We currently intend to evaluate EDP1815 in additional inflammatory disease indications. Potential indications include psoriatic arthritis, asthma, allergy, axial spondylarthritis and rheumatoid arthritis.
In December 2020, we announced EDP1908 as our lead candidate in oncology following presentation of preclinical data at the Society for Immunotherapy for Cancer meeting in November 2020. Preclinical data presented showed that orally administered EDP1908, an EV, resulted in superior tumor growth control versus the parent microbial strain or anti-PD-1 therapy, with an observed dose-dependent reduction in tumor growth. We anticipate initiation of clinical development in 2022.
In March 2021, we announced a strategic collaboration to develop and commercialize our lead inflammation product candidate, EDP1815, in the Middle East, Turkey, and Africa with Meddist Company Limited, ("ALJ"),or ALJ, a company focused on accelerating access to affordable modern medical care while addressing unmet medical needs in developing markets around the world.
Together, we and ALJ will work to address the significant disparity in access to medical care in the fastest-growing populations and growth economies of the developing world. Africa’s population is projected to reach 1.7 billion by 2030 and 2.5 billion by 2050.
Under the terms of the agreement, we received an upfront payment from ALJ. We will be primarily responsible for the development and manufacturing of EDP1815 worldwide, whilst ALJ will be primarily responsible for development, regulatory submissions and commercialization activities in the agreed-upon regions. ALJ and we will participate in a 50:50 profit share arrangement. See Note 2 - Summary of Significant Accounting Policies and Note 3 of the notes- ALJ Collaborative Agreement to our unaudited condensed consolidated condensed financial statements in this Quarterly Report on Form 10-Q for additional information regarding the commercialization and license agreement with ALJ.
For a discussion of recently adopted or issued accounting pronouncements please refer to Note 2 to- Summary of Significant Accounting Policies of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities in our unaudited condensed consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. These items, including estimates related to the application of ASC 606 to our collaboration agreement with ALJ, application of ASC 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging to our K2HV debt and warrants, accrued research and development expenses and stock-based compensation, are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.amounts. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions. In making estimates
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
From time to time, we may be involved in claims and proceedings arising in the course of our business. The outcome of any such claim or proceeding, regardless of the merits, is inherently uncertain. We are not subject to any material legal proceedings.
On February 12, 2021, the European Patent Office issued a Communication of a Notice of Opposition for European patent EP 3223834, which is held by us. In July 2021, we filed our reply to the Notice of Opposition. In January 2022, the European Patent Office issued a preliminary opinion and a summons to oral proceedings. We filed our final written submission in July 2022, and the oral proceedings are scheduled in September 2022. We are currently evaluating all options available to us with respect to this matter. The patent at issue does not relate to any of our current product candidates, and receipt of this communication and/or any subsequent proceeding is not expected to affect any of our current development plans.
Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and the related notes and Part I, Item 2. “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and in our 2020 Annual Report on Form 10-K filed with the SEC on March 9, 2021,24, 2022, including our consolidated financial statements and the related notes thereto, before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment.
We are a development-stage company and have incurred significant losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.
Since inception, we have incurred significant operating losses. Our net loss was $93.5$60.4 million and $64.6$59.8 million for the ninesix months ended SeptemberJune 30, 2021,2022 and 2020, respectively. Our net loss was $93.7 million and $85.5 million for the years ended December 31, 2020 and 2019,2021, respectively. As of SeptemberJune 30, 2021,2022, we had an accumulated deficit of $386.0$475.1 million. As noted below, we have identified conditions and events that raise substantial doubt about our ability to continue as a going concern. Through SeptemberJune 30, 2021,2022, we have financed our operations through private placements of our preferred stock, borrowings under loan and security agreements and proceeds from equity offerings of our common stock.stock, private placements of our since redeemed preferred stock and borrowings under loan and security agreements. We have devoted substantially all of our financial resources and efforts to developing our platform, identifying potential product candidates and conducting preclinical and clinical trials. We are in the early stages of developing our product candidates, and we have not completed the development of any product candidate. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase substantially as we:we, without limitation:
In addition, we anticipate that our expenses will increase substantially if we experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges.
