,000 shares authorized, 36,810 shares issued and outstanding at March 31, 2018; 32,090 shares issued and outstanding at December 31, 2017		4		3
Accumulated deficit		(277,948)		(141,562)
Additional paid-in capital		1,151,037		692,350
Total stockholders’ equity		404,050		246,132
Accumulated deficit		(581,715)		(359,613)
Total liabilities and stockholders’ equity	$	432,057	$	270,575
Total stockholders’ equity		569,326		332,740
Total liabilities and stockholders’ equity	$	667,253	$	391,578

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AveXis, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except ~~share and~~ per share data)

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended March 31,
	2017		2016		2017		2016
	2018		2017
Revenue	$	—	$	—	$	—	$	—
Operating expenses:
General and administrative		1622,~~095~~747		79,~~083~~638		~~38,898~~		~~17,325~~
Research and development		33199,~~425~~709		1420,~~098~~327		~~98,946~~		~~40,542~~
Total operating expenses		49222,~~520~~456		2129,~~181~~965		~~137,844~~		~~57,867~~
Loss from operations		(49222,~~520~~456)		(2129,~~181~~965)		~~(137,844)~~		~~(57,867)~~
Interest income		881		99		1,458		230
Interest income, net		354		246
Net loss and comprehensive loss	$	(48222,~~639~~102)	$	(2129,~~082~~719)	$	~~(136,386)~~	$	~~(57,637)~~
Basic and diluted net loss per common share	$	(16.5220)	$	(01.8707)	$	~~(4.67)~~	$	~~(2.75)~~
Weighted-average basic and diluted common shares outstanding		3135,~~941,185~~842		2427,~~166,113~~734		~~29,228,847~~		~~20,958,421~~

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AveXis, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2017		2016
	2018		2017
Cash flows from operating activities
Net loss	$	(~~136~~222,~~386~~102)	$	(5729,~~637~~719)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,~~315~~267		33244
Stock-based compensation		2312,~~595~~988		225,~~713~~084
Changes in operating assets and liabilities
Prepaid and other current assets		(4,355)		(2,908)
Prepaid expenses and other current assets		(3,391)		(2,533)
Other long-term assets		(~~1,228~~149)		(~~848~~642)
Accounts payable		61,~~624~~706		16,~~051~~526
Accrued expenses and other current liabilities		(1,~~461~~884)		4(7,~~262~~154)
Accrued indemnification obligation		(1,~~669~~153)		~~136~~67
Net cash used in operating activities		(113,565)		(33,198)
Accrued licensing fees payable		52,107		—
Net cash used in operating activities		(160,611)		(28,127)
Cash flows from investing activities
Capital expenditures		(237,~~364~~921)		(118,~~702~~064)
Net cash used in investing activities		(237,~~364~~921)		(118,~~702~~064)
Cash flows from financing activities
Proceeds from issuance of common stock, net of issuance costs		269,869		247,228
Proceeds from issuance of common stock		431,857		—
Payments of deferred offering costs		—		(1,198)
Proceeds from exercise of stock options		5,029		215
Proceeds from exercise of stock options		1,258		218
Taxes paid on stock-based compensation vesting and exercise		(2,833)		—
Service-based restricted stock unit vesting		(417)		—
Net cash provided by financing activities		434,053		215
Proceeds from exercise of stock warrants		—		42
Net increase (decrease) in cash and cash equivalents and restricted cash		265,521		(35,976)
Net cash provided by financing activities		270,710		246,290
Cash and cash equivalents and restricted cash, Beginning of Period		324,117		240,430
Net increase in cash and cash equivalents		133,781		201,390
Cash and cash equivalents and restricted cash, End of Period	$	589,638	$	204,454
Cash and cash equivalents, Beginning of Period		240,430		62,252
Supplemental Disclosure of Non-cash Investing and Financing Activities
Cash and cash equivalents, End of Period	$	374,211	$	263,642
Capital expenditures in accounts payable and accrued liabilities	$	7,009	$	5,842
Supplemental Cash Flow Information
Shares issued in settlement with stockholder (See Note 7)		11,647		—
Capital expenditures in accounts payable and accrued liabilities	$	4,954	$	4,927
Deferred issuance costs for underwritten offering in accounts payable and accrued liabilities	$	—	$	727

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AveXis, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1.Background

~~AveXis~~Avexis, Inc., ~~was~~(“the ~~formed~~Company”) onis ~~March 8,~~a ~~2010~~clinical‑stage ingene ~~the~~therapy ~~state~~company ofdedicated ~~Delaware~~to asdeveloping ~~Biolife~~and ~~Cell~~commercializing ~~Bank, LLC~~novel treatments for patients suffering from rare and life‑threatening neurological genetic diseases. InThe ~~January~~Company’s ~~2012~~initial product candidate, ~~the~~AVXS‑101, ~~Company~~is ~~converted~~its ~~from~~proprietary agene ~~limited~~therapy ~~liability~~product ~~company~~candidate tofor athe ~~corporation,~~treatment ~~Biolife~~of ~~Cell~~spinal ~~Bank~~muscular atrophy, ~~Inc~~ (“SMA”). InSMA ~~January~~is ~~2014,~~a ~~the~~severe ~~Company~~neuromuscular ~~amended~~disease ~~and~~characterized ~~restated~~by ~~its~~the ~~Certificate~~loss of ~~Incorporation~~motor neurons, leading to ~~change~~progressive ~~its~~muscle ~~name~~weakness toand ~~AveXis, Inc~~paralysis. ~~("AveXis"~~SMA oris ~~"the~~generally ~~Company")~~divided into sub‑categories termed SMA Type 1, 2, 3 and 4.

~~The~~On April 6, 2018, the Company isentered ainto ~~clinical-stage~~an ~~gene~~Agreement ~~therapy~~and Plan of Merger (the “Merger Agreement”) with Novartis AG, a company ~~dedicated~~organized tounder ~~developing~~the laws of Switzerland (“Parent”), and ~~commercializing~~Novartis ~~gene~~AM ~~therapy~~Merger ~~treatments~~Corporation, ~~for~~a ~~patients~~Delaware ~~suffering~~corporation ~~from~~and ~~rare~~a wholly owned subsidiary of Parent (“Purchaser”), pursuant to which, and ~~life-threatening~~upon ~~neurological~~the ~~genetic~~terms ~~diseases.~~and ~~The~~subject ~~Company's~~to ~~initial~~the ~~product~~conditions ~~candidate~~described therein, ~~AVXS-101~~on April 17, is2018, Purchaser commenced a ~~gene~~cash ~~therapy~~tender ~~product~~offer ~~candidate~~(the ~~currently~~“Offer”) into aacquire ~~pivotal~~all ~~clinical~~of ~~trial~~the ~~for~~outstanding shares of the ~~treatment~~Company’s common stock at a purchase price of ~~spinal~~$218.00 ~~muscular~~per ~~atrophy~~share, ~~(“SMA”)~~net to the seller in cash, ~~Type 1~~without interest, ~~the~~subject ~~leading~~to ~~genetic~~any ~~cause~~required withholding of ~~infant mortality~~taxes. As of the date of this filing, the Offer and the merger contemplated by the Merger Agreement have not been completed (see Note 11).

~~Initial~~January 2018 Underwritten Public Offering

On ~~February~~January 1022, ~~2016~~2018, the Company completed an ~~initial~~underwritten public offering ~~(“IPO”), which resulted in the issuance and sale~~ of 4,~~750~~509,~~000~~840 shares of its common stock, atincluding athe ~~public~~exercise ~~offering price of $20.00 per share, resulting~~ in ~~net~~full ~~proceeds~~by ~~of approximately $88.4 million after deducting underwriting discounts. Upon~~ the ~~closing~~underwriters of ~~the~~their ~~IPO,~~option ~~the~~to 3purchase 588,~~278,938~~240 shares offrom ~~Class~~the ~~B-1 preferred stock~~Company, ~~326,557~~at ~~shares~~a ofpublic ~~Class~~offering ~~B-2~~price ~~preferred~~of ~~stock,~~$102.00 ~~2,365,020~~per ~~shares~~share. ofAfter ~~Class~~deducting Cthe ~~preferred~~underwriting ~~stock~~discounts and 3commissions,~~105,000~~ ofthe ~~Class~~net Dproceeds ~~preferred~~to ~~stock were automatically converted into shares of~~ the Company’s ~~common~~were ~~stock~~approximately $431.9 million.

On March 3, 2016, the underwriters of the Company’s IPO exercised their over-allotment option to purchase an additional 527,941 shares of the Company’s common stock at the initial public offering price of $20.00 per share, less underwriting discounts and commissions, resulting in additional net proceeds of approximately $9.8 million.

September 2016 Underwritten Public Offering

On September 13, 2016, the Company completed an underwritten public offering of 4,887,500 shares of its common stock, 4,597,645 shares of which were issued and sold by the Company, including the exercise in full by the underwriters of their option to purchase 637,500 shares from the Company, and 289,855 shares of which were sold by PBM Capital Investments, LLC ("PBM"), an existing stockholder of the Company, each at a public offering price of $34.50 per share. After deducting the underwriting discounts and commissions, the net proceeds to the Company were approximately $149.1 million. The Company did not receive proceeds from the sale of the common stock by PBM.

June 2017 Underwritten Public Offering

On June 26, 2017, the Company completed an underwritten public offering of 4,111,250 shares of its common stock, including the exercise in full by the underwriters of their option to purchase 536,250 shares from the Company, at a public offering price of $70.00 per share. After deducting the underwriting discounts and commissions, the net proceeds to the Company were approximately $269.9 million.

2.Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and footnote disclosures normally included in the annual consolidated financial statements. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The December 31, 2017 condensed consolidated balance sheet data contained within this Form 10-Q was derived from audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (“Annual Report on Form 10-K”), but does not include all disclosures required by GAAP.

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necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The December 31, 2016 condensed consolidated balance sheet data contained within this Form 10-Q was derived from audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (“Annual Report on Form 10-K”), but does not include all disclosures required by GAAP.

Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies as of and for the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018, as compared with the significant accounting policies described in the Company’s Annual Report on Form 10-K.

Use of Estimates

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 and disclosure of contingent ~~assets and liabilities at the date of the financial statements and reported amounts of revenues, if any, and expenses during the reporting period. Actual results could differ from those estimates.~~

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assets and liabilities at the date of the financial statements and reported amounts of revenues, if any, and expenses during the reporting period. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (“ASC 842”). The guidance requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. Existing sale-leaseback guidance, including guidance for real estate, is replaced with a new model applicable to both lessees and lessors. ASC 842 is effective for fiscal years beginning after December 15, 2018. The Company is evaluating the adoption of ASC 842, but has not determined the effects it may have on the Company’s consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). ASU 2016-15 is intended to reduce the diversity in practice regarding how certain transactions are classified within the statement of cash flows. ASU 2016-15 is effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted with retrospective application. The Company is evaluating the adoption of ASU 2016-15, but has not determined the effects it may have on the Company’s consolidated financial statements.

Recently Adopted Accounting Pronouncements

In ~~March~~August 2016, the FASB issued ASU No. 2016-0918, ~~Compensation~~ –Statement ~~Stock~~of ~~Compensation~~Cash Flows (Topic ~~718~~230).: ~~The~~Restricted ~~new~~Cash. ~~standard~~This ~~simplifies~~update ~~several~~is ~~aspects~~intended ofto ~~the~~reduce ~~accounting~~diversity ~~for~~in ~~employee share-based payment transactions, including~~ the ~~accounting~~presentation ~~for~~of ~~income~~restricted ~~taxes,~~cash ~~forfeitures,~~ and ~~statutory~~restricted ~~tax~~cash ~~withholding~~equivalents ~~requirements, as well as classification~~ in the statement of cash flows. Under this guidance, a company recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the statement of operations. This change eliminates the notion of the additional paid-in capital pool and reduces the complexity in accounting for excess tax benefits and tax deficiencies. The ~~new~~updated standard iswas effective for ~~public~~the ~~companies~~Company ~~for~~in ~~annual~~the ~~reporting~~quarterly ~~periods~~period ~~beginning~~ending ~~after~~March ~~December 15~~31, ~~2016, including interim periods within those annual reporting periods; however, early adoption is allowed~~2018. The ~~Company~~adoption ~~adopted~~of ~~the~~this ~~new~~updated standard onresulted ~~January~~in 1,restricted ~~2017.~~cash ~~The~~being ~~adoption~~combined ofwith ~~this~~cash ~~standard~~and ~~did~~cash ~~not~~equivalents ~~have a material impact~~ on the ~~Company’s~~cash ~~consolidated~~flow ~~financial statements~~statement.

3. Restricted Cash

As of March 31, 2018, restricted cash was $2.8 million and related to a letter of credit signed by the Company in the three months ended March 31, 2018. The letter of credit was signed in conjunction with an amendment to the lease at the Libertyville, Illinois manufacturing facility. There was no restricted cash as of December 31, 2017.

The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported within the condensed consolidated balance sheet to the same items as reported in the condensed consolidated statement of cash flows:


	Three Months Ended
	March 31,
	2018		2017
Cash and cash equivalents	$	586,808	$	204,454
Restricted cash		2,830		—
Cash and cash equivalents and restricted cash	$	589,638	$	204,454

4.Property and Equipment, Net

Property and equipment, net, consists of the following (in thousands):


	March 31,		December 31,
	2018		2017
Equipment	$	41,733	$	34,777
Leasehold improvements		12,513		7,123
Construction in progress		11,208		15,656
Furniture		978		919
Property and equipment, gross		66,432		58,475
Less: accumulated depreciation		(3,568)		(2,301)
Property and equipment, net	$	62,864	$	56,174

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Depreciation expense was $1.3 million and $0.~~Property~~2 million for the three months ended March 31, 2018 and ~~Equipment~~2017, ~~Net~~respectively. Advances paid towards the acquisition of property and equipment, and the cost of property and equipment not ready for use before the end of the period, are both classified as construction in progress.

~~Property~~5.Accrued Expenses and ~~equipment,~~Other ~~net,~~Current ~~consists of the following (in thousands):~~ Liabilities

	September 30,		December 31,
	2017		2016
Furniture	$	713	$	108
Equipment		30,480		230
Leasehold improvements		4,458		777
Construction in progress		12,057		23,162
Property and equipment, gross		47,708		24,277
Less: accumulated depreciation		(1,376)		(76)
Property and equipment, net	$	46,332	$	24,201

Depreciation expense was $586 and $6 for the three months ended September 30, 2017 and 2016, respectively, and $1,315 and $33 for the nine months ended September 30, 2017 and 2016, respectively. Advances paid towards the acquisition of property and equipment, and the cost of property and equipment not ready for use before the end of the period, are both classified as construction in progress.

4.Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

	September 30,		December 31,
	March 31,		December 31,
	2017		2016
	2018		2017
Accrued manufacturing development costs	$	38,~~865~~786	$	710,~~167~~356
Accrued payroll, bonus and deferred compensation		5,199		3,841
Accrued construction in progress		5,912		4,156
Accrued construction in progress		2,826		2,979
Accrued payroll, bonus and deferred compensation		4,413		9,589
Accrued clinical trial costs		~~617~~3,277		~~389~~864
Accrued professional and consulting fees		13,~~143~~338		15,~~588~~406
Other		1,626		830
Accrued loss on settlement		—		11,647
Accrued expenses and other current liabilities	$	15,276	$	16,794
Accrued franchise taxes and other		3,840		2,920
Accrued expenses and other current liabilities	$	29,566	$	44,938

5.Accrued Indemnification Obligation

In January 2014, the Company issued 2,334,391 shares of restricted common stock to a member of its Board of Directors (Dr. Brian Kaspar, see Note 6), a related party, pursuant to a consulting agreement for scientific advisory services to be performed by the director on behalf of the Company. In connection with the restricted stock purchase agreement, the Company agreed to indemnify Dr. Kaspar for any taxes, interest, fines, penalties or other costs and expenses that Dr. Kaspar may incur in the future should the Internal Revenue Service succeed in a tax determination that the stock price paid by Dr. Kaspar (which was par value) was lower than the fair market value of the stock on the date of grant. The indemnification term is in effect for six years after the due date of the tax return for the year in which the stock was issued. In January 2016, the Company entered into an employment agreement with Dr. Kaspar.

In connection with the preparation of the Company's audited consolidated financial statements for the year ended December 31, 2014, the Company determined that the per share fair value of the Company's common stock on January 28, 2014, the grant date, was $1.51.

As a result, the Company issued Dr. Kaspar an amended Form 1099 for the 2014 tax year reflecting an aggregate fair value of the restricted stock grant of $3.5 million. Due to the indemnity obligation contained in Dr. Kaspar’s restricted stock purchase agreement, the Company was required to reimburse Dr. Kaspar for the taxes he paid following the amendment of Dr. Kaspar’s 2014 personal income tax return. As a result, the Company has concluded that payment of such indemnity is probable as of December 31, 2016 and September 30, 2017.

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Additionally, the Company intends to gross-up such indemnification payment for the tax that will be payable by Dr. Kaspar on the indemnity payment.

On May 3, 2017, the Company paid Dr. Kaspar $1.7 million, which represents the tax liabilities owed to the U.S., State of Ohio and municipality of New Albany, Ohio pursuant to Dr. Kaspar’s 2014 amended tax returns. As a result, the Company has accrued balances of $2.8 million and $4.5 million at September 30, 2017 and December 31, 2016, respectively, representing the Company’s best estimate of the ultimate tax indemnification and gross-up payment to be made to Dr. Kaspar. The overall decrease in the accrued indemnification obligation was due to the May 3, 2017 payment to Dr. Kaspar, offset slightly by the accrual of additional interest through September 30, 2017. The Company expects to pay this entire amount in 2017.

6.Stock-Based Compensation

2014 Stock Plan (the “2014 Plan”) and 2016 Equity Incentive Plan (the “2016 Plan”)

The following table summarizes stock option activity under the 2014 Plan and the 2016 Plan (collectively, the “Plans”) for the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018 (in thousands, except per share data):

		Weighted		Weighted Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Shares	Price		Life (Years)	Value (a)
Outstanding at December 31, 2016	2,577	$	22.01	8.79	$	66,466
Outstanding at December 31, 2017	3,167	$	41.30	8.35	$	219,656
Granted	~~959~~672	$	75124.3757
Exercised	(~~152~~97)	$	1026.4249
Cancelled or forfeited	(7462)	$	2042.2795
Outstanding at September 30, 2017	3,310	$	38.04	8.53	$	194,310
Outstanding at March 31, 2018	3,680	$	56.88	8.45	$	249,205
Exercisable at September 30, 2017	1,116	$	20.03	7.96	$	85,622
Exercisable at March 31, 2018	1,240	$	22.52	7.55	$	125,304
Exercisable and expected to vest at September 30, 2017	3,310	$	38.04	8.53	$	194,310
Exercisable and expected to vest at March 31, 2018	3,680	$	56.88	8.45	$	249,205

(a) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the estimated fair value of the common stock for the options that were in-the-money at ~~September~~March 3031, ~~2017~~2018 and December 31, 2017. The intrinsic value of the outstanding stock options as of March 31, ~~2016~~2018 at the purchase price of $218.00 per share in the Offer is equal to $592.9 million (see Note 11).

For the ~~nine~~ three months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017, the total number of stock options exercised was ~~152~~97,388 and 3443,120, respectively, resulting in total proceeds of $~~1,258~~5.0 million and $~~218~~0.2 million, respectively.

As of ~~September~~March ~~30, 2017 and December~~ 31, ~~2016,~~2018 there was $4989.08 million ~~and $20.6 million, respectively,~~ of unrecognized stock-based compensation expense related to stock option awards that is expected to be recognized over a weighted-average period of 1.4 ~~and 1.4~~ years~~, respectively~~.

The Company has recorded total stock-based compensation expense related to the issuance of stock option awards under the Plans in the consolidated statements of operations and comprehensive loss as follows (in thousands): 8

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Research and development	$	4,894	$	2,007	$	10,418	$	14,758
General and administrative		5,274		2,616		12,490		7,253
	$	10,168	$	4,623	$	22,908	$	22,011

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The Company has recorded total stock-based compensation expense related to the issuance of stock option awards under the Plans in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):


	Three Months Ended
	March 31,
	2018		2017
Research and development	$	6,995	$	1,978
General and administrative		5,274		2,765
	$	12,269	$	4,743

Stock Options Granted

The weighted-average grant date fair value of options granted during the three months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016 was $60.34 and $27.87, respectively, and for the nine months ended September 30,~~ 2017 ~~and 2016~~ was $5485.5655 and $2347.9820, respectively, on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	Three Months Ended				~~Nine Months Ended~~
	September 30,		September 30,		September 30,		September 30,
	March 31,		March 31,
	2017		2016		2017		2016
	2018		2017
Expected volatility	~~100~~77.1368	%	9786.8288	%	~~88.81~~	%	~~92.46~~	%
Risk-free interest rate	12.8153	%	1.1094	%	~~1.90~~	%	~~1.42~~	%
Expected term (in years)	6.08		6.08		~~6.08~~		~~6.08~~
Expected dividend yield	0.00	%	0.00	%	~~0.00~~	%	~~0.00~~	%

Options generally expire ten years following the date of grant. Options typically vest over a period of ~~three to~~ four years, but vesting provisions can vary by award based on the discretion of the Board of Directors. Options to purchase common stock carry an exercise price equal to the estimated fair value of the Company’s common stock on the date of grant. Options to purchase shares of the Company’s common stock may be exercised by payment of the exercise price in cash, by the delivery of previously acquired shares of common stock having a fair value equal to the exercise price payable or the withholding of common shares equal to the fair value of the aggregate exercise price. Upon the termination of service of a holder of stock options awarded under the Plans, all unvested options are immediately forfeited and vested options may be exercised within three months of termination.

Service-Based Restricted Stock Units

AsThe ofCompany ~~September~~grants ~~30, 2017, and December 31, 2016, there were 37,934 and 57,500, respectively, outstanding service-based~~ restricted stock units (“RSUs”) ~~granted~~with ~~to employees. During the nine months ended September 30, 2017, 18,966 RSUs vested, which included 5,961 RSUs exchanged for tax~~service-~~related~~based ~~purposes~~vesting ~~resulting~~terms infrom ~~the~~time ~~remaining 13,005 RSUs converting~~ to ~~common stock~~time. The ~~Company~~outstanding ~~recognized~~RSUs ~~RSU-related~~vest ~~stock-based~~over ~~compensation~~a ~~expense~~period of ~~$687~~three ~~during~~years. ~~the~~For ~~nine~~awards ~~months~~that ~~ended~~vest ~~September~~subject ~~30,~~to ~~2017,~~the satisfaction of ~~which~~service ~~$613~~requirements, iscompensation ~~recorded within research and development~~ expense ~~and~~is ~~$74 within~~measured ~~general~~based ~~and~~on ~~administrative~~the ~~expense.~~fair ~~There~~value ~~were~~of ~~57,500~~the RSUs ~~issued~~on ~~and~~the ~~outstanding~~date as of ~~September~~grant ~~30, 2016. At September 30, 2017~~ and ~~2016,~~is ~~there was $541 and $0, respectively, of unrecognized compensation cost related to unvested RSUs that will be~~ recognized as expense ~~over~~on a ~~weighted~~straight-~~average~~line ~~period~~basis ofover ~~0.9 years. A summary of~~ the ~~status~~requisite ofservice ~~the~~period. ~~Company's~~All RSUs atissued ~~September~~vest ~~30,~~over ~~2017~~time ~~and~~as ofstipulated ~~changes~~ in ~~RSUs outstanding under~~ the ~~2016~~individual ~~Plan~~RSU ~~for~~award ~~the~~agreements. ~~nine months ended September 30, 2017 is as follows (in thousands, except per share data):~~

		Weighted
		Average
		Grant Date
	Number	Fair Value
	of Shares	Per Share
Outstanding at December 31, 2016	58	$	34.90
Granted	—		—
Vested	(19)	$	34.90
Forfeited and cancelled	(1)	$	34.90
Outstanding at September 30, 2017	38	$	34.90

A summary of the status of the Company's RSUs at March 31, 2018 and of changes in RSUs outstanding under the 2016 Plan for the three months ended March 31, 2018 is as follows (in thousands, except per share data):

The Company granted RSUs with service-based vesting terms. The outstanding RSUs vest over a period of three years. For awards that vest subject to the satisfaction of service requirements, compensation expense is measured based on the fair value of the RSUs on the date of grant and is recognized as expense on a straight-line basis, net of estimated forfeitures, over the requisite service period. All RSUs issued vest over time as stipulated in the individual RSU award agreements.


		Weighted
		Average
		Grant Date
	Number	Fair Value
	of Shares	Per Share
Outstanding at December 31, 2017	27	$	38.79
Granted	139		129.85
Vested	(10)	$	40.24
Forfeited and cancelled	(0)	$	34.90
Outstanding at March 31, 2018	156	$	119.79

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At March 31, 2018, there was $17.7 million of unrecognized compensation cost related to unvested RSUs that will be recognized as expense over a weighted-average period of 1.8 years.

The Company has recorded total stock-based compensation expense related to the issuance of service-based RSUs under the Plans in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):


	Three Months Ended
	March 31,
	2018		2017
Research and development	$	399	$	302
General and administrative		320		39
	$	719	$	341

Performance-Based Restricted Stock Units

On March 20, 2017, the Company granted to certain employees a total of 49,332 performance-based restricted stock units (“PSUs)”. These PSUs vest upon the achievement of certain regulatory and manufacturing milestones. If the milestones do not occur on or before the three-year anniversary of the grant date, all unvested PSUs will be cancelled. As of ~~September~~March 3031, ~~2017~~2018, all 49,332 of these PSUs were outstanding, none had vested and the weighted -average grant date fair value of all shares was $79.75 per share. The Company has not yet recognized any PSU-related stock-based compensation expense as regulatory and manufacturing milestones have not yet been met; however, in the event the performance conditions are met, $3.9 million of research and development compensation expense will be recognized by the Company. There were no PSUs ~~issued~~granted ~~and outstanding~~ during the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2018.

Restricted Stock Granted to Non-Employees

In January 2014, the Company issued 2,334,391 shares of restricted common stock to Dr. Brian Kaspar pursuant to a consulting agreement for scientific advisory services. Of these shares, 583,597 common shares were vested at the time of grant and the remaining restricted shares were scheduled to vest in the amount of 25% per year on the second, third and fourth anniversary of the grant date pursuant to a restricted stock purchase agreement, which became effective upon the effectiveness of the consulting agreement.

In January 2016, the Company entered into an employment agreement with Dr. Kaspar. Upon the effectiveness of the employment agreement, Dr. Kaspar’s 1,750,794 unvested shares granted pursuant to the restricted stock purchase agreement vested in full. As a result of the vesting of the remainder of this award the Company recorded $10.4 million of additional stock-based compensation expense during the year ended December 31, 2016.

Warrants Granted to Non-Employees

During the ~~nine~~three ~~month~~months ~~period~~ ended ~~September~~March 3031, 2018 and 2017, there were no warrants exercised and as a result no proceeds received by the Company. As of ~~September~~March 3031, ~~2017~~2018, there were 305,775 common stock warrants vested and outstanding issued to non-employees with a weighted-average exercise price of $2.57.

7.Equity and Net Loss Per Common Share

Basic net loss per common share is computed using the weighted -average number of common shares outstanding during the period. Diluted net loss per common share is computed using the sum of the weighted -average number of common shares outstanding during the period and, if dilutive, the weighted -average number of potential shares of common stock, including the assumed exercise of stock options, stock warrants and unvested restricted common stock.

~~The~~For ~~Company applies~~ the ~~two-class~~three ~~method~~months toended ~~calculate~~March ~~its~~31, ~~basic~~2018 and ~~diluted net loss per share attributable to common stockholders~~2017, asthe ~~its~~following ~~preferred~~potentially ~~stock~~dilutive ~~and common stock are participating~~ securities. ~~The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would~~ have been ~~available~~excluded tofrom ~~common~~the ~~stockholders.~~computations ~~However,~~of ~~the~~diluted ~~two~~weighted-~~class~~average ~~method~~shares ~~does~~outstanding ~~not~~because ~~impact~~ the ~~net~~effect ~~loss~~would ~~per~~be ~~share~~anti-dilutive ~~of common stock as the Company was~~ (in athousands): ~~net loss position for each of the periods presented. For the three and nine month periods~~


	Three Months Ended
	March 31,
	2018	2017
Stock options	3,680	2,734
Stock warrants	306	306
Unvested service-based restricted stock units	156	42
Unvested performance-based restricted stock units	49	49
	4,191	3,131

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ended September 30, 2017 and 2016, the following potentially dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding because the effect would be anti-dilutive (in thousands):

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2017	2016	2017	2016
Stock options	3,310	2,567	3,310	2,567
Stock warrants	306	310	306	310
Unvested service-based restricted stock units	38	58	38	58
Unvested performance-based restricted stock units	49	—	49	—
	3,703	2,935	3,703	2,935

Amounts in the table above reflect the common stock equivalents of the noted instruments.

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The following table summarizes the calculation of the basic and diluted net loss per common share (in thousands, except per share data):

	~~Three Months Ended~~	Three Months Ended					~~Nine Months Ended~~
	September 30,						September 30,
		March 31,
	2017			2016			2017		2016
		2018			2017
Numerator:
Net loss and comprehensive loss	$	~~(48,639)~~$	222,102	$	~~(21,082)~~$	29,719	$	~~(136,386)~~	$	~~(57,637)~~
Denominator:
Weighted-average basic and diluted common shares		~~31,941~~	35,842		~~24,166~~	27,734		~~29,229~~		~~20,958~~
Basic and diluted net loss per common share	$	~~(1.52)~~$	6.20	$	~~(0.87)~~$	1.07	$	~~(4.67)~~	$	~~(2.75)~~

On December 29, 2017, the Company entered into a settlement agreement and release with a stockholder to whom the Company had issued a promissory note in 2012. Under the settlement agreement, the Company was obligated to issue 105,237 shares of common stock as of December 31, 2017 and recognized a non-cash expense of $11.6 million within general and administrative expense for the year ended December 31, 2017. The Company issued the shares in January 2018.

8.Commitments and Contingencies

Operating Leases

In March ~~2014~~2018, the Company entered into a lease agreement, which ~~expired~~expires in ~~April~~August ~~2017~~2027, for approximately 29,~~418~~500 square feet ofadjacent ~~office~~to the Company’s existing space in ~~Dallas~~San Diego, ~~Texas~~California. The lease agreement provides for annual escalation in rent payments during the lease term. The Company is amortizing the escalation in rental payments on a straight‑line basis over the term of the lease.

~~The~~In ~~Company~~March ~~leases a 15~~2018,~~668~~ ~~square~~the ~~foot~~Company ~~facility~~entered ~~for~~into ~~its corporate headquarters in Bannockburn, Illinois, pursuant to~~ a lease ~~that~~agreement, which expires in July ~~2024.~~2026, ~~The lease agreement provides~~ for ~~annual~~approximately ~~escalation~~44,000 insquare ~~rent~~feet ~~payments~~of ~~during~~warehouse, ~~the~~office ~~lease~~and ~~term.~~storage ~~The~~space ~~Company is amortizing the escalation~~ in ~~rental~~Libertyville, ~~payments on a straight-line basis over the term of the lease~~Illinois.

~~The~~In March 2018, the Company ~~also~~entered ~~leases~~into a 1lease agreement,~~318~~ which expires in July 2024, for approximately 4,700 square ~~foot~~feet adjacent to the Company’s existing facility in ~~Columbus~~Bannockburn, ~~Ohio~~Illinois. The lease agreement provides for ~~research~~annual ~~and~~escalation ~~development~~in ~~activities,~~rent ~~pursuant~~payments toduring athe lease ~~that~~term. ~~expires~~The Company is amortizing the escalation in ~~March~~rental ~~2019~~payments on a straight‑line basis over the term of the lease.

In March 2016, the Company entered into a lease agreement, which expires in August 2026, for approximately 48,529 square feet of warehouse and office space in Libertyville, Illinois. A portion of the warehouse space is used as manufacturing space. The lease agreement provides for annual escalation in rent payments during the lease term. The Company is amortizing the escalation in rental payments on a straight‑line basis over the term of the lease. In May 2017, the Company entered into two month-to-month lease agreements to add an additional 4,582 square feet of office space in Libertyville, Illinois. This has subsequently been reduced to one month-to-month lease agreement. In September 2017, the Company entered into a lease agreement that commences in January 2018 and expires in August 2026 for approximately 12,539 square feet of warehouse and office space in Libertyville, Illinois adjacent to the Company’s manufacturing facility.

In July 2017, the Company entered into a lease agreement which expires in June 2027, for approximately 16,808 square feet in San Diego, California for research and development activities. The lease agreement provides for annual escalation

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in rent payments during the lease term. The Company is amortizing the escalation in rental payments on a straight‑line basis over the term of the lease.