To become and remain profitable, we must succeed in developing and eventually commercializing products that generate significant revenue. This will require us to be successful in a range of challenging activities, including
Because of the numerous risks and uncertainties associated with pharmaceutical product and biological product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. If we are required by the FDA or other regulatory authorities to perform preclinical studies or clinical trials in addition to those currently expected, or if there are any delays in completing our preclinical studies or clinical trials or the development of any of our product candidates, our expenses could increase and revenue could be further delayed.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress our value and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations.
We will need additional funding in order to complete development of our product candidates and commercialize our products, if approved. If we are unable to raise capital when needed, we could be forced to delay, reduce or discontinue our product development programs or commercialization efforts.
We expect our expenses to increase in connection with our ongoing activities, particularly as we conduct clinical trials, scale or build manufacturing capacity and expand into additional therapeutic areas.
• the cost of manufacturing clinical supplies of our product candidates, including EDP1815 EDP1867,
• the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for
• the costs, timing and outcome of regulatory review of our product candidates;
• the costs and timing of future commercialization activities, including manufacturing, marketing, sales and
distribution for any of our product candidates for which we receive marketing approval;
• the revenue, if any, received from commercial sales of our product candidates for which we receive
• 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;
• the extent to which we acquire or invest in businesses, products and technologies, including entering into
Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Additionally, market volatility
restrictive covenants such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborators or others at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.
If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or product development programs or the commercialization of any product candidates or cease our operations. In addition, we may be unable to make milestone and royalty payments due under our intellectual property license agreements or other payments under our agreements with CROscontract research organizations ("CROs") and academic research collaborators, or expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.
Our limited operating history may make it difficult to evaluate the success of our business to date and to assess our future viability.
Since our inception in 2014, we have devoted substantially all of our resources to identifying and developing our product candidates, building our intellectual property portfolio, process development and manufacturing function, planning our business, raising capital and providing general and administrative support for these operations. All of our product candidates are in clinical or preclinical development. We have not yet demonstrated our ability to successfully complete a Phase 3 or other pivotal clinical trial, obtain regulatory approvals to commercialize a product, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Additionally, we expect our financial condition and operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control.
Consequently, any predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history.
We have identified conditions and events that raise substantial doubt about our ability to continue as a going concern.
The terms of our loan and security agreements place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.
On June 16, 2021 or the Amended(the "Amended Credit Facility Effective Date,Date"), we entered intofurther amended the Amended2019 Credit Facility with K2HV,(as so amended, the “Amended Credit Facility”), pursuant to which (i) the existing $15.0 million third tranche commitment was replaced and superseded with a new $15.0 million fourth tranche commitment, which we drew down on June 16, 2021, (ii) K2HV may convert up to $5.0 million of outstanding principal of the Loans (as defined in the Amended Credit Facility) into shares of our common stock, (iii) the interest-only period is extended through February 28, 2023, with the first amortization payment on March 1, 2023, (iv) priorincludes an election to January 1, 2022, at our election,adjust the amortization schedule can be adjusted to be based on a 30-month repayment period, and if so adjusted, upon final payment or prepayment of the loans we must pay a final payment equal to 4.8% of the aggregate original principal amount of the loans borrowed, which we elected on December 22, 2021, and (v) at our election, we may prepay the loans, subject to a prepayment fee of 2% of the amount prepaid if such prepayment occurs no later than the 18-month anniversary of the Amended Credit Facility Effective Date, or if the prepayment occurs after the 18-month anniversary of the Amended Credit Facility Effective Date but prior to the maturity date, 1% of the amount prepaid. All of the other terms and conditions of the 2019Amended Credit Facility remain unchanged and in full force and effect.
As of SeptemberJune 30, 2021,2022, the outstanding principal balance under the Amended Credit Facility was $45.0 million. The Amended Credit Facility contains customary representations, warranties, affirmative and negative covenants and events of default applicable to us and our subsidiaries.
If we default under the Amended Credit Facility, K2HV may accelerate all of our repayment obligations and exercise all of their rights and remedies under the Amended Credit Facility and applicable law, potentially requiring us to renegotiate our agreement on terms less favorable to us or to immediately cease operations. Further, if we are liquidated, the lenders’ rightrights to repayment would be senior to the rights of the holders of our common stock to receive any proceeds from the liquidation. K2HV could declare a default upon the occurrence of any event, among others, that they interpret as a material adverse effect or a change of control as delineated under the Amended Credit Facility, payment defaults, or breaches of covenants thereby requiring us to repay the loan immediately or to attempt to reverse the declaration of default through negotiation or litigation. Any declaration by the lendersK2HV of an event of default couldwould significantly harm our business and prospects and could cause the price of our common stock to decline. If we raise any additional debt financing, the terms of such additional debt could further restrict our operating and financial flexibility.
With our current cash resources, we do not expect to be able to meet our future debt repayment obligation to K2HV. In order to meet this obligation, we will need to raise additional capital and / or restructure our existing debt, which may be on unfavorable terms.
The K2HV debt repayment obligation begins in March 2023 with payments of principal and interest continuing through August 2024. See Note 8 - Loan and Security Agreements. As our current cash resources are insufficient to meet these principal and interest obligations, we will need to raise additional capital and / or restructure the existing debt obligation on new terms which may be less favorable than the existing terms. Such new terms may include additional encumbrances placed on our assets, incremental dilutive conversion features, the imposition of more restrictive covenants or other onerous conditions.
We may seek to establish collaboration agreements in the future, and we may not be successful or we may not be able to establish them on commercially reasonable terms and may have to alter our development and commercialization plans.
We may seek to form collaborations to fund our operations, potentially accelerate research and development activities, expand our capabilities, and provide for commercialization activities by third parties. Any of these relationships may require us to incur up-front expenses, increase our near and long-term expenditures, commit to substantial future milestone and royalty payments, issue securities that dilute our existing stockholders, and divert attention of our management.
If and when we seek to enter into collaborations, we may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of a product candidate, reduce or delay its development program, delay its potential commercialization, or reduce the scope of any sales or marketing activities.
Risks Related to the Discovery, Development and Regulatory Approval of Our Product Candidates
We are very early in our development efforts and may not be successful in our efforts to use our platform to build a pipeline of product candidates and develop marketable drugs.
We are using our technology platform to harness the small intestinal axis, with an initial focus on developing therapies in immunology, specifically inflammatory diseases, and also oncology. While we believe our preclinical studies and clinical trials to date have validated our platform to a degree, we are at an early stage of development and our platform has not yet, and may never lead to, approvable or marketable products. We are developing these product candidates and additional product candidates that we intend to use to potentially treat broader immunological diseases, respiratory diseases, neuro-inflammation and degeneration, liver diseases, type I diabetes, food allergy, neurobehavior, cardiovascular disease and diseases of metabolism. We may have problems applying our technologies to these other areas, and our new product candidates may not demonstrate a comparable ability in treating disease as our initial product candidates. Even if we are successful in identifying additional product candidates, they may not be suitable for clinical development as a result of our inability to manufacture more complex oral biologics, limited efficacy, unacceptable safety profiles or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance. The success of our product candidates will depend on several factors, including the following:
•completion of preclinical studies and clinical trials with positive results;
•receipt of marketing approvals from applicable regulatory authorities;
•obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;
•making arrangements with CMOs, or establishing our own commercial manufacturing capabilities;
•launching commercial sales of our products, if and when approved, whether alone or in collaboration with others;
•entering into new collaborations throughout the development process as appropriate, from preclinical studies through to commercialization;
•acceptance of our products, if and when approved, by patients, the medical community and third-party payors;
•effectively competing with other therapies;
•obtaining and maintaining coverage and adequate reimbursement by third-party payors, including government payors, for our products, if approved;
•protecting our rights in our intellectual property portfolio;
•operating without infringing or violating the valid and enforceable patents or other intellectual property of third parties;
•maintaining an acceptable safety profile of the products following approval; and
•maintaining and growing an organization of scientists and business people who can develop and commercialize our products and technology.