Guarantees and Indemnifications

~~The~~In the normal course of business, the Company has ~~accrued~~entered ~~$2.8~~into ~~million~~agreements ~~and~~that ~~$4.5~~contain ~~million~~a atvariety ~~September~~of ~~30,~~representations ~~2017~~ and ~~December~~provide ~~31,~~for ~~2016,~~general ~~respectively~~indemnification, ~~representing~~including indemnification agreements with the Company’s officers and directors. The Company's ~~best~~exposure ~~estimate~~under ofthese ~~the~~agreements ~~ultimate~~is ~~tax~~unknown ~~indemnification~~because ~~and~~it ~~gross-up~~involves ~~payment~~claims tothat may be made toagainst Drthe Company in the future. ~~Kaspar~~To ~~pursuant~~date, the Company has not paid any claims or been required to adefend ~~tax~~any ~~indemnification~~action ~~granted~~related to Drthese indemnification obligations. ~~Kaspar~~As inof ~~connection~~March ~~with~~31, a2018 ~~restricted~~and ~~common~~December ~~stock~~31, ~~grant~~2017, ~~(see~~the ~~Note~~Company 5)did not have any material indemnification claims related to these agreements that were probable or reasonably possible and consequently has not recorded any related liabilities.

Additionally, in the normal course of business, the Company has entered into agreements that contain a variety of representations and provide for general indemnification, including indemnification agreements with the Company’s officers and directors. The Company's exposure under these agreements is unknown because it involves claims that may be made against the Company in the future. To date, the Company has not paid any claims or been required to defend any action related to these indemnification obligations. As of September 30, 2017 and December 31, 2016, the Company did not have any material indemnification claims related to these agreements that were probable or reasonably possible and consequently has not recorded any related liabilities.

Litigation

On September 8, 2016, Sophia's Cure Foundation ("“SCF"”), a non-profit 501(c)(3) public charity, filed a complaint in U.S. District Court, Southern District of Ohio, naming as defendants Nationwide Children's Hospital ("“NCH"”) and other entities affiliated with NCH, the Company and certain of the Company's present and former executives (the "“Complaint"”). According to the complaint, in 2012, SCF and Nationwide Children’s Hospital Foundation (“NCH Foundation”) entered into a donation agreement under which SCF provided NCH a gift of $550,000 to fund clinical work associated with the study of the product candidate that the Company now refers to as AVXS-101 for SMA Type 1 patients, and NCH Foundation agreed in such donation agreement to reference SCF as the "primary sponsor" of such clinical work in all publications issued by NCH Foundation. The complaint also alleges that NCH breached the donation agreement by not naming SCF as the sponsor of the investigational new drug application (the "IND") that it filed for AVXS-101. Additionally, the complaint alleges that the Company and the named Company executives tortiously interfered with SCF's rights under the donation agreement by assuming sponsorship of the IND under the NCH License. There is no contractual relationship between the Company and SCF. The complaint seeks, among other relief, monetary damages of $500.0 million and equitable relief, including taking steps to designate SCF as the sponsor of the IND. On October 10, 2017, the Court granted all of the defendants’ motions to dismiss. On October 31, 2017, SCF filed a second amended complaint against all of the defendants except two of the Company’s present executives, who were dropped from the second amended complaint. The Company believes that the second amended complaint is without merit and intends to vigorously defend itself and its present and former executives from the allegations. The Company views the possibility of loss in this matter to be remote.

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patients, and NCH Foundation agreed in such donation agreement to reference SCF as the “primary sponsor” of such clinical work in all publications issued by NCH Foundation. The complaint also alleges that NCH breached the donation agreement by not naming SCF as the sponsor of the investigational new drug application (the “IND”) that it filed for AVXS-101. Additionally, the complaint alleges that the Company and the named Company executives (present and former) tortiously interfered with SCF’s rights under the donation agreement by assuming sponsorship of the IND under the NCH License. There is no contractual relationship between the Company and SCF. The complaint seeks, among other relief, monetary damages of $500.0 million and equitable relief, including taking steps to designate SCF as the sponsor of the IND. On October 10, 2017, the Court granted all of the defendants’ motions to dismiss. On October 31, 2017, SCF filed a second amended complaint against all of the defendants except two of the Company’s present executives, who were dropped from the second amended complaint. The Company believes that the second amended complaint is without merit and intends to vigorously defend itself and its present and former executives from the allegations. The Company filed a new motion to dismiss on December 5, 2017. The Company views the possibility of loss in this matter to be remote.

Lawsuits may be asserted against the Company in the normal course of business. Based on information currently available, management believes that the disposition of any matters, including the matter involving SCF described above, will not have a material adverse effect on the financial position, results of operations or cash flows of the Company.

9.Taxes

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, including its net operating losses. Based on its history of operating losses, the Company believes that it is more likely than not that the benefit of its deferred tax assets will not be realized. Accordingly, the Company has provided a full valuation allowance for deferred tax assets as of ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017.

13On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act, or TCJA. The TCJA makes significant changes in U.S. tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and a reduction of the amount of the orphan drug credit. As a result of the TCJA, the Company remeasured its ending deferred tax assets and liabilities at December 31, 2017 to the newly enacted U.S. federal corporate tax rate of 21%. The Company recognized the provisional tax impacts related to the remeasurement of the deferred tax assets and liabilities pursuant to SEC Staff Accounting Bulletin No. 118 and included these amounts in its consolidated financial statements for the year ended December 31, 2017. The Company did not record any adjustments to this provisional amount during the three months ended March 31, 2018 and will continue to analyze and refine its calculations related to the remeasurement as the impact of TCJA is finalized.

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10.Collaboration and License Agreements

The Company has entered into three license agreements related to its SMA programs and its planned preclinical programs in Rett syndrome and amyotrophic lateral sclerosis (“ALS”) caused by mutations in the gene that produces the copper zinc superoxide dismutase 1 (“SOD1”) enzyme (“genetic ALS”).

REGENXBIO Inc.

~~Effective~~On ~~June~~January 78, ~~2017~~2018, the Company entered into aan ~~License~~amendment ~~Agreement~~ (the “~~REGENX Rett and ALS License~~Amendment”) ~~with~~to ~~REGENXBIO Inc. (“REGENX”). Under~~ the ~~terms~~License ofAgreement ~~the~~dated ~~REGENX~~March ~~Rett~~21, ~~and~~2014 ~~ALS~~(as ~~License~~amended, ~~REGENX granted~~ the ~~Company~~“REGENXBIO anSMA ~~exclusive worldwide license to utilize REGENX's proprietary adeno-associated virus ("AAV"~~License”) ~~gene~~between ~~delivery platform for~~ the ~~treatment~~Company ~~of Rett syndrome~~ and ~~genetic~~REGENXBIO ~~ALS caused~~Inc. ~~by mutations in the gene that produces the copper zinc superoxide dismutase 1~~ (“~~SOD1~~REGENXBIO”) ~~enzyme by in vivo gene therapy, using REGENX’s AAV9 gene delivery vector~~. Under the ~~REGENX~~terms ~~Rett~~of ~~and~~the ~~ALS License~~Amendment, ~~REGENX~~REGENXBIO granted the Company an exclusive, worldwide commercial license, ~~under~~with ~~the licensed patent~~ rights to ~~make~~sublicense, ~~have~~to ~~made,~~all ~~use,~~recombinant ~~import,~~adeno-associated ~~sell~~virus ~~and~~vectors ~~offer~~in ~~for~~REGENXBIO’s ~~sale~~intellectual ~~any~~property ~~products~~portfolio ~~covered~~during by the ~~REGENX~~term ~~Rett~~of ~~and ALS License (~~the ~~“REGENX~~license ~~Rett~~agreement ~~and~~for ~~ALS licensed products”) in~~ the ~~field of the~~ treatment of ~~(i)~~SMA ~~Rett syndrome~~ in humans by in vivo gene therapy. ~~using~~Additionally, ~~AAV9 delivering~~ the ~~gene~~Amendment ~~encoding~~modifies ~~for~~the ~~methyl~~terms ~~CpG binding protein 2,~~ and ~~(ii)~~conditions ~~ALS~~of ~~caused~~the byLicense ~~SOD1~~Agreement ~~mutation~~relating into ~~humans~~assignment. byUnder inthe ~~vivo~~amended ~~gene~~assignment ~~therapy~~provision, ~~using AAV9 delivering~~ the ~~gene~~Company ~~encoding~~is ~~for~~permitted ~~SOD1, subject~~ to ~~certain~~transfer ~~rights~~the ~~reserved~~License byAgreement ~~REGENX and its licensors.~~

As consideration for the REGENX Rett and ALS License, in June 2017 the Company paid an initial fee of $6.0 million. This $6.0 million initial fee paid to REGENX was recognized as research and development expense during the three months ended September 30, 2017. Additionally, the Company agreed to pay potential future milestones of up to $36.0 million in the aggregate for the REGENX Rett and ALS licensed products, and a low double digit royalty on net sales, if any, of the REGENX Rett and ALS licensed products, subject to reduction in specified circumstances; and lower mid-double digit percentages of any sublicense fees the Company receives from sublicenses of the licensed intellectual property rights. The Company also agreed to pay an annual maintenance fee on each anniversary of the effective date of the REGENX Rett and ALS License.12

The REGENX Rett and ALS License will expire upon the later of (i) the expiration, lapse, abandonment or invalidation of the last valid claim of the licensed intellectual property to expire, lapse or become abandoned or unenforceable in all the countries of the world or (ii) seven years from the first commercial sale of each REGENX Rett and ALS licensed product. Upon expiration of the REGENX Rett and ALS License, the license granted to the Company becomes irrevocable, perpetual, royalty-free and fully paid-up. The Company has the right to terminate the REGENX Rett and ALS License upon a specified period of prior written notice. REGENX may terminate the REGENX Rett and ALS License if the Company or its affiliates become insolvent, if the Company is greater than a specified number of days late in paying money due under the REGENX Rett and ALS License, or, effective immediately, if the Company or its affiliates, or sublicensees commence any action against REGENX or its licensors to declare or render any claim of the licensed patent rights invalid or unenforceable. Either party may terminate the REGENX Rett and ALS License for material breach if such breach is not cured within a specified number of days.

Nationwide Children’s Hospital

In September 2016, the Company entered into two exclusive license agreements with NCH, pursuant to which NCH granted the Company exclusive, worldwide licenses under certain patent rights to make, have made, use, sell, offer for sale and import any products covered by each license (“NCH licensed products”) and a non-exclusive, worldwide license under certain technical information to develop and manufacture the NCH licensed products, in the field of therapies and treatments of Rett syndrome and ALS in human use, respectively (each an “NCH License”).

The Company paid an initial fee of $0.2 million to NCH in connection with the NCH License for Rett syndrome and $0.1 million in connection with the NCH License for ALS in human use. Each initial fee was recognized as research and development expense during the three months ended September 30, 2016. Additionally, the Company agreed to pay potential future development milestone-based payments and an annual maintenance fee under each NCH License. Following the first commercial sale of an NCH licensed product for Rett syndrome or ALS, as applicable, under an

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~~applicable~~without ~~NCH~~REGENXBIO’s ~~License,~~consent in connection with a change of control of the Company, ~~must~~subject ~~begin~~to ~~paying~~the ~~NCH~~transferee anor ~~aggregate~~successor ~~low-single~~agreeing ~~digit~~in ~~royalty~~writing onto ~~net~~be ~~sales~~bound by the terms of ~~NCH~~the ~~licensed~~License ~~products~~Agreement. The byAmendment requires that in a change of control of the Company, ~~its~~the ~~affiliates~~following amounts due under the license agreement, if unpaid at the time of the change in control, become immediately payable: the first and ~~sublicensees~~second ~~during~~anniversary payments of $30.0 million each and the ~~term~~first sales-based milestone payment of ~~such~~$40.0 ~~license~~million.

15As consideration for the Amendment, the Company paid $80.0 million upon entry into the Amendment and is required to pay $30.0 million on the first anniversary of the effective date of the Amendment and $30.0 million on the second anniversary of the effective date of the Amendment. In addition, pursuant to the Amendment, the Company agreed to pay up to $120.0 million in the aggregate of potential future sales-based milestone payments for all REGENXBIO SMA licensed products. The Company also agreed to pay a mid‑single digit to low double-digit royalty percentages on net sales of REGENXBIO SMA licensed products using adeno-associated virus serotype 9 (“AAV9”) and a low-double digit royalty percentage on net sales of any product candidate developed by the Company for the treatment of SMA using an adeno-associated virus vector other than AAV9, in each case subject to a reduction in specified circumstances. During the three months ended March 31, 2018, $130.7 million of expenses were recognized within research and development representing the $80.0 million upfront payment made to REGENXBIO in January 2018 and the net present value of the guaranteed fixed payments due on the first and second anniversaries of the effective date of the Amendment. As of March 31, 2018, the Company has accrued the net present value of the first anniversary payment within short-term licensing fees payable and the second anniversary payment within long-term liabilities on the balance sheet. Additionally, the Company recognized interest expense of $1.4 million associated with the accretion of its discounted guaranteed fixed payments due to REGENXBIO in 2019 and 2020.

The REGENXBIO SMA License term continues until the last valid patent claim expires or lapses in all countries of the world. Additionally, the Company may terminate the REGENXBIO SMA License at any time upon a specified notice period and REGENXBIO may terminate the REGENXBIO SMA License upon the breach (after notice and cure periods) or insolvency of the Company, if the Company is greater than a specified number of days late (after notice and cure periods) in paying money due under the REGENXBIO SMA License or if the Company, its affiliates, or sublicensees challenges the REGENXBIO SMA patents subject to the REGENXBIO SMA License. Either party may terminate the REGENXBIO SMA License for material breach if such breach is not cured within a specified number of days.

GÉNÉTHON

In March 2018, the Company entered into a license agreement with Généthon, acting in its own name and for its own behalf as well as in the name and on behalf of Centre National de la Recherche Scientifique (together “Généthon”), pursuant to which Généthon granted the Company an exclusive, worldwide license to certain patents for in vivo gene replacement therapy delivery of the survival motor neuron protein gene using the AAV9 vector into the central nervous system for the treatment of SMA. Under the Généthon agreement, the Company paid Généthon a one-time upfront license fee of $4.0 million. The Company is also required to pay $0.5 million for the first three years to support Généthon’s ongoing research, ongoing annual management fees of $25 thousand and up to a total of $11.0 million in development and sales-based milestone fees for licensed products. Under the terms of the Généthon agreement, the Company is also required to pay Généthon mid-single digit royalties of net sales on licensed products, subject to reduction in certain circumstances due to royalty stacking provisions and a mid-teens percentage of any sublicense fees that the Company receives from sublicensees for the licensed intellectual property rights. As of March 31, 2018, the Company had recognized $4.5 million of research and development expenses related to the Généthon license and no royalty fees have been recognized.

11. Subsequent Events

On April 6, 2018, the Company entered into the Merger Agreement with Parent and Purchaser, pursuant to which, and upon the terms and subject to the conditions described therein, on April 17, 2018, Purchaser commenced the Offer to acquire all of the outstanding shares of the Company’s common stock at a purchase price of $218.00 per share (such price, as it may be increased as described in the following sentence, the “Offer Price”), net to the seller in cash, without interest, subject to any required withholding of taxes. In the event Parent elects to extend the Outside Date (as defined in the Merger Agreement) in accordance with the terms of the Merger Agreement, the Offer Price will be increased to

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$225.00 per share, net to the seller in cash, without interest, subject to any required withholding of taxes. The Offer will expire at 12:00 Midnight, New York City time, at the end of the day on Monday, May 14, 2018 (unless the Offer is extended).

The obligation of Purchaser to purchase shares of the Company’s common stock tendered in the Offer is subject to customary closing conditions, including (i) shares of the Company’s common stock having been validly tendered and not withdrawn that represent at least a majority of the total number of shares of the Company’s common stock then-outstanding on a fully diluted basis, (ii) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), without the imposition of a Burdensome Condition (as defined in the Merger Agreement), (iii) the absence of injunctions or other legal restraints preventing the consummation of the Offer or the Merger, as defined below, or imposing a Burdensome Condition and (iv) certain other conditions set forth in Exhibit A to the Merger Agreement. The consummation of the Offer is not subject to any financing condition.

Following the completion of the Offer, subject to the satisfaction or waiver of certain customary conditions set forth in the Merger Agreement, Purchaser will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent (the “Merger”), pursuant to the procedure provided for under Section 251(h) of the Delaware General Corporation Law (the “DGCL”), without any stockholder approvals. The Merger will be effected as soon as practicable following the time of purchase by Purchaser of shares of the Company’s common stock validly tendered and not withdrawn in the Offer. At the effective time of the Merger (the “Effective Time”), each issued and outstanding share of the Company’s common stock (other than shares owned by (i) the Company, any subsidiary of the Company, Parent, Purchaser and any other subsidiary of Parent and (ii) stockholders of the Company who have validly exercised their statutory rights of appraisal under the DGCL) will be converted into the right to receive the Offer Price, in cash, without interest, subject to any required withholding of taxes.

Until the earlier of the termination of the Merger Agreement and the Effective Time, the Company has agreed to operate its business in the ordinary course and has agreed to certain other operating covenants, as set forth more fully in the Merger Agreement. The Merger Agreement includes customary termination provisions for both the Company and Parent and provides that, in connection with the termination of the Merger Agreement under specified circumstances, including termination by the Company to accept a Superior Company Proposal (as defined in the Merger Agreement), the Company will be required to pay a fee equal to $284 million. The Merger Agreement also provides that, in connection with the termination of the Merger Agreement under specified antitrust related circumstances, Parent will be required to pay to the Company a “reverse termination fee” equal to $437 million, which fee increases in the event Parent elects to extend the Outside Date in accordance with the terms of the Merger Agreement.

Each of the Company and Parent filed a Premerger Notification and Report Form under the HSR Act with respect to the Offer and the Merger with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice on April 13, 2018. On April 30, 2018, the waiting period under the HSR Act applicable to the Offer and the Merger expired. Accordingly, the condition to the Offer relating to the expiration or termination of the waiting period under the HSR Act has been satisfied

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

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 (the “Annual Report”), our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Forward-Looking Statements

This Quarterly Report contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions intended to identify statements about the future. These statements speak only as of the date of this Quarterly Report and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements include, without limitation, statements about the following:

our pending acquisition by Novartis AG, including uncertainties as to the timing of the tender offer and the subsequent merger; the risk that the tender offer or the subsequent merger may not be completed in a timely manner or at all; uncertainties as to the percentage of our stockholders tendering their shares in the tender offer; the possibility that competing offers or acquisition proposals for our company will be made; the possibility that any or all of the various conditions to the consummation of the tender offer or the subsequent merger may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals); the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement dated April 6, 2018, or the “Merger Agreement”, among Novartis AG, Novartis AM Merger Corporation and us, including in circumstances which would require us to pay a termination fee; the effect of the announcement or pendency of the transactions contemplated by the Merger Agreement on our ability to retain and hire key personnel, our ability to maintain relationships with our customers, suppliers and others with whom we do business, or our operating results and business generally; risks related to diverting management’s attention from our ongoing business operations; and the risk that stockholder litigation in connection with the transactions contemplated by the Merger Agreement may result in significant costs of defense, indemnification and liability;

the timing, progress and results of preclinical studies and clinical trials for AVXS-101 and any other product candidates, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available and our research and development programs;

the timing of and our ability to obtain and maintain regulatory approval of AVXS-101;

· the proposed clinical development pathway for AVXS-101 and the acceptability of the results of such trials for regulatory approval of AVXS-101 by the U.S. Food and Drug Administration, or the FDA or comparable foreign regulatory authorities;

· the proposed timing of filing investigational new drug applications with the FDA in connection with gene therapies we are developing for ~~ALS~~a ~~and~~genetic ~~Rett~~form ~~syndrome~~of inamyotrophic ~~connection~~lateral ~~with~~sclerosis, ~~the~~or ~~recent~~genetic ~~license~~ALS, ~~agreements executed with REGENX~~ and ~~Nationwide~~Rett ~~Children’s Hospital~~syndrome;

our expectations regarding timing for meetings with regulatory agencies;

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our expectations regarding the size of the patient populations for our product candidates, if approved for commercial use;

our manufacturing capabilities and strategy, including the scalability and commercial viability of our manufacturing methods and processes and our ability to establish a satisfactory potency assay for AVXS-101;

our ability to successfully commercialize AVXS-101;

our estimates of our expenses, ongoing losses, future revenue, capital requirements and our needs for or ability to obtain additional financing;

· our ability to identify and develop new product candidates, including our planned new programs in Rett syndrome and genetic ALS;

our ability to identify, recruit and retain key personnel;

our and our licensors’ ability to protect and enforce our intellectual property protection for AVXS-101, and the scope of such protection;

our financial performance;

· the development of and projections relating to our competitors or our industry; and

· our expectations about the outcome of litigation and controversies with third parties, including the lawsuit filed by Sophia’s Cure Foundation; and the impact of laws and regulations.

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· the impact of laws and regulations.

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

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

Business Overview

We are a clinical-‑stage gene therapy company dedicated to developing and commercializing novel treatments for patients suffering from rare and life-‑threatening neurological genetic diseases. ~~Our~~In ~~initial~~April ~~product candidate~~2018, ~~AVXS-101,~~we isannounced ~~our~~that ~~proprietary~~we ~~gene~~had ~~therapy~~entered ~~product~~into ~~candidate.~~an WeAgreement ~~are~~and ~~conducting~~Plan ~~our pivotal clinical trial for AVXS-101 for the treatment~~ of ~~spinal~~Merger ~~muscular~~with ~~atrophy~~Novartis ~~Type 1~~AG, ~~or SMA Type 1, the leading genetic cause of infant mortality. SMA Type 1 is~~ a ~~lethal~~company ~~genetic~~organized ~~disorder~~under ~~characterized by motor neuron loss and associated muscle deterioration, resulting in mortality or~~ the ~~need~~laws ~~for permanent ventilation support before the age~~ of ~~two for greater than 90% of patients. The survival motor neuron protein~~Switzerland, or ~~SMN~~Parent, ~~is a critical protein for normal motor neuron signaling~~ and ~~function.~~Novartis ~~Patients~~AM ~~with~~Merger ~~SMA Type 1 either have experienced a deletion of their SMN1 genes~~Corporation, ~~which~~or ~~prevents them from producing adequate levels of functional SMN protein~~Purchaser, ~~or carry~~ a ~~mutation~~Delaware incorporation ~~their~~and ~~SMN1 gene. AVXS-101 is designed to deliver~~ a ~~fully~~wholly ~~functional~~owned ~~human~~subsidiary ~~SMN gene into the nuclei~~ of ~~motor neurons that then generates an increase in SMN protein levels and we believe this will result in improved motor neuron function and patient outcomes~~Parent.

~~The~~Our ~~U.S.~~initial ~~Food~~product ~~and~~candidate, ~~Drug Administration~~AVXS-101, oris ~~FDA,~~our ~~and~~proprietary gene therapy product candidate for the ~~European~~treatment ~~Medicines~~of ~~Agency~~spinal muscular atrophy, or ~~EMA,~~SMA. ~~have~~SMA ~~each~~is ~~granted~~a ~~AVXS-101~~severe ~~orphan~~neuromuscular ~~drug~~disease ~~designation~~characterized ~~for~~by the ~~treatment~~loss of ~~SMA~~motor neurons, leading to progressive muscle weakness and ~~the~~paralysis. ~~FDA~~The ~~has~~incidence ~~granted~~of ~~AVXS-101~~SMA ~~fast~~is ~~track~~approximately ~~designation~~one ~~for~~in ~~the~~10,000 ~~treatment~~live ofbirths. SMA is generally divided into sub categories termed SMA Type 1, 2, 3 and 4. ~~The~~We ~~FDA~~are ~~granted~~conducting ~~breakthrough~~a ~~therapy~~pivotal ~~designation~~clinical trial for AVXS-101 for the treatment of SMA Type 1, inthe ~~pediatric~~leading ~~patients,~~genetic ~~and~~cause ~~the~~of ~~EMA~~infant ~~granted~~mortality. ~~access~~SMA ~~into~~Type ~~its~~1 ~~PRIority~~is ~~MEdicines~~a lethal genetic disorder characterized by motor neuron loss and associated muscle deterioration, resulting in mortality or ~~PRIME,~~the ~~program~~need for ~~AVXS-101~~permanent ventilation support before the age of two for greater than 90% of patients. In the ~~treatment~~incident population, approximately 60% of SMA patients have Type 1. In ~~addition~~our toPhase ~~developing~~1 ~~AVXS-101~~trial toof ~~treat~~infants with SMA Type 1, weat ~~plan~~24 tomonths ~~develop~~following ~~AVXS-101~~gene totransfer, ~~treat~~15 ~~additional~~of ~~SMA~~15 ~~types~~(100%) ~~and~~patients ~~develop~~were ~~other~~alive ~~novel~~and ~~treatments~~without need for ~~rare~~permanent ~~neurological~~ventilation. ~~genetic~~The ~~diseases~~median age at last follow-up was 27. 8 months and 30.7 months for patients in the proposed therapeutic dose cohort, or Cohort 2,

We expect to conduct an end-of-Phase 1 meeting with the FDA late in the fourth quarter of 2017, which we expect will help further inform the regulatory pathway for AVXS-101. We anticipate providing an update on the outcome of that meeting once the official minutes are available, which we anticipate to be early in the first quarter of 2018. With the pivotal trial initiated, we are continuing discussions with the FDA on key topics, including dosing, for intrathecal administration of AVXS-101 for the planned clinical trial in patients with SMA Type 2. We intend to initiate a pivotal trial of AVXS-101 for the treatment of SMA Type 1 in Europe during the first half of 2018.16

~~Pivotal~~Table ~~Trial~~ of ~~AVXS-101~~Contents

Inand ~~September~~low-dose ~~2017~~cohort, ~~based~~or onCohort ~~the FDA’s review of our clinical~~1, ~~chemistry,~~respectively. ~~manufacturing~~Natural ~~and~~history ~~control~~indicates ~~data,~~only ~~including~~eight apercent ~~potency assay~~ of ~~AVXS-101,~~untreated ~~we initiated our pivotal trial of AVXS-101 for~~ patients with SMA Type 1 ~~using~~survive ~~the~~event-free ~~intravenous,~~at or20 ~~IV,~~months ~~formulation~~of ~~produced by our GMP commercial manufacturing process~~age. We ~~The~~observed ~~first~~a ~~patient~~favorable insafety ~~the~~profile ~~clinical~~and ~~trial~~AVXS-101 was ~~dosed~~well ~~during the fourth quarter 2017~~tolerated.

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

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

Regulatory Approvals

United States

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

We held an end-of-Phase 1 meeting with the FDA in December 2017. The goal of the end-of-Phase 1 meeting was to review the non-clinical, clinical and Chemistry, Manufacturing and Controls, or CMC, data that had been generated by us to that date, and to align with the FDA on next steps leading to a Biologics License Application, or BLA, submission. The FDA provided detailed information requests in each of the areas discussed, which have now been addressed through a series of information request response submissions to the investigational new drug, or IND, application.

The general purpose of the pre-BLA meeting is to outline what information is to be submitted in the BLA and how that information will be submitted. We submitted a pre-BLA meeting request and the FDA granted the pre-BLA meeting setting a date for the meeting in June 2018. As part of a pre-BLA briefing package, whose purpose is to provide the necessary background information to FDA to enable them to make informed decisions about the AVXS-101 clinical development program, we plan to provide the available clinical data from our on-going pivotal trial of AVXS-101 in

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~~The~~SMA ~~open-label,~~Type ~~single-arm,~~1 ~~single-dose, multi-center trial, which we call~~ (STR1VE,); isSMA ~~designed~~Type to1 ~~evaluate~~LTFU Study; the ~~efficacy~~Phase ~~and safety of a one-time IV infusion of AVXS-101 of~~ 1.1 xtrial ~~1014~~in ~~vg/kg,~~SMA ~~which~~Type is2 ~~equivalent~~(STRONG); toand the ~~proposed~~Phase ~~therapeutic~~3 ~~dose~~Pre- ~~received~~Symptomatic byTrial ~~the second dosing cohort~~ in ~~our~~SMA ~~Phase~~Type 1 ~~trial~~,2 inand ~~patients~~3 ~~with SMA Type 1~~(SPRINT).

The trial will enroll a minimum of 15 patients with SMA Type 1 who are less than six months of age at the time of gene therapy, and who have one or two copies of the SMN2 backup gene as determined by genetic testing and bi-allelic SMN1 gene deletion or point mutations. There will be at least a four-week dosing interval between dosing of the first three patients to allow review of the safety analysis from six time points (days one, two, seven, 14, 21 and 30), as well as early signals of efficacy, prior to dosing of the next patient.Europe

The ~~intent-to-treat~~European Medicines Agency, or ~~ITT~~EMA, ~~population~~has isgranted ~~defined~~AVXS-101 asorphan ~~patients~~drug ~~who~~designation ~~are~~for ~~less~~the ~~than~~treatment ~~six~~of ~~months~~SMA. ofThe ~~age~~EMA ~~and~~has ~~symptomatic~~also atgranted ~~the~~access ~~time~~into ofits ~~gene~~PRIority ~~therapy~~MEdicines, ~~with~~or ~~two~~PRIME, ~~copies~~program for AVXS-101 for the treatment of SMA Type 1. PRIME is intended to enhance support for the ~~SMN2~~development ~~gene~~of asmedicines—specifically ~~determined~~those that may offer a major therapeutic advantage over existing treatments or benefit patients without treatment options—through early and proactive support by ~~genetic~~EMA ~~testing,~~to ~~bi-allelic~~optimize ~~SMN1~~the ~~gene~~generation ~~deletion~~of robust data and nodevelopment ~~c.859G>C~~plans, ~~mutation~~and inpotentially ~~SMN2. The~~expedite ~~intended~~the ~~enrollment~~assessment ~~will~~of ~~include~~the atmarketing ~~least~~authorization 15application so these medicines may reach patients ~~that~~sooner. We ~~meet~~have ~~the~~requested ~~ITT~~a ~~criteria~~pre-marketing authorization application, or MAA, meeting from EMA. The ~~first~~purpose 3of ~~patients~~this ~~will~~meeting beis ~~ITT~~to ~~patients~~discuss ~~per~~ the ~~trial~~possible ~~protocol~~approval ~~definition~~pathways ~~and~~that ~~will~~may be ~~dosed~~available 4to ~~weeks~~grant ~~apart~~AVXS-101 toMarketing ~~assess~~Authorization ~~safety~~in the EU and ~~efficacy~~the ~~using~~timelines ~~CHOP~~under ~~INTEND~~which an MAA may be submitted.

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

· In ~~The~~March ~~achievement~~2018, Japan’s Ministry of ~~the~~Health, ~~developmental~~Labour ~~milestone~~and ofWelfare ~~independent~~awarded ~~sitting~~AVXS-101 SAKIGAKE designation for atthe ~~least~~treatment 30of ~~seconds~~SMA atType 181. The ~~months~~designation was based on data from the Phase 1 clinical trial of ~~age;~~AVXS-101. ~~and~~

· SAKIGAKE ~~Event-free~~is ~~survival~~intended atto 14promote ~~months~~research ofand ~~age,~~development ~~with~~in anJapan ~~event~~for ~~defined~~innovative new medical products that satisfy certain criteria, such as ~~either~~the ~~death~~severity orof atthe ~~least~~intended 16indication, ~~hours~~by ~~per~~providing ~~day~~prioritized consultation review during the early stages of ~~required~~development ~~ventilation~~and ~~support~~by ~~for~~shortening ~~breathing~~the target review period for 14license ~~consecutive~~applications ~~days~~from 12 months to as few as six months. The benefits of SAKIGAKE are similar to breakthrough therapy designation in the ~~absence~~United States and access to the PRIME scheme in the European Union, both of ~~acute~~which ~~reversible~~have ~~illness~~already orbeen ~~perioperatively~~granted to AVXS-101.

~~Co-secondary~~Clinical ~~outcome~~Trials ~~measures will include:~~

· In ~~The~~addition ~~ability~~ to ~~thrive~~our ongoing trials discussed below, ~~defined~~we asintend to expand our clinical development program of AVXS-101 for the ~~ability~~treatment of SMA by initiating additional clinical trials to ~~remain~~further ~~independent~~evaluate ~~from~~AVXS-101, ~~feeding~~including ~~support~~in new patient populations. First, ~~tolerate~~we ~~thin~~intend ~~liquids~~to initiate a pivotal trial of AVXS-101 for the treatment of SMA Type 1 in Europe during the first half of 2018. Second, we intend to initiate a multi-national pediatric “all comers” trial for approximately 50 patients between approximately six months and ~~maintain~~18 ~~weight;~~years of age who do not qualify for other AVXS-101 trials at the time of gene therapy, to evaluate a one-time intrathecal, or IT, dose of AVXS-101 in the late fourth quarter of 2018 or early 2019. Finally, we expect to submit investigational new drug applications for AVXS-201 for Rett syndrome (MECP2) and AVXS-301 for genetic ALS (SOD1) in late 2018/early 2019.