If we do not successfully develop and commercialize product candidates based upon our technologicaltechnical approach, we will not be able to obtain product revenue in future periods, which likely would result in significant harm to our financial position and adversely affect our stock price.
Our product candidates are intendeddesigned to act on cells in the small intestine to produce systemic therapeutic effects with limited systemic exposure. This biological interaction between the small intestine and the rest of the body may not function in humans the way we have observed in mice and our drugs may not reproduce the systemic effects we have seen in preclinical and early clinical data.
We believe our product candidates, including EDP1815 EDP1867,and EDP2939, and EDP1908 have the potential to work by modulating systemic responses via interactions with cells in the small intestine. Dosing to achieve sufficient exposure may require an inconvenient dosing regimen. Even with a successful formulation and appropriate delivery profile to achieve proper exposure of our microbes or extracellular vesicles to the small intestine, we may not get sufficient or even any activity at the site of disease. This may be because our understanding of the mechanisms of the small intestine do not work in humans the way we believe they do. Despite there being strong academic literature to support the concept and our observations in preclinical studies in mice and early clinical trials in humans, these
principles and the ability to use pharmaceutical preparations derived from single strains of microbes to modulate the immune system and other systems hashave not yet been proven in humans.
Our product candidates are an unproven approach to therapeutic intervention.
All of our product candidates are based on targeting SINTAX. We have not, nor to our knowledge has any other company, received regulatory approval for an oral therapeutic based on this approach. We cannot be certain that our approach will lead to the development of approvable or marketable products. In addition, our product candidates may have different safety profiles and efficacy in various indications. Finally, the FDA or other regulatory agencies may lack experience in evaluating the safety and efficacy of products based on singe strains of microbes, which
could result in a longer than expected regulatory review process, increase our expected development costs and delay or prevent commercialization of our product candidates.
Our platform relies on third parties for biological materials to expand our microbial library.
Our platform relies on third parties for biological materials, including human samples containing bacteria, to expand our microbial library. Some biological materials have not always met our expectations or requirements, and any disruption in the supply of these biological materials could materially adversely affect our business and ability to build our pipeline of product candidates. For example, if any supplied biological materials are contaminated, we would not be able to use such biological materials. Although we have quality control processes and screening procedures, biological materials are susceptible to damage and contamination. Improper storage of these materials, by us or any third-party suppliers,supplier, may require us to destroy some or all of our raw materials or products.
Even if our product candidates do not cause off targetoff-target adverse events, there may be immunotoxicity associated with the fundamental pharmacology of our product candidates.
Our product candidates, including EDP1815 EDP1867,and EDP2939, and EDP1908 are designed to work by modulating the immune system. While we have observed in preclinical and clinical studies that our product candidates have limited systemic exposure in preclinical studies and early clinical trials, the pharmacological immune effects we aim to induce are systemic. Systemic immunomodulation from taking our product candidates could lead to immunotoxicity in patients, which may cause us or regulatory authorities to delay, limit or suspend clinical development. Other immunomodulatory agents have shown immunotoxicity. This includes immune suppressive agents, such as HUMIRA or REMICADE, which have shown an increased risk of infection or, in rare instances, certain types of blood cancer. In the case of immune activating agents, such as YERVOY, induction of adverse auto-immune events has been observed in some patients. Immunotoxicity in one program could cause regulators to view these adverse events as a class effect of our product candidates which may impact the timing of the development of our pipeline of potential product candidates. Even if the adverse events are manageable, the profile of the drug may be such that it limits or diminishes the possible number of patients who could receive our therapy.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label or result in significant negative consequences following marketing approval, if any.
Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. For example, some of our product candidates may consist of live biological material that may remain viable in humans, which carries a risk of causing infections in patients. Some infections may require treatment with antibiotics to eliminate the bacteria. All of our product candidates are screened for antibiotic sensitivity but it is possible that if antibiotic therapy does not eliminate the live biological material, a resistant version of our strain could remerge.emerge. These events, while unlikely, could cause a delay in our clinical development and/or could increase the regulatory standards for the entire class of our product candidates. In an instance where the infection risk of taking our product candidates is high, this may cause the benefit risk profile of therapy to be non-competitive in the market and may lead to discontinuation of development of the product.product candidate.
In addition, it is possible that infections from our product candidates could be rare and not frequently observed in our clinical trials. In larger post marketing authorization trials, however, data could show that the infection risk, while small, does exist. If unacceptable side effects arise in the development of our product candidates, we, the FDA or
comparable foreign regulatory authorities, the IRBs at the institutions in which our clinical trials are conducted, or the data safety monitoring boardmonitors could suspend or terminate our clinical trials, or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny approval of our product candidates for any or all targeted indications. Treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the trial or could result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff. We expect to have to train medical personnel using our product candidates to understand the side effect profiles for our clinical trials and upon any commercialization of any of our product candidates. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in patient injury or death. Any of these occurrences may harm our business, financial condition and prospects significantly.
If any of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including:
• regulatory authorities may withdraw their approval of the product;
• we may be required to recall a product or change the way such product is administered to patients;
• additional restrictions may be imposed on the marketing of the particular product or the manufacturing
processes for the product or any component thereof;
• we may be required to conduct post-marketing studies or clinical trials;
• regulatory authorities may require the addition of labeling statements, such as a ‘‘‘"black box’’box" warning or a
contraindication;
• we may be required to implement a risk evaluation and mitigation strategy or create a medication guide
outlining the risks of such side effects for distribution to patients;
• we could be sued and held liable for harm caused to patients;
• the product may become less competitive; and
• our reputation may suffer.
Any of the foregoing events could prevent us from achieving or maintaining market acceptance of thea particular product candidate, if approved, and result in the loss of significant revenues to us, which would materially and adversely affect our results of operations and business.
Companies with microbiome products or differing microbial products may produce negative clinical data which will adversely affect public perception of our product candidates, and may negatively impact regulatory approval of, or demand for, our potential products.
Our product candidates are pharmaceutical compositions of commensal microbes.microbes or derivatives thereof. While we believe our approach is distinct from microbiome therapies, negative data from clinical trials using microbiome-based therapies (e.g.(e.g., fecal transplant) and other microbial therapies could negatively impact the perception of the therapeutic use of microbial-based products. This could negatively impact our ability to enroll patients in clinical trials. The clinical and commercial success of our potential products will depend in part on the public and clinical communities’ acceptance of the use of therapeutic microbes.microbes and derivatives thereof. Moreover, our success depends upon physicians prescribing, and their patients being willing to receive, treatments that involve the use of product candidates we may develop in lieu of, or in addition to, existing treatments with which they are already familiar and for which greater clinical data may be available.
Adverse events in our preclinical studies or clinical trials, or those of our competitors or of academic researchers utilizing therapeutic microbes, even if not ultimately attributable to our product candidates, and the resulting publicity, could result in increased governmental regulation, unfavorable public perception, increased volatility in our stock price, potential regulatory delays in the testing or approval of our potential product candidates, stricter labeling requirements for our product candidates that are approved, if any, and a decrease in demand for any such products.
Catastrophic loss of our master cell banks could significantly impair our ability to manufacture our product candidates.
Our product candidates require that we manufacture from master cell banks ("MCBs") of our microbial strains. There is a possibility of a catastrophic failure or destruction of our MCBs. This could make it impossible for us to continue to manufacture a specific product candidate or product. Recreating and recertifyingre-certifying our MCBs is possible but not
certain and could put at risk the supply of our product candidates for preclinical studies or clinical trials or any products, if approved, to our customers.
Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
All of our product candidates are currently in clinical or preclinical development. It is impossible to predict when or if any of our product candidates will prove effective and safe in humans or will receive regulatory approval, and the risk of failure through the product development process is high. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failed clinical trial can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. For example, in certain of our clinical trials, investigational drug products are being delivered in a capsule for targeted release in the small intestine. This formulation has not previously been clinically tested, nor are we able to dose mice with a capsule for targeted release in the small intestine. Our ongoing clinical trials will be the first time this formulation is tested, and we cannot assure you that the results of this formulation will be consistent with the observations from our preclinical studies. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials due to adverse safety profiles or lack of efficacy, notwithstanding promising results in earlier trials, and we cannot be certain that we will not face similar setbacks.
The results from earlier clinical trials of product candidates may not predict the results that will be obtained in subsequent subjects or in subsequent human clinical trials of that product candidate. There can be no assurance that any trial will ultimately be successful or support further clinical advancement of any given product candidate.
In addition, we cannot be certain as to the type and number of clinical trials the FDA or similar foreign regulatory authorities will require us to conduct before we may successfully gain approval, referred to as licensure with respect to biological products in the United States, to market any of our product candidates. Requirements for us to conduct more clinical trials than we anticipate for a given product candidate could cause us to incur significant development costs, delay or prevent the commercialization of our products or otherwise adversely affect our business.
We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including:
• regulators, IRBs or ethics committees may not authorize us or our investigators to commence a clinical trial
or conduct a clinical trial at a prospective trial site;
• we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or
clinical trial protocols with prospective trial sites;
• clinical trials of our product candidates may demonstrate undesirable side effects or produce negative or
inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or
abandon product development programs;
• the number of patients required for clinical trials of our product candidates may be larger than we anticipate,
enrollment in these clinical trials may be lower or slower than we anticipate, or participantspatients may drop out of these clinical trials at a higher rate than we anticipate;
• our CROs, CMOs and other third-party contractors may fail to comply with regulatory requirements or meet
their contractual obligations to us in a timely manner, or at all;
• we may have to, or regulators or IRBIRBs may require that we or our investigators, suspend
or terminate clinical trials of our product candidates for various reasons, including noncompliance with
regulatory requirements or a finding that the participantspatients are being exposed to unacceptable health risks;
• the cost of clinical trials of our product candidates may be greater than we anticipate;
• the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our
product candidates may be insufficient or inadequate;
• regulators may revise the requirements for approving our product candidates, or such requirements may not
be as we anticipate; and
• regarding trials managed by any future collaborators, our collaborators may face any of the above issues,
and may conduct clinical trials in ways they view as advantageous to them but potentially suboptimal for us.
If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive, or if there are safety concerns, we may:
•be delayed in obtaining marketing approval for our product candidates;
•lose the support of any future collaborators, requiring us to bear more of the burden of developing certain microbial strains;strains or derivatives thereof;
•not obtain marketing approval at all;
•obtain marketing approval in some countries and not in others;
•obtain approval for indications or patient populations that are not as broad as we intend or desire;
•obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;
•be subject to additional post-marketing testing requirements; or
•have the product removed from the market after obtaining marketing approval.
In addition, disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing clinical trials.
We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by a Data Safety Monitoring Boarddata safety monitoring board or ethics committee for such trial or by the FDA or comparable foreign regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or comparable foreign regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, or changes in governmental regulations or administrative actions. For example, in September 2021 the FDA placed anthe IND for aour Phase 2 topicatopic dermatitis trial of EDP1815 on clinical hold and requested that we amend our protocol to account for risks to patients that require their current atopic dermatitis medications be discontinued, the manner in which safety data is collected, and defined study halting criteria. The FDA has sincesubsequently lifted the clinical hold.
Further, conducting clinical trials in foreign countries, as we have in the past and may continue to do in the future for our product candidates, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled patients in foreign countries to adhere to the clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries.