· 24-Month ~~The~~Follow-Up ~~ability~~Data tofrom ~~remain~~Phase ~~independent~~1 Trial of ~~ventilatory~~AVXS-101 ~~support~~in atSMA 18Type ~~months of age.~~1

~~Top~~The Phase 1, open-~~Line~~label, ~~Results~~dose-escalation trial was designed to evaluate the safety and tolerability of AVXS-101 in patients with SMA Type 1. The key measures of efficacy were the time from birth to an event and video confirmed achievement of ability to sit unassisted. Additionally, several exploratory objective measures were assessed, including a standard motor milestone development survey and the Children’s Hospital of Philadelphia Infant Test of Neuromuscular Disorders, or CHOP INTEND. In April 2018, we reported 24-month follow-up data from the Phase 1 ~~Clinical~~trial ~~Trial~~ of AVXS-101 for the treatment of SMA Type 1. After the 24-month follow-up, to date, 11 patients have enrolled in the LTFU, trial for ongoing evaluation.

~~In our fully enrolled Phase 1 clinical trial, we treated 15 SMA Type 1 patients, divided into two dosing cohorts, and observed a favorable safety profile and that AVXS~~Event-~~101 is generally well-tolerated. As of August 7, 2017, all patients in the study have survived event~~ free, inSurvival contrast to the 8% event free rate demonstrated in an independent, peer-reviewed natural history study for patients with SMA Type 1. Additionally, we have observed improved motor function, including in some patients, the attainment of motor milestones such as the ability to sit unassisted, crawl, stand and walk — motor milestone achievements that are essentially never seen among untreated patients suffering from SMA Type 1. The open-label, dose-escalating study was designed to evaluate the safety and tolerability of AVXS-101 in patients with SMA Type 1. The key measures of efficacy were the time from birth to an "event," which was defined as either death or at least 16 hours per day of required ventilation support for breathing for 14 consecutive days in the absence of acute reversible illness or perioperatively, and video confirmed achievement of ability to sit unassisted. Additionally, several exploratory objective measures were assessed, including a standard motor milestone development survey and Children's Hospital of Philadelphia Infant Test of Neuromuscular Disorders, or CHOP INTEND.Safety

~~· Event~~ Twenty-~~free~~four ~~Survival~~months ~~and~~following ~~Safety:~~gene ~~Data as of August 7~~transfer, ~~2017, showed no new events, and~~ 15 of 15 ~~patients~~ (100%) patients were ~~event-free~~alive at 20 months of age. The expected event-free survival rate at 20 months based on the natural history of the disease is 8%. Based on data accumulated up to this date, AVXS-101 appeared to have a favorable safety profile and towithout beneed ~~generally~~for ~~well~~permanent ~~tolerated, with no new treatment related safety or tolerability concerns identified~~ventilation. The median age at last follow-up was 2527.78 months and 30.87 months for patients ~~who received a dose of AVXS-101 administered~~ in ~~the~~Cohort ~~proposed~~2 ~~therapeutic dose-cohort~~ and inCohort ~~low-dose cohort~~1, respectively. ~~Use~~Natural ofhistory ~~the~~indicates ~~term~~only ~~"proposed~~eight ~~therapeutic~~percent ~~dose"~~of ~~does~~untreated ~~not~~patients ~~imply~~with ~~that~~SMA weType ~~have~~1 ~~established~~survive ~~efficacy, but this one~~event-~~time~~free ~~dose~~at is20 ~~the~~months ~~dosing~~of ~~level that we presently intend to evaluate in future trials~~age.

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o AVXS-101 Asappeared ~~has~~to ~~been~~have ~~previously reported,~~ a ~~total~~favorable ofsafety ~~five~~profile ~~adverse~~and ~~events,~~to orbe ~~AEs,~~generally inwell ~~four patients were deemed treatment-related. Of these~~tolerated, two were serious adverse events, or SAEs, experienced by two patients, and three were non-serious AEs experienced by two patients. All consisted of clinically asymptomatic liver enzyme elevations and were resolved with ~~prednisolone treatment. There were~~ no ~~clinically~~new ~~significant elevations of gamma~~treatment-~~glutamyl~~related ~~transferase,~~safety ~~alkaline phosphatase~~ or ~~bilirubin~~tolerability ~~and,~~concerns asidentified ~~such,~~at the ~~conditions for drug induced liver injury, also known as Hy’s Law, were not met. Other non~~24-~~treatment-related~~month ~~AEs were expected and were associated with SMA~~follow-up.

o· A cumulative total of ~~297~~319 adverse events, or AEs, (five treatment-related AEs and ~~292~~314 non-treatment related AEs) were reported ~~as of August 7, 2017,~~ following monitoring and source verification. Of these, 5660 were determined to be serious adverse events, or SAEs, and ~~241~~259 were non-serious AEs.

· ~~Treatment~~As ~~Durability~~reported in 2016, one patient in Cohort 1 had a pulmonary event that required increased use of bi-level positive airway pressure, or BiPAP, in advance of surgery related to hypersalivation, a condition experienced by some SMA patients; the event was determined by independent review to represent progression of disease and ~~Motor~~not ~~Milestone~~to ~~Achievement:~~be related to the use of AVXS-101. Following surgery, the respiratory support needs decreased below event definition threshold.

o· As ofhas ~~August~~been 7,previously ~~2017~~reported, 11a total of 12five ~~patients~~AEs ~~(92%)~~ in ~~the~~four ~~proposed~~patients ~~therapeutic~~were ~~dose~~deemed treatment-~~cohort~~related. ~~have~~Of ~~achieved~~these, two were SAEs experienced by two patients, and ~~maintained~~three ~~CHOP~~were non-~~INTEND~~serious ~~scores~~AEs experienced by two patients. All consisted of ~~≥40~~clinically ~~points~~asymptomatic atliver 20enzyme orelevations ~~more~~and ~~months~~were resolved with prednisolone treatment. There were no clinically significant elevations of ~~age~~gamma-glutamyl transferase, alkaline phosphatase or bilirubin and, as such, Hy’s Law was not met. Other non-treatment-related AEs were expected and were associated with SMA.

o Treatment AsDurability ofand ~~August~~Motor 7,Milestone ~~2017,~~Achievement 11from ofLong-Term ~~12 patients (92%) in the proposed therapeutic dose~~Follow-~~cohort~~Up ~~achieved head control, 9 of 12 patients (75%) could roll over and 11 of 12 patients (92%) could sit with assistance by 20 months of age.~~Study

o Patients Asin ofCohort ~~August~~2 7,continued ~~2017,~~to 11achieve ofnew 12milestones ~~patients~~during ~~(92%) in~~ the ~~proposed~~LTFU ~~therapeutic~~trial. ~~dose-cohort~~Detailed ~~could~~Cohort ~~sit~~2 ~~unassisted~~motor ~~for~~milestone atdata ~~least~~is ~~five~~included ~~seconds, 10 of 12 patients (83%) could sit unassisted for at least 10 seconds and nine of 12 patients (75%) could sit unassisted for 30 seconds or more by 20 months of age~~below.

o· AsTwo ofadditional ~~August 7, 2017, two of 12~~ patients ~~(17%)~~achieved in the ~~proposed~~ability ~~therapeutic~~to ~~dose-cohort~~sit ~~could~~unassisted ~~crawl,~~for ~~pull~~30 toseconds aor ~~stand~~more. ~~and~~Eleven ~~stand~~of ~~and~~12 ~~walk~~(92%) ~~independently~~patients bycould 20sit ~~months of age~~unassisted.

Two additional patients achieved the ability to stand with assistance. Four of 12 (33%) could stand with assistance.

Three of four patients achieving these new milestones were on AVXS-101 alone (one sitting and two standing with assistance).

The oldest child from Cohort 2 at the time of last visit in the LTFU study was 46.2 months and 40.6 months post gene therapy.

STR1VE

We are conducting a U.S. pivotal clinical trial for AVXS‑101 for the treatment of SMA Type 1. During the first quarter of 2018, following review of safety data and early signals of efficacy from the first three patients dosed in our pivotal trial of AVXS-101 for SMA Type 1, we, with agreement from the FDA, have initiated screening for the remaining patients in the trial as per the protocol. STR1VE is designed to evaluate the efficacy and safety of a one-time intravenous infusion of AVXS-101. As of April 11, 2018, eleven patients were enrolled in the trial, and six patients were symptomatic and at least one-month post gene therapy treatment. All patients had homozygous deletion of SMN1 and two copies of SMN2; no patient had the known SMN2 gene modifier mutation (c.859G>C). The patient population and baseline characteristics are closely matched to the Phase 1 trial.

All six symptomatic patients were alive and event-free as of April 11, 2018. AVXS-101 appeared to have a favorable safety profile and to be generally well tolerated. At the time of gene transfer, the mean age was 3.2 months, with the oldest patient at 5.0 months of age. In the six patients who were at least one-month post gene transfer, a cumulative total of 25 adverse events were reported. Two patients experienced transient elevations in transaminases greater than 3x ULN that were not clinically significant and all resolved with prednisolone treatment without any clinical manifestations or sequelae. There were no serious adverse events (SAEs) reported.

CHOP-INTEND scores increased by an average of 7.8 at one month after gene transfer (in six patients) and 17.3 at three months after gene transfer (in three patients), reflecting improvement in motor function. These data correlate to CHOP-INTEND achievement by the proposed therapeutic dose cohort in the Phase 1 trial, which experienced mean increases of 9.8 points at one month and 15.4 points at three months. Early CHOP-INTEND increases have been observed to be associated with eventual motor milestone achievement.

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~~§ All motor milestones have been assessed and adjudicated by an independent third-party reviewer using video evidence.~~ STRONG

The proposed therapeutic dose-cohort

Age at Gene Transfer (mos)

Event-Free Survivala

Event-free Survival and Motor and Other Milestones Among the 12 Patients in the Proposed Therapeutic Dose-Cohort as of August 7, 2017*

Brings Hand to Mouth

Controls Head

Rolls Overb

Sits with Assistance

Sits Unassistedc

Other Achievements

≥5 secs

≥10 secs

≥30 secs

Speaks

Swallows

No NIV Use

No Nutritional Supportd

E.04

5.6

31.1

E.05

4.2

28.5

E.06

1.9

26.1

E.07

3.6

28.1

E.08

7.9

32.4

E.09

4.9

28.9

E.10

0.9

25.3

E.11

2.3

23.8

E.12

2.6

23.9

E.13

0.9

22.1

E.14

4.1

22.0

E.15

2.1

20.6

This Study

100

Natural History

8 by 20 mose

0**

8 by 20 mose

We are also currently conducting a Phase 1 clinical trial of AVXS-101 for the treatment of SMA Type 2. Following review of safety data from the first three patients dosed in Cohort 1 using the lower dose (6.0 x 1013 vg), the first patient has been dosed in Cohort 2, the higher dose cohort (1.2 X 1014 vg). Four total patients with SMA Type 2 have now been treated with AVXS-101 in the STRONG study. Three patients less than 60 months of age will be enrolled in Cohort 2 and, if safety is established according to the Data Safety Monitoring Board, an additional 21 patients will be enrolled in Cohort 2 until there are a total of 12 patients less than 24 months, and 12 patients at least 24 months but less than 60 months of age. Therefore, as of April 11, 2018, four patients have been dosed. SMA Type 2 typically presents between six and 18 months of age, and those affected will never walk without support and most will never stand without support. SMA Type 2 results in mortality in more than 30% of patients by the age of 25.

*At baseline, none of the patients in the proposed therapeutic dose-cohort had achieved any of the listed motor milestones except for bringing a hand to the mouth. As of August 7, 2017, the majority of these patients had reached at least one major motor milestone. No patients in Cohort 1 are listed, since none attained any motor milestones. NA denotes not available, and NIV noninvasive ventilation. Plus signs indicate achievement of milestone.SPRINT

a. In ~~Event-free~~April ~~survival~~2018, (the ~~primary~~first ~~efficacy~~patient ~~outcome)~~ was ~~defined~~dosed asin ~~the~~a ~~age~~Phase at3 ~~the~~trial ~~end~~evaluating ofAVXS-101 ~~the~~in ~~study~~pre-symptomatic atpatients ~~which~~with ~~patients~~SMA ~~were~~Types ~~free~~1, of2 ~~ventilatory~~and ~~support~~3, which ~~was~~we ~~defined~~refer to as ~~the need for ventilation for at least 16 hours per day for at least 14 consecutive days~~SPRINT.

b. SPRINT ~~According~~is a multi-cohort, multi-national trial expected to ~~item~~enroll 20approximately on44 ~~the~~pre-symptomatic ~~Bayley~~patients ~~Scales~~with ofa ~~Infant~~bi-allelic ~~and~~deletion ~~Toddler~~of ~~Development~~SMN1; two, ~~rolling~~three ~~over~~or isfour ~~defined~~copies asof SMN2; ~~movement~~and who are less than six weeks of age at ~~least~~the ~~180~~time ~~degrees~~of ~~both~~gene ~~left~~therapy. The trial is designed to evaluate appropriate clinical endpoints, including developmental milestones, survival, bulbar function and ~~right~~safety ~~from~~of a ~~position~~one-time intravenous infusion of ~~lying~~AVXS-101 onof ~~the~~1.1 ~~back~~x 1014 vg/kg.

c. Collaboration ~~Sitting unassisted for at least 5 seconds is in accordance with the criteria of item 22 on the Bayley Scales of Infant~~ and ~~Toddler~~Licensing Development gross motor subtest and surpasses the 3-second count that is used as a basis for sitting (test item 1) on the Hammersmith Functional Motor Scale–Expanded for Spinal Muscular Atrophy (SMA). Sitting unassisted for at least 10 seconds is in accordance with the criteria used in the World Health Organization Multicentre Growth Reference Study. Sitting unassisted for at least 30 seconds defines functional independent sitting and is in accordance with the criteria of item 26 on the Bayley Scales of Infant and Toddler Development gross motor subtest.Agreements

We have significant collaboration and licensing agreements that support our research, development and manufacturing processes. Refer to the 10-K for background information on these agreements. During the quarter ended March 31, 2018 the following agreements were entered into or amended:

REGENXBIO

On January 8, 2018, we entered into an amendment, or the Amendment, to the License Agreement dated March 21, 2014, as amended, the REGENXBIO SMA License, between us and REGENXBIO Inc., or REGENXBIO, which expanded upon the exclusive, worldwide license agreement previously entered into for the development and commercialization of products to treat SMA.

Under the terms of the Amendment, we were granted exclusive, worldwide rights to all vectors in REGENXBIO’s NAV Technology Platform for the treatment of SMA in addition to adding and amending certain terms of the 2014 REGENXBIO License Agreement, including the modification of the assignment provision to permit assignment of the REGENXBIO SMA License without REGENXBIO’s consent in the event of a change of control of the company. The Amendment requires that in a change of control of the company, the following amounts due under the license agreement, if unpaid at the time of the change in control, become immediately payable: the first and second anniversary payments of $30 million each and the first sales-based milestone payment of $40 million. We paid REGENXBIO an upfront payment of $80 million in January 2018 in connection with the Amendment and agreed to make an additional payment of $30 million on the first anniversary of the effective date of the Amendment and an additional payment of $30 million on the second anniversary of the effective date of the Amendment. REGENXBIO is eligible to receive potential sales-based milestone payments of up to $120 million. For any product developed for the treatment of SMA using the NAV AAV9 vector, we will continue to pay mid-single to low double-digit royalties on net sales as defined in the original 2014 License Agreement, and for any product developed for the treatment of SMA using a NAV vector, other than NAV AAV9, we will pay REGENXBIO a low double-digit royalty on net sales. Research and development expenses in the amount of $130.7 million were recognized during the three months ended March 31, 2018, representing the $80 million upfront payment made in January 2018 and the net present value of the payments due on the first and second anniversaries of the effective date of the Amendment.

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d. Nutritional support refers to the placement of either a gastrostomy tube or a nasogastric tube, as determined by the preference of the parents or the primary physician. Once enrolled in the study, all the patients who required nutritional support underwent gastrostomy-tube placement, and none were removed during the study. Généthon

e In March 2018, we entered into a license agreement with Généthon, acting in its own name and for its own behalf as well as in the name and on behalf of Centre National de la Recherche Scientifique, pursuant to which Généthon granted us an exclusive, worldwide license to certain patents for in vivo gene replacement therapy delivery of the SMN gene using the AAV9 vector into the central nervous system for the treatment of SMA. ~~Data~~This agreement strengthens the AVXS-101 intellectual property estate by providing greater freedom to operate in U.S., Europe and Japan. Under the Généthon agreement, we paid Généthon a one-time upfront license fee of $4.0 million. We are also required to pay $0.5 million for the first three years to support Généthon’s ongoing research, ongoing annual management fees of $25 thousand and up to a total of $11.0 million in milestone fees for licensed products. Under the terms of the Généthon agreement, we are also required to pay Généthon mid-single digit royalties of net sales on licensed products, subject to reduction in certain circumstances due to royalty stacking provisions, and a mid-teens percentage of any sublicense fees that we receive from ~~Finkel~~sublicensees etfor althe licensed intellectual property rights. These royalty rates are subject to potential reduction in other specified circumstances. As of March 31, 2018, we have paid $4.5 million under the Généthon license representing the one-time up-front license fee and the first of three $0.5 million research fees.

** Data are from De Sanctis et alFinancing

· To ~~Nutritional~~date, we have funded our research and ~~Respiratory~~development ~~Support:~~and operating activities primarily through private and public equity financings totaling $1,025.9 million of net proceeds, including $431.9 million in net proceeds from a public equity financing during the three months ended March 31, 2018. We have not generated any revenue from sales of gene therapy products to date. We have incurred significant annual net operating losses in every year since our inception and expect to continue to incur net operating losses for the foreseeable future. As of March 31, 2018, we had an accumulated deficit of $581.7 million. We expect to continue to incur significant expenses and operating losses for the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase significantly if and as we continue to develop and conduct clinical trials with respect to AVXS‑101; develop our planned new programs for Rett syndrome and genetic amyotrophic lateral sclerosis, or ALS; maintain, expand and protect our intellectual property portfolio; establish a commercial infrastructure to support the manufacture, marketing and sale of AVXS‑101 if it receives regulatory approval; and hire additional personnel, such as clinical, regulatory, manufacturing, quality control and scientific personnel.

o According to natural history of the disease, nearly all Type 1 patients require nutritional and respiratory support by 12 months of age, and are not able to swallow or speak effectively.

o As of August 7, 2017, all patients who were free of respiratory or feeding support on January 20, 2017, continued without the need for supportive care.

§ As of August 7, 2017, six of seven (86%) patients in the proposed therapeutic dose-cohort that did not require feeding support before treatment continued without feeding support after treatment; seven of 10 (70%) patients that did not require bi-level positive airway pressure, or BiPAP, support before treatment did not require BiPAP support at last assessment.

§ As of August 7, 2017, eleven of 12 (92%) patients in the proposed therapeutic dose-cohort were fed orally, and six of 12 (50%) patients were exclusively fed orally.

o Further, as of August 7, 2017, eleven of 12 (92%) patients were able to speak; three more patients than previously reported on April 25, 2017 at the American Academy of Neurology.

To date, we have funded our research and development and operating activities primarily through public and private equity offerings totaling $597.5 million of net proceeds. We have not generated any revenue from sales of gene therapy products to date. We have incurred significant annual net operating losses in every year since our inception and expect to continue to incur net operating losses for the foreseeable future. Our net operating losses were $38.5 million and $83.0 million for the years ended December 31, 2015 and 2016, respectively. As of September 30, 2017, we had an accumulated deficit of $277.9 million. We expect to continue to incur significant expenses and increasing operating losses for at least the next few years. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase significantly if and as we continue to develop and conduct clinical trials with respect to AVXS-101; develop our planned new programs for Rett syndrome and genetic ALS; maintain, expand and protect our intellectual property portfolio; establish a commercial infrastructure to support the manufacture, marketing and sale of AVXS-101 if it receives regulatory approval; and hire additional personnel, such as clinical, regulatory, manufacturing, quality control and scientific personnel.

Licensing Agreements

AVXS-101

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

Nationwide Children’s Hospital

In October 2013, we entered into an exclusive, worldwide license agreement with Nationwide Children’s Hospital, or NCH, under certain patent applications, and a non-exclusive license under certain technical information, for the use of its scAAV9 technology for the treatment of SMA, of all types, or the NCH SMA License. In January 2016, we amended and restated the NCH SMA License in its entirety. Under the NCH SMA License, we initially issued NCH and The Ohio State University, or OSU, 331,053 shares of common stock. Until May 2015, when we had reached a market capitalization of $100.0 million, we were obligated to issue additional shares to NCH and OSU from time to time to maintain a 3% ownership of the company on a fully-diluted basis. We issued an aggregate of 124,990 additional shares of common stock between October 2013 and May 2015 pursuant to these anti-dilution obligations. With certain exceptions, we are required to make up to $0.1 million in development milestone based payments to NCH. In addition, we are responsible for all clinical trial costs that are not covered by grants or certain other sources.

Following the first commercial sale of a NCH SMA licensed product we must begin paying NCH an aggregate low-single digit royalty on net sales of any products covered by the NCH SMA License, subject to reduction in specified

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circumstances and annual minimum royalties that increase over time. In addition, we must pay NCH a portion of sublicensing revenue received from our sublicense of the licensed technology at percentages between low-double digits and low-teens.

On November 6, 2015, the FDA approved our sponsorship of the IND and the transfer of the associated regulatory filing from NCH.

ReGenX Biosciences, LLC

In March 2014, we entered into an exclusive license agreement with ReGenX Biosciences, LLC, or ReGenX Biosciences, predecessor to REGENXBIO Inc., or REGENX, under certain patent rights owned by the Trustees of the University of Pennsylvania and licensed to ReGenX Biosciences, for the development and commercialization of products to treat spinal muscular atrophy by in vivo gene therapy using AAV9, or the ReGenX SMA License. Under the ReGenX SMA License, we paid ReGenX Biosciences an initial licensing fee of $2.0 million. We are also required to pay ReGenX Biosciences: annual maintenance fees, up to $12.25 million in milestone fees for all products covered by the ReGenX SMA License, or ReGenX SMA licensed products; mid-single to low-double digit royalty percentages on net sales of ReGenX SMA licensed products, subject to reduction in specified circumstances; and lower mid-double digit percentages of any sublicense fees we receive from sublicensees for the licensed patent rights. As of September 30, 2017, we have paid $2.4 million under the ReGenX SMA License, which includes $0.3 million in aggregate milestone payments.

Asklepios Biopharmaceutical, Inc.

In May 2015, we entered into a non-exclusive, worldwide license agreement with Asklepios Biopharmaceutical, Inc., or AskBio, under certain patents and patent applications, for the use of AskBio’s self-complementary AAV genome technology for the treatment of SMA in humans, or the AskBio License. Under the AskBio License, we paid AskBio a one-time upfront license fee of $1.0 million, payable across stipulated milestones. We are also required to pay ongoing annual maintenance fees, up to a total of $0.6 million in clinical development milestone payments and up to a total of $9.0 million in commercial milestone payments. Under the terms of the AskBio License, we are required to pay AskBio annual tiered royalties on net sales of any products covered by the AskBio License, on a country-by-country basis, starting at percentages in the low-single digits and increasing to mid-single digits. These royalty rates are subject to potential reduction in specified circumstances, including, in the event we exercise our option to make a specified one-time royalty option fee payment to AskBio. We must also pay AskBio a low-double digit percentage of all consideration we receive from any sublicense of the licensed technology. Through September 30, 2017, we have paid the $1.0 million upfront license fee owed under the AskBio License.

Preclinical Programs for Rett Syndrome and ALS

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

REGENXBIO Inc.

Effective June 7, 2017, we entered into an exclusive license agreement with REGENX under certain patents and patent applications owned by the Trustees of the University of Pennsylvania and licensed to REGENX, for the development and commercialization of products to treat Rett syndrome and genetic ALS using the AAV 9 vector, or the REGENX Rett and ALS License. Under the REGENX Rett and ALS License, REGENX granted us an exclusive, worldwide license under the licensed patent rights to make, have made, use, import, sell and offer for sale any products covered by the REGENX Rett and ALS License, or the REGENX Rett and ALS licensed products, in the field of the treatment of (i) Rett syndrome in humans by in vivo gene therapy using AAV9 delivering the gene encoding for methyl CpG binding protein 2, and (ii) ALS caused by SOD1 mutation in humans by in vivo gene therapy using AAV9 delivering the gene encoding for SOD1, subject to certain rights reserved by REGENX and its licensors. The patent rights exclusively in-licensed include an issued United States patent, which expires in 2026. We have the right to sublicense the licensed technology to third parties subject to certain conditions as specified in the REGENX Rett and ALS License. Under the REGENX Rett and ALS License we grant a non-exclusive, worldwide, royalty-free, transferable, sublicenseable,

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irrevocable, perpetual license back to REGENX to (a) use any patentable modifications and improvements to the licensed technology that we or our affiliates or sublicensees develop, or licensed back improvements, and (b) practice the licensed back improvements in connection with AAV9 outside of our fields of use.

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

· an initial fee of $6.0 million;

· an annual maintenance fee;

· up to $36.0 million in total milestone fees for the REGENX Rett and ALS licensed products;

· a low double digit royalty percentage on net sales of REGENX Rett and ALS licensed products, subject to reduction in specified circumstances; and

· a lower mid-double digit percentage of any sublicense fees we receive from sublicensees for the licensed intellectual property rights.

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

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

Nationwide Children’s Hospital

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

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

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

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

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

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

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

· By us at any time after the second anniversary of the effective date of the applicable NCH License by providing six months' prior written notice to NCH;

· By either party upon the other party's material breach of the applicable NCH License that is not cured within 90 days after receiving written notice of such breach, except in certain cases in which we may request a longer cure period;

· By NCH in the event of our bankruptcy, insolvency or certain similar occurrences; or

· By NCH if we or any of our affiliates bring any action or proceeding against NCH, other than a suit brought in response to any suit brought by NCH.

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

Financial Operations Overview

Revenue

To date, we have not generated any revenue from the commercial sale of gene therapy products~~, and we do not expect to generate substantial revenue for at least the next few years~~. In the future, we will seek to generate revenue primarily from product sales and, potentially, collaborations with strategic partners.

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Operating Expenses

We classify our operating expenses into two categories: research and development and general and administrative expenses. Personnel costs including salaries, benefits, bonuses and stock-based compensation expense, comprise a significant component of each of these expense categories. We allocate expenses associated with personnel costs based on the nature of work associated with these resources.

Research and Development Expenses

Research and development expense consists of expenses incurred while performing research and development activities to discover and develop potential gene therapy treatments. This includes conducting preclinical studies and clinical trials, investment in our manufacturing facility, manufacturing equipment and manufacturing development efforts and activities related to regulatory filings for product candidates. We recognize research and development expenses as they are incurred. Up-front fees incurred in obtaining technology licenses for research and development activities are ~~expensed as incurred if the technology licensed has no alternative future use. Our research and development expense primarily consists of:~~

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expensed as incurred if the technology licensed has no alternative future use. Our research and development expense primarily consists of:

salaries and personnel-related costs, including benefits and any employee stock-based compensation, for our scientific personnel performing research and development activities;

stock-based compensation expense related to restricted common stock grants and stock warrant issuances to consultants assisting us in the research and development of our product candidate;

costs related to executing preclinical studies and clinical trials;

costs related to acquiring, developing and manufacturing materials for preclinical studies and clinical trials;

· costs related to developing processes and analytical methods to manufacture and test product from a significant number of small scale and full scale engineering ~~and GMP clinical manufacturing~~ runs;

fees paid to consultants and other third parties who support our product candidate development;

other costs incurred in seeking regulatory approval of our product candidates; and

allocated facility-related costs and overhead.

We typically utilize our employee, consultant and infrastructure resources across our development programs. To date, substantially all of our research and development expenses have been associated with AVXS-101.

We plan to increase our research and development expense for the foreseeable future as we continue our effort to develop and manufacture AVXS-101 and to advance the development of future product candidates, subject to the availability of sufficient funding.

The successful development of product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs required to complete the remaining development of AVXS-101 or any future product candidates. This is due to the numerous risks and uncertainties associated with the development of product candidates.

General and Administrative Expense

General and administrative expense consists primarily of salaries and personnel-related costs, including employee benefits and any stock-based compensation, for employees performing functions other than research and development. This includes personnel in executive, business operations, finance and administrative support functions. Other general and administrative expenses include marketing expenses, facility-related costs not otherwise allocated to research and development expense, professional fees for auditing, tax and legal services, expenses associated with obtaining and maintaining patents and costs of our information systems.

We expect that our general and administrative expense will increase as we continue to operate as a public reporting company and continue to develop and potentially commercialize AVXS-101 and our future product candidates. We believe that these increases likely will include increased costs for director and officer liability insurance, costs related to the hiring of additional personnel and increased fees for outside consultants, lawyers and accountants. We also expect to continue to incur increased costs to comply with corporate governance, internal controls, investor relations, disclosure and similar requirements applicable to public reporting companies.

25Interest Income, net

~~Table~~Interest income primarily consists of ~~Contents~~$1.8 million of interest income earned on our cash and cash equivalents, net of interest expense of $1.4 million associated with the accretion of our discounted guaranteed fixed payments due to REGENXBIO in 2019 and 2020.

continue to incur increased costs to comply with corporate governance, internal controls, investor relations, disclosure and similar requirements applicable to public reporting companies.

Interest Income

Interest income primarily consists of any interest income earned on our cash and cash equivalents.

Income Taxes

To date, we have not been required to pay U.S. federal or state income taxes because we have not generated taxable income.

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Critical Accounting Policies and Significant Judgments and Estimates

Our critical accounting policies are described in Note 2 to our consolidated financial statements for the year ended December 31, ~~2016~~2017, included in our Annual Report on Form 10-K. There were no material changes to our critical accounting policies during the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018.

Emerging Growth Company Status

Under Section 107(b) of the JOBS Act, an “emerging growth company,” or EGC, can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we are subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

As an EGC, we rely on certain of exemptions and reduced reporting requirements under the JOBS Act, including exemptions from the requirement to provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an EGC until the earlier of: the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; December 31, 2021; the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission, or SEC. Based on our public float as of the date of this report, we currently expect that we will become a large accelerated filer, and cease to be an EGC, as of December 31, 2017.

Recent Accounting Pronouncements

See Note 2 to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report for disclosure of recent accounting pronouncements.

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Results of Operations

Comparison of the Three ~~and Nine~~ Months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017

The following table summarizes our results of operations for the three ~~and nine~~ months ended ~~September~~ 30March 31, ~~2017~~2018 and ~~2016~~2017, together with the dollar increase or decrease in those items (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended March 31,				Period-to-Period
		2017		2016	Period-to-Period Change			2017		2016	Period-to-Period Change
	2018		2017		Change
Net revenue:
Revenue	$	—	$	—	$	—
Revenue	$	—	$	—	$	—	$	—	$	—	$	—
Operating expenses:
Operating expenses:
General and administrative		22,747		9,638		13,109
General and administrative		16,095		7,083		9,012		38,898		17,325		21,573
Research and development		199,709		20,327		179,382
Research and development		33,425		14,098		19,327		98,946		40,542		58,404
Total operating expenses		222,456		29,965		192,491
Total operating expenses		49,520		21,181		28,339		137,844		57,867		79,977
Loss from operations		(222,456)		(29,965)		(192,491)
Interest income		881		99		782		1,458		230		1,228
Interest income, net		354		246		108
Net loss	$	(48222,~~639~~102)	$	(2129,~~082~~719)	$	(27192,~~557~~383)	$	~~(136,386)~~	$	~~(57,637)~~	$	~~(78,749)~~

General and Administrative Expense

General and administrative expense increased from $79.16 million for the three months ended ~~September~~March 3031, ~~2016~~2017, to $1622.17 million for the three months ended ~~September~~March 3031, ~~2017~~2018. This $913.01 million increase included increases of $23.78 million in salaries and personnel-related costs, $2.68 million of market research expenses, $2.8 million in non-cash stock-based compensation expense, $2.8 million in legal, professional and consulting fees and $1.9 million in other administrative costs driven by increased headcount across all general and administrative functions to support our overall growth,. ~~and~~In ~~$1.6~~addition, ~~million~~we inincurred ~~legal,~~increased ~~professional~~franchise ~~and~~taxes ~~consulting~~of ~~fees~~$0.5 million.

General and administrative expense increased from $17.3 million for the nine months ended September 30, 2016, to $38.9 million for the nine months ended September 30, 2017. This $21.6 million increase included increases of $6.9 million in salaries and personnel-related costs, $5.8 million in other administrative costs driven by increased headcount across all general and administrative functions to support our overall growth, $5.3 million in non-cash stock-based compensation expense, and $3.6 million in legal, professional and consulting fees.