Our product development costs will increase if we experience delays in clinical testing or in obtaining marketing approvals. We do not know whether any of our preclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant preclinical study or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do, potentially impairing our ability to successfully commercialize our product candidates and harming our business and results of operations.
the centralized EU portal. Once the CTA is approved, clinical study development may proceed. The CTR entails a three-year transition period. The extent to which ongoing and new clinical trials will be governed by the CTR varies. For clinical trials whose CTA was made under the Clinical Trials Directive before January 31, 2022, the Clinical Trials Directive will continue to apply on a transitional basis for three years. Additionally, sponsors may still choose to submit a CTA under either the Clinical Trials Directive or the CTR until January 31, 2023 and, if authorized, those will be governed by the Clinical Trials Directive until January 31, 2025. By that date, all ongoing trials will become subject to the provisions of the CTR. Compliance with the CTR requirements by us and our third-party service providers, such as CROs, may impact our development plans.
It is currently unclear to what extent the UK will seek to align its regulations with the EU. The UK regulatory framework in relation to clinical trials is derived from existing EU legislation (as implemented into UK law, through secondary legislation). On January 17, 2022, the MHRA, launched an eight-week consultation on reframing the UK legislation for clinical trials. The consultation closed on March 14, 2022 and aims to streamline clinical trial approvals, enable innovation, enhance clinical trials transparency, enable greater risk proportionality and promote patient and public involvement in clinical trials. The outcome of the consultation will be closely watched and will determine whether the UK chooses to align with the regulation or diverge from it to maintain regulatory flexibility. A decision by the UK not to closely align its regulations with the new approach that will be adopted in the EU may have an effect on the cost of conducting clinical trials in the UK as opposed to other countries and/or make it harder to seek a marketing authorization in the EU for our product candidates on the basis of clinical trials conducted in the UK.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies governing clinical trials, our development plans may be impacted.
If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.
We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States. For example, we are developing certain product candidates, such as EDP1815, and EDP1867, to treat inflammatory diseases including psoriasis and atopic dermatitis. There are a limited number of patients from which to draw for clinical trials concerning any given indication.
Patient enrollment is also affected by other factors including:
•the severity of the disease under investigation;
•the patient eligibility criteria for the trial in question;
•the perceived risks and benefits of the product candidate under study;
•the availability of other treatments for the disease under investigation;
•the existence of competing clinical trials;
•the efforts to facilitate timely enrollment in clinical trials;
•our payments for conducting clinical trials;
•the patient referral practices of physicians;
•the ability to monitor patients adequately during and after treatment; and
•the proximity and availability of clinical trial sites for prospective patients.
Our inability to enroll a sufficient number of patients or volunteers for our clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing.
The COVID-19 pandemic has adversely impacted and may continue to adversely impact our business, including our preclinical studies and clinical trials, and finances.
In 2020, a strain ofThe ongoing pandemic caused by the novel coronavirus disease, COVID-19, was declared a pandemic and spread across the world, including throughout the United States, Europe and Asia. The pandemic and government measures taken in response have had and continue to have a significant impact, both direct and indirect, on businesses and commerce, as
worker shortages have occurred, supply chains have been disrupted, and some facilities and production have been suspended, and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen.suspended. In response to the spread of COVID-19, we have adopted and continue to employ several temporaryflexible business practices, including telecommuting and staggered work shifts in our laboratories, to protect our employees while continuing business operations. In addition, due to the COVID-19 pandemic, enrollment of new patients into, and the retention of existing patients in, our on-going clinical trials have been and continue tomay in the future be impacted due primarily to lower patient participation. As a result of the ongoing COVID-19 pandemic, we may continue to experience disruptions and face new disruptions that could severely impact our business, preclinical studies and clinical trials and finances, including:
• delays in receiving approval from local regulatory authorities to initiate our planned clinical trials;
• delays or difficulties in enrolling patients in our clinical trials;
• delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and
clinical site staff;
• delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials, including
interruptions in global shipping that may affect the transport of clinical trial materials;
• continued changes in local regulations as part of athe evolving response to the COVID-19 pandemic which may require us to
change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to
discontinue such clinical trials altogether;
• diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals
serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;
• interruptions of key clinical trial activities, such as clinical trial site data monitoring, due to limitations on
travel imposed or recommended by governments, employers and others or interruption of clinical trial
subject visits and study procedures (such as skin biopsies that are deemed non-essential activities), which may impact the integrity of subject data and clinical trials endpoints