Research and Development Expense

Research and development expense increased from $1420.13 million for the three months ended ~~September~~March 3031, ~~2016~~2017, to $33199.47 million for the three months ended ~~September~~March 3031, ~~2017~~2018. The $19179.34 million increase was primarily attributable to ~~product~~$135.2 ~~manufacturing~~of expenses ~~and~~recognized ~~associated~~pursuant ~~accelerated~~to ~~spending,~~the ~~including~~REGENXBIO ~~increased~~SMA ~~headcount,~~License and the Généthon agreement described above in ~~our~~“—Collaboration ~~product~~and ~~manufacturing~~Licensing ~~facility,~~Agreements.” asResearch ~~well~~and asdevelopment expenses ~~related~~also increased due to ~~the~~increased ~~conclusion~~spending ofat our ~~Phase~~manufacturing 1facility, ~~clinical~~which ~~trial~~specifically ofincluded ~~AVXS-101~~increases inof ~~SMA~~$13.8 ~~Type~~million 1on materials and ~~commencement~~supplies offor ~~our~~the ~~pivotal~~facility, ~~trial~~$12.8 ofmillion ~~AVXS-101.~~on ~~More~~salary ~~specifically,~~and ~~this~~personnel ~~amount~~expenses ~~included~~resulting ~~increases~~from of increased headcount, $57.6 million inon ~~research~~process ~~and~~ development, ~~supplies~~primarily ~~and~~lab ~~materials~~testing, $5.21 million in ~~third~~non-~~party~~cash ~~clinical~~stock-based ~~and~~compensation ~~manufacturing research and development~~ expense ~~associated with product manufacturing~~, $31.80 million inof ~~salaries~~fixed ~~and~~asset ~~personnel-related expenses~~depreciation, ~~driven~~payments bymade ~~increased~~to ~~headcount~~support ~~across~~third ~~all~~party research ~~and~~of ~~development and manufacturing functions,~~ $20.69 million inand ~~other~~rent ~~research~~expense and ~~development~~utilities ~~expenses,~~ of $20.~~3 million~~5 ~~in non-cash stock-based compensation expense and~~million. Furthermore, ~~partially~~expenses ~~offset~~related byto ~~decreases~~clinical oftrials increased $04.20 million ~~in license fees~~.

Research and development expense increased from $40.5 million for the nine months ended September 30, 2016, to $99.0 million for the nine months ended September 30, 2017. This $58.4 million increase included the benefit of a $4.4 million decrease in non-cash stock-based compensation expense that was primarily attributable to the recognition of $10.4 million of additional stock compensation expense upon the vesting in full of Dr. Kaspar’s restricted stock award during the year ended December 31, 2016. Excluding this non-cash stock-based compensation benefit, research and development expense increased $62.9 million which was primarily attributable to increased product manufacturing expenses and associated accelerated spending, including increased headcount, in our product manufacturing facility as 23

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~~well~~ Interest ~~as expenses related to the conclusion of our Phase 1 clinical trial of AVXS-101 in SMA Type 1 and the commencement of our pivotal trial of AVXS-101. More specifically~~Income, this amount included increases of $25.8 million in third-party clinical and manufacturing research and development expense associated with product manufacturing, $16.3 million in research and development supplies and materials, $8.8 million in salaries and personnel-related expenses, driven by increased headcount across all research and development and manufacturing functions, $6.1 million in other research and development expenses, and $5.9 million in license fees.net

Interest ~~Income~~income for the three months ended March 31, 2018 consisted of interest earned of $1.8 on our cash and cash equivalents offset by interest expense of $1.4 million associated with the accretion of our discounted guaranteed fixed payments due to REGENXBIO in 2019 and 2020. Interest income for the three months ended March 31, 2017 consisted of interest earned of $0.2 million on our cash and cash equivalents.

Interest income for the nine months ended September 30, 2017 consists of interest earned on our cash and cash equivalents and increased from the prior periods due to larger balances of cash and cash equivalents during those periods.

Liquidity and Capital Resources

Sources of Liquidity

To date, we have funded our research and development and operating activities primarily through private and public equity financings, ~~including~~totaling $~~98.2 million~~1, ~~$149~~025.19 million ~~and $269.7 million~~ of net proceeds. This ~~from~~includes ~~our~~an ~~initial~~underwritten public offering, ~~our~~during ~~September~~the ~~2016~~three ~~public~~months ~~offering~~ended ~~and~~March ~~our~~31, ~~June~~2018 ~~2017~~of ~~public~~4,509,840 ~~offering~~shares of our common stock, ~~respectively~~which, ~~and~~after ~~$80.5~~deducting ~~million~~the ofunderwriting ~~aggregate~~discounts ~~net~~and ~~proceeds~~commissions ~~from~~and ~~private~~other ~~placements~~offering ofcosts, resulted ~~stock~~in ~~prior~~net toproceeds ~~our~~of ~~initial~~approximately ~~public~~$431.9 ~~offering~~million.

As of ~~September~~March 3031, ~~2017~~2018, we had cash and cash equivalents of $~~374~~586.28 million and had no debt outstanding. As of March 31, 2018, we had $2.8 million of restricted cash related to a lease agreement entered into to expand our manufacturing facility in Libertyville, Illinois.

Cash Flows

The following table provides information regarding our cash flows for the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017 (in thousands):

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2017		2016
	2018		2017
Net cash used in operating activities	$	(~~113~~160,~~565~~611)	$	(3328,~~198~~127)
Net cash used in investing activities		(237,~~364~~921)		(118,~~702~~064)
Net cash provided by financing activities		~~270~~434,~~710~~053		~~246,290~~215
Net increase in cash and cash equivalents	$	133,781	$	201,390
Net increase / (decrease) in cash and cash equivalents and restricted cash	$	265,521	$	(35,976)

Operating Activities

For the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018, our net cash used in operating activities of $~~113~~160.6 million primarily consisted of a net loss of $~~136~~222.41 million, primarily attributable to our spending on research and development, manufacturing and general and administrative expenses. The ~~and~~net loss of $2222.1 million ~~in net cash used in changes in working capital items, which~~ was partially offset by ~~$24.9 million in adjustments for non-cash items, primarily stock-based compensation. The $2.6 million in net cash used in~~ changes in working capital ~~represents~~of ~~primarily a~~ $547.62 million, ~~increase~~which inwas ~~prepaid~~primarily ~~expenses~~due ~~and~~to ~~other~~increases ~~current~~in ~~assets~~licensing ~~and~~fees ~~other~~payable ~~long-term assets~~ and a $314.13 million ~~increase~~ in ~~accrued~~adjustments ~~expenses~~for ~~and~~non-cash ~~other current liabilities and the accrued indemnification obligation~~items, ~~partially~~primarily ~~offset~~stock-based ~~by a $6~~compensation.6 ~~million decrease in accounts payable.~~

For the ~~nine~~three months ended ~~September 30~~March 31, ~~2016~~2017, our net cash used in operating activities of $3328.21 million primarily consisted of a net loss of $5729.67 million, primarily attributable to our spending on research and development, manufacturing and general and administrative expenses and $3.7 million in net cash used in changes in working capital items, which was partially offset by $225.7 3 million in adjustments for non-cash items. ~~and~~The $13.7 million in net cash used in changes in working capital ~~items~~represents primarily a $3.2 ~~Adjustments~~million ~~for~~increase ~~non-cash~~in ~~items~~prepaid ~~primarily~~expenses ~~consisted~~and ofother ~~$22.7~~current ~~million~~assets ofand ~~stock~~other long-~~based~~term ~~compensation~~assets ~~expense,~~and ofa ~~which~~ $107.41 million ~~was~~decrease ~~associated~~in ~~with~~accrued ~~the~~expenses, ~~vesting~~partially inoffset ~~full~~by ofa ~~the~~$6.5 ~~restricted~~million ~~stock~~increase ~~grant~~in toaccounts Drpayable. ~~Kaspar.~~ ~~The~~Adjustments ~~change~~for innon-cash ~~working~~items ~~capital~~consisted ~~was~~of ~~primarily~~$5.1 ~~attributable~~million toof astock-based compensation expense and $30.72 million ~~increase~~of depreciation and amortization.

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in prepaid expenses and other long-term assets, partially offset by a $5.4 million increase in accounts payable and accrued expenses and other current liabilities.

Investing Activities

For the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018, net cash used in investing activities consisted of $237.4 9 million of capital expenditures, primarily related to our manufacturing facility and purchases of property and equipment. For the ~~nine~~three months ended ~~September 30~~March 31, ~~2016~~2017, net cash used in investing activities consisted of $118.71 million of capital expenditures, primarily related to our manufacturing facility and purchases of property and equipment.

During the nine months ended September 30, 2017, we transferred a significant amount of our capital assets from Construction in progress to Equipment upon the successful completion of GMP manufacturing runs. We expect to continue to transfer capital assets as we complete the build-out of our scalable GMP manufacturing facility.

Financing Activities

For the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018, net cash provided by financing activities of $~~270~~434.7 1 million consisted primarily of funds raised from our ~~June~~January ~~2017~~2018 underwritten public offering, proceeds from stock option exercises of $5.0 million, partially offset by taxes paid on stock-based compensation earnings of $2.8 million. For the ~~nine~~three months ended ~~September 30~~March 31, ~~2016~~2017, net cash provided by financing activities ~~consisted primarily~~ of $~~246~~0.32 million ~~from~~consisted ~~our~~of ~~initial~~proceeds ~~public~~from ~~offering~~the ~~and~~exercise ~~our~~of ~~September~~employee ~~2016~~stock ~~public offering~~options.

Future Funding Requirements

To date, we have not generated any revenues from the commercial sale of approved gene therapy products or drug therapies ~~and we do not expect to generate substantial revenue for at least the next few years~~. If we fail to complete the development of our product candidates in a timely manner or fail to obtain their regulatory approval, our ability to generate future revenue will be compromised. We do not know when, or if, we will generate any revenue from our gene therapy core business. We do not expect to generate significant revenue unless and until we obtain regulatory approval of and commercialize AVXS-101. In addition, we expect our expenses to increase in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, product candidates, including with respect to development of AVXS-101 for other types of SMA and other product candidates for other diseases. We also expect to continue to incur costs associated with operating as a public company. In addition, subject to obtaining regulatory approval of product candidates, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution. We anticipate that we will need additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

Based upon our current operating plan, we believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into ~~the fourth quarter of 2019~~2020. We intend to devote the majority of our capital resources for clinical development, ~~manufacturing~~ and regulatory approval of AVXS-101. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures necessary to complete the development of product candidates.

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

· • the ~~progress~~consummation ~~and results~~ of ~~our~~the ~~studies and clinical trials for AVXS-101~~Merger;

· • the ~~scope,~~ progress, ~~results~~ and ~~costs~~results of ~~preclinical~~our ~~development,~~studies ~~laboratory testing~~ and clinical trials for ~~our other product candidates, including our planned new programs in Rett syndrome and ALS~~AVXS-101;

· • the ~~number~~scope, progress, results and costs of preclinical development, ~~requirements~~laboratory oftesting ~~other~~and ~~product~~clinical ~~candidates~~trials ~~that~~for weour ~~may~~other ~~pursue~~product candidates;

· • the ~~costs,~~number ~~timing~~ and ~~outcome~~development ofrequirements ~~regulatory review~~ of ~~our~~other product candidates that we may pursue;

29• the costs, timing and outcome of regulatory review of our product candidates;

• the cost and timing of establishing and validating manufacturing processes and facilities, including our own, for development and commercialization of our product candidates, if approved;

• the efforts necessary to institute post-approval regulatory compliance requirements;

• the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;

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· • the ~~cost~~revenue, ~~and~~if ~~timing~~any, received from commercial sales of ~~establishing~~our ~~and~~product ~~validating~~candidates ~~manufacturing~~for ~~processes~~which ~~and~~we ~~facilities~~receive marketing approval, ~~including~~which ~~our~~may ~~own~~be affected by market conditions, ~~for~~including ~~development~~obtaining coverage and ~~commercialization~~adequate reimbursement of our product candidates from third-party payors, ifincluding ~~approved~~government programs and managed care organizations, and competition within the therapeutic class to which our product candidates are assigned;

· • the ~~efforts~~costs ~~necessary~~and totiming ~~institute~~of ~~post-approval~~preparing, ~~regulatory~~filing ~~compliance~~and ~~requirements~~prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and

· • the ~~costs~~extent ~~and~~to ~~timing~~which ofwe ~~future~~acquire ~~commercialization~~or ~~activities,~~in-license ~~including~~other product ~~manufacturing,~~candidates ~~marketing, sales~~ and ~~distribution,~~technologies. ~~for any of our product candidates for which we receive marketing approval;~~

· Our ~~the~~future commercial revenue, if any, ~~received~~will ~~from~~be ~~commercial~~derived from sales of ~~our~~therapy ~~product~~products. ~~candidates~~Accordingly, ~~for~~we ~~which~~may weneed ~~receive~~to ~~marketing~~continue ~~approval,~~to ~~which~~rely on additional financing to achieve our business objectives. Adequate additional financing may not be ~~affected~~available byto ~~market~~us ~~conditions~~on acceptable terms, ~~including~~or ~~obtaining~~at ~~coverage~~all. ~~and~~To ~~adequate~~the ~~reimbursement~~extent that we raise additional capital through the sale of equity or convertible debt securities, the terms of these equity securities or this debt may restrict our ~~product~~ability ~~candidates~~to ~~from~~operate. ~~third-party~~Any ~~payors~~future debt financing and equity financing, ~~including~~if ~~government~~available, ~~programs~~may involve agreements that include covenants limiting and ~~managed~~restricting ~~care~~our ~~organizations~~ability to take specific actions, ~~and~~such ~~competition~~as ~~within~~incurring ~~the~~additional ~~therapeutic~~debt, ~~class~~making capital expenditures, entering into profit-sharing or other arrangements or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to ~~which~~relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates ~~are~~or ~~assigned;~~to grant licenses on terms that may not be favorable to us.

· the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and

· the extent to which we acquire or in-license other product candidates and technologies.

Our future commercial revenue, if any, will be derived from sales of therapy products that we do not expect to be commercially available for at least the next few years, if at all. Accordingly, we may need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the terms of these equity securities or this debt may restrict our ability to operate. Any future debt financing and equity financing, if available, may involve agreements that include covenants limiting and restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, entering into profit-sharing or other arrangements or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

Contractual Obligations, Commitments and Contingencies

We lease aan 15approximately 20,~~668~~700 square foot facility for our corporate headquarters in Bannockburn, Illinois, pursuant to a lease that expires in July 2024. The lease agreement provides for annual escalation in rent payments during the lease term. We also lease a 1,318 square foot facility in Columbus, Ohio for research and development activities, pursuant to a lease that expires in March 2019. In March 2016, we entered into a lease agreement, which expires in August 2026, for approximately 48,529 square feet of manufacturing, warehouse and office space in Libertyville, Illinois. The lease agreement provides for annual escalation in rent payments during the lease term. In March 2014, we entered into a lease agreement, which expired in April 2017, for approximately 2,418 square feet of office space in Dallas, Texas. In May 2017, we entered into two month-to-month lease agreements to add an additional 4,582 square feet of office space in Libertyville, Illinois which has subsequently been reduced to one month-to-month lease agreement. In September 2017, the Company entered into a lease agreement that commences in January 2018 and expires in August 2026 for approximately 12,539 square feet of warehouse and office space in Libertyville, Illinois adjacent to our manufacturing facility. In July 2017, we entered into a lease agreement which expires in June 2027, for approximately 16,808 square feet in San Diego, California for research and development activities. The lease agreement provides for annual escalation in rent payments during the lease term. In March 2018, we entered into a lease agreement, which expires in August 2027, for approximately 9,500 square feet adjacent to our existing space in San Diego, California. The lease agreement provides for annual escalation in rent payments during the lease term. We are amortizing the escalation in rental payments on a straight‑line basis over the term of the lease. In March 2018, we entered into a lease agreement, which expires in July 2026, for approximately 44,000 square feet of warehouse, office and storage space in Libertyville, Illinois.

We may be required to make certain royalty payments under our licensing and supply agreements, as described in “—Collaboration and Licensing Agreements;” however, the amount and timing of when these payments will actually be made is uncertain, and the payments are contingent upon the initiation and completion of future activities.

~~During~~Other than the ~~three~~amendment to the REGENXBIO SMA License and ~~nine~~the ~~months~~Généthon ~~ended~~agreement ~~September~~described ~~30,~~above ~~2017~~in “—Collaboration and Licensing Agreements,” there were no other material changes outside the ordinary course of our business to the contractual obligations specified in the table of contractual obligations included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.

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Off-Balance Sheet Arrangements

During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under SEC rules.

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

Our primary exposure to market risk for our cash and cash equivalents is interest income sensitivity, which is affected by changes in the general level of U.S interest rates. As of ~~September~~March 3031, ~~2017~~2018, we had cash and cash equivalents totaling $~~374~~586.2 8 million. Cash and cash equivalents consist of cash, deposits with banks and short term highly liquid money market instruments with remaining maturities at the date of purchase of 90 days or less. These instruments are exposed to the impact of interest rate changes which may result in fluctuations to our interest income. The primary objective of our investment activity is to preserve capital to fund our operations. We also seek to maximize income from our investments without assuming significant risk. To achieve our objectives, we maintain a portfolio of investments in a variety of securities of high credit quality. We do not believe a sudden change in the interest rates would have a material impact on our financial condition or results of operations. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

AsWe ~~required~~maintain by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures ~~as of September 30, 2017. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company~~ that are designed to ensure that information required to be disclosed byin aour ~~company~~reports inunder the ~~reports~~Securities ~~that~~Exchange itAct ~~files~~of or1934, ~~submits~~as ~~under~~amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the ~~SEC’s~~ rules ~~and~~ ~~forms. Disclosure controls~~ and ~~procedures include~~forms, ~~without limitation, controls~~ and ~~procedures designed to ensure~~ that such information ~~required to be disclosed by a company in the reports that it files or submits under the Exchange Act~~ is accumulated and communicated to ~~the company’s management~~us, including ~~its~~our ~~principal~~Chief ~~executive~~Executive Officer and ~~principal~~Chief ~~financial~~Financial ~~officers~~Officer, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2017, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2017, our disclosure controls and procedures were not effective at the reasonable assurance level as a result of the material weaknesses discussed below. Notwithstanding these material weaknesses, our management has concluded that the financial statements included elsewhere in this Quarterly Report present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with generally accepted accounting principles (“GAAP”).

InAs ~~connection~~required ~~with~~by ~~the preparation of our Annual Report on Form~~Rule ~~10-K~~13a‑15(b) ~~for~~under the ~~year~~Exchange ~~ended December 31~~Act, ~~2016,~~an ~~our~~evaluation ~~management~~of ~~concluded~~the ~~that,~~effectiveness as of ~~December 31, 2016,~~ our ~~internal~~disclosure ~~control~~controls ~~over~~and ~~financial~~procedures ~~reporting was not effective,~~ (as adefined ~~result of material weaknesses~~ in ~~our~~Rule 13a‑15(e) ~~control~~under ~~over~~the ~~financial~~Exchange ~~reporting. A~~Act) ~~material~~as ~~weakness~~of isMarch ~~a deficiency~~31, or2018 awas ~~combination~~conducted ofunder ~~deficiencies,~~the insupervision ~~internal~~and ~~control~~with ~~over~~the ~~financial~~participation ~~reporting such that there is a reasonable possibility that a material misstatement~~ of our ~~financial~~management, ~~statements~~including ~~will~~our ~~not~~Chief beExecutive ~~prevented~~Officer orand ~~detected~~Chief onFinancial ~~a timely basis~~Officer. ~~The~~ ~~material~~Based ~~weaknesses~~on ~~identified~~this inevaluation, our ~~internal~~Chief ~~control~~Executive ~~over~~Officer ~~financial~~and ~~reporting~~Chief ~~related~~Financial toOfficer ~~our~~concluded ~~lack~~that ~~of sufficiently trained professionals with an appropriate level of accounting knowledge, lack of written policies regarding~~ our ~~accounting~~disclosure ~~function~~controls and procedures towere ~~identify~~effective ~~and~~as ~~appropriately~~of ~~account~~March ~~for complex debt and equity agreements or share-based compensation awards~~31, ~~lack of restricted access to key financial systems and records and appropriate segregation of duties~~2018.

31Changes in Internal Control over Financial Reporting

~~Table~~There were no changes to our internal control over financial reporting identified in connection with the evaluation required by Rule 13a‑15(d) and 15d‑15(d) of ~~Contents~~the Exchange Act that occurred during the quarter ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Status of Remediation of Material Weaknesses

We have taken numerous steps to address these material weaknesses and believe we have made significant progress toward remediating them, primarily through the hiring of multiple additional full-time accounting and financial personnel. With the addition of these personnel and others, we believe we now have sufficient personnel with an appropriate level of accounting knowledge and experience commensurate with our financial reporting requirements.

Based on our risk assessments and ongoing reviews of our financial statements, we have implemented controls over key financial transaction areas, application of GAAP, SEC reporting and associated disclosures and are in the process of formally documenting our key accounting policies and procedures. We have also performed additional review procedures in areas subject to audit adjustments in prior periods and have identified key controls for our significant processes. In addition, effective January 1, 2017, we have converted to a new enterprise resource planning (“ERP”) financial system to support improved automation and control over our finance and accounting functions, including proper access and segregation of duties. Effective with our IPO, we no longer have complex debt and equity agreements. We have designed and implemented controls and procedures to identify and appropriately account for our share-based compensation awards.

During the remainder of 2017, we intend to continue our remediation efforts by completing the documentation of our key controls and testing the design and operating effectiveness of these controls. We are actively working to implement effective internal control over financial reporting, which includes remediation of these material weaknesses. However, such compliance is not guaranteed, and we cannot provide any assurance that our internal control over financial reporting will be effective as a result of these efforts.

Except as described above, there were no changes in our internal control over financial reporting during the fiscal quarter ended September 30, 2017 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.OTHER INFORMATION

Item 1.Legal Proceedings

For this item, please refer to Note 8, ~~Commitments and Contingencies~~ to the ~~Notes to~~ Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report.

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Item 1A.Risk Factors

The discussion of our business and operations discussed in this report should be read together with the risk factors contained in Item 1A of our Annual Report, as filed with the SEC on ~~March 16~~February 28, ~~2017~~2018, and as amended on April 30, 2018, which describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies, or prospects in a material and adverse manner. There are no material changes from the risk factors as previously disclosed in our Annual Report, except as noted below:

~~Preclinical~~Risk ~~testing~~Factors ofRelated ~~our~~to ~~gene~~the ~~therapy~~Merger ~~product candidates for Rett syndrome and ALS may not result in our advancement of these programs into clinical trials.~~

~~Although~~The aannouncement ~~substantial~~and ~~amount~~pendency of our ~~efforts~~acquisition to date have focused on the development of AVXS-101 for SMA, a key element of our strategy is to discover, develop and potentially commercialize a portfolio of product candidates to treat other rare and life-threatening neurological genetic diseases. In furtherance of that strategy, we recently announced that we had entered into a license agreement with REGENX to develop and commercialize gene therapy treatments to treat two rare monogenic disorders: Rett syndrome and a genetic form of amyotrophic lateral sclerosis, or ALS, caused by ~~mutations~~Novartis inAG ~~the~~could ~~superoxide~~adversely ~~dismutase~~affect ~~1, or SOD1, gene. Our development efforts for~~ our Rett syndrome and ALS programs are at an extremely early stage, and we have not yet completed IND-enabling preclinical studies for either of these programs. It is possible that future research and preclinical development of these programs may not establish sufficient indications of clinical benefit or acceptable tolerability to support the submission of an IND for one or both of these programs, in which case we may never initiate clinical trials, and we may be forced to suspend development activities for one or both of these programs. If we are not able to advance these programs into clinical trials, we will not be able to commercialize products for these indications, which would have a material adverse effect on our future business ~~prospects~~, financial condition, ~~and~~ results ofand operations.

~~The~~On ~~development~~April 6, 2018, the company entered into an Agreement and Plan of ~~product~~Merger, ~~candidates~~or ~~for~~the ~~our~~Merger ~~Rett~~Agreement, ~~syndrome~~with Novartis AG, a company organized under the laws of Switzerland, or Parent, and ~~ALS~~Novartis ~~programs~~AM ~~will~~Merger beCorporation, a Delaware corporation and a wholly owned subsidiary of Parent, or Purchaser, pursuant to which, and upon the terms and subject to ~~many~~the ~~risks~~conditions described therein, on April 17, 2018 Purchaser commenced a cash tender offer, or the Offer, to acquire all of the outstanding shares of the company’s common stock at a purchase price of $218.00 Ifper weshare, donet ~~not~~to ~~successfully~~the ~~develop~~seller ~~and~~in ~~commercialize~~cash, ~~product~~without ~~candidates~~interest, subject to any required withholding of taxes. Following the completion of the Offer, subject to the satisfaction or waiver of certain customary conditions set forth in ~~these~~the ~~programs~~Merger Agreement, ~~our~~Purchaser ~~business~~will ~~prospects~~merge ~~may~~with beand ~~adversely~~into ~~affected~~the company, with the company surviving as a wholly owned subsidiary of Parent. We refer to this as the Merger, and the Offer and the other transactions contemplated by the Merger Agreement as the Transaction.

~~Even~~The ifannouncement ~~the results of IND-enabling studies for our gene therapy product candidates for the treatment of Rett syndrome~~ and ~~ALS~~pendency ~~substantiate advancing these programs into clinical trials, the development~~ of ~~these product candidates will be subject to many risks. There is a high failure rate for drugs and biologic products proceeding through clinical trials. Many companies in~~ the ~~pharmaceutical~~Transaction ~~and~~could ~~biotechnology~~cause ~~industries~~disruptions ~~have suffered significant setbacks~~ in ~~late-stage clinical trials even after achieving promising results in preclinical testing~~ and ~~earlier-stage~~create ~~clinical~~uncertainty ~~trials.~~surrounding ~~Data~~our ~~obtained~~business, ~~from~~which ~~preclinical~~could ~~and~~have ~~clinical~~an ~~activities~~adverse ~~are~~effect ~~subject~~on toour ~~varying interpretations~~business, ~~which~~financial ~~may delay~~condition, ~~limit~~results orand ~~prevent regulatory approval. In addition~~operations, weregardless ~~may experience regulatory delays or rejections as a result~~ of ~~many~~whether ~~factors, including due to changes in regulatory policy during~~ the ~~period~~Transaction ofis ~~our product candidate development~~completed. ~~Success~~These inrisks ~~preclinical~~to ~~testing~~our ~~and~~business ~~early~~include ~~clinical trials does not ensure that later clinical trials will generate~~ the ~~same results or otherwise provide adequate data to demonstrate the efficacy and safety of a product candidate. Frequently~~following, ~~product~~all ~~candidates that have shown promising results in early clinical trials have subsequently suffered significant setbacks in later clinical trials. In addition, the design~~ of awhich ~~clinical~~could ~~trial~~be ~~can~~exacerbated ~~determine~~by ~~whether its results will support approval of~~ a ~~product~~delay ~~and flaws~~ in the ~~design~~completion of ~~a clinical trial may not become apparent until~~ the ~~clinical~~Transaction: ~~trial is well advanced.~~

~~Our~~• ~~ability~~the todiversion ~~successfully~~of ~~develop~~significant ~~gene~~management ~~therapy~~time ~~treatments for Rett syndrome~~ and ~~ALS~~resources ~~will~~towards bethe ~~subject~~completion ~~to many~~ of the ~~same~~Transaction; development risks as our AVXS-101 product candidate for SMA, including those discussed under the headings "Risk Factors — Risks related to the development of our current product candidate" and "Risk Factors — Risks related

33• the impairment of our ability to attract, retain, and motivate key personnel, including our senior management;

• difficulties maintaining relationships with customers, suppliers, and other business partners;

• the inability to pursue alternative business opportunities or make appropriate changes to our business because of requirements in the Merger Agreement that we conduct our business in the ordinary course and not engage in certain kinds of transactions prior to the completion of the Merger; and

• litigation relating to the Transaction and the costs and distractions related thereto.

The Transaction may not be completed within the expected timeframe, or at all, and the failure to complete the Transaction could adversely affect our business and the market price of our common stock.

The completion of the Transaction is subject to a number of conditions, including (i) the Company’s stockholders tendering a sufficient number of shares of the Company’s common stock in the Offer, (ii) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, without the imposition of a Burdensome Condition (as defined in the Merger Agreement), (iii) the absence of injunctions or other legal restraints preventing the consummation of the Offer or the Merger, or imposing a Burdensome Condition and (iv) certain other conditions set forth in Exhibit A to the Merger Agreement.

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Many of the conditions to consummation of the ~~commercialization~~Transaction are not within our control or the control of ~~AVXS-101"~~Parent inor Purchaser, and none of us can predict when or if these conditions will be satisfied. There can be no assurance that our ~~Annual~~business, ~~Report~~our onrelationships ~~Form~~or ~~10-K~~our ~~for~~financial ~~the~~condition ~~year~~will ~~ended~~not ~~December~~be 31adversely affected, ~~2016~~as compared to the condition prior to the announcement of the Transaction, ~~which~~if the Transaction is ~~incorporated~~not byconsummated. ~~reference~~Failure ~~into~~to ~~this~~complete ~~Quarterly~~the ~~Report~~Transaction oncould ~~Form~~adversely ~~10-Q.~~affect ~~These~~our ~~risks~~business ~~include~~and the ~~risks~~market price of our common stock in a number of ways, including the following:

· • ~~completing~~if ~~preclinical~~the ~~studies~~Merger ~~and~~is ~~clinical~~not ~~trials~~completed, ~~with~~the ~~positive~~share ~~results~~price of our common stock will change to the extent that the current market price of our stock reflects an assumption that the Transaction will be completed;

· • ~~receiving~~we ~~marketing~~have ~~approvals~~incurred, ~~from~~and ~~applicable~~will ~~regulatory~~continue ~~authorities~~to incur, significant costs, expenses and fees for professional services and other costs in connection with the Transaction, for which we may receive little or no benefit if the Transaction is not completed. Many of these fees and costs will be payable by us even if the Transaction is not completed and may relate to activities that we would not have undertaken other than to complete the Transaction;

· • ~~obtaining,~~a ~~maintaining,~~failed ~~defending~~Merger may result in negative publicity and ~~enforcing~~a ~~intellectual~~negative ~~property~~impression ~~rights~~of ~~important~~us toin the ~~product~~investment ~~candidates~~community; and

· • ~~establishing~~upon ~~commercial~~termination ~~manufacturing~~of ~~capabilities,~~the Merger Agreement by us or ~~contracting~~Parent ~~with~~under ~~third-party~~specified ~~manufacturers~~circumstances, ~~with~~we ~~such~~would ~~capabilities;~~be required to pay a termination fee of $284 million.

· establishing and maintaining collaborations, licensing or other arrangements;

· launching commercial sales, if and when approved;

· achieving acceptance, if and when approved, by patients and the medical community;

· effectively competing with other therapies; and

· maintaining an acceptable safety profile following approval.

If we are unable to successfully develop and commercialize product candidates for Rett syndrome or ALS, we will not be able to obtain future revenues from these programs, which would have a material adverse effect on our future business prospects, financial condition and results of operations.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

~~None~~In January 2018, we issued 105,237 shares of common stock for non-cash consideration in a transaction that was exempt from registration under Section 4(a)(2) of the Securities Act.

Item 3.Default Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

None.

Item 5.Other Information

None.

Item 6.Exhibits

See the Exhibit Index for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.

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EXHIBIT INDEX

ExhibitNumber	~~Description of Exhibit~~	Description of Exhibit
3.1	Fifth Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on February 17, 2016).
2.1		Agreement and Plan of Merger dated as of April 6, 2018 among Novartis AG, Novartis AM Merger Corporation and the Registrant (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on April 9, 2018).
3.2	Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on February 17, 2016).
3.1		Fifth Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on February 17, 2016).
4.1	Specimen Stock Certificate evidencing the shares of common stock (incorporated by reference to Exhibit 4.1 to Amendment No. 2 to the Registration Statement on Form S-1 filed on February 9, 2016).
3.2		Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on February 17, 2016).
10.1	Employment Agreement dated October 19, 2017 between Registrant and Phillip B. Donenberg.
3.3		Amendment to the Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on April 9, 2018).
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
4.1		Specimen Stock Certificate evidencing the shares of common stock (incorporated by reference to Exhibit 4.1 to Amendment No. 2 to the Registration Statement on Form S-1 filed on February 9, 2016).
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
10.1		License Agreement dated March 9, 2018 by and between the Registrant and Généthon.
32.1*	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
101.SCH	XBRL Taxonomy Extension Schema Document.
32.1*		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.INS		XBRL Instance Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

* These certifications are being furnished solely to accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	AVEXIS, INC.
Date: November 9, 2017	By:	/s/ Phillip B. Donenberg
Date: May 4, 2018	By:	/s/ Phillip B. Donenberg
		Phillip B. Donenberg
		Senior Vice President, Chief Financial Officer
		(Principal Financial and Principal Accounting Officer)

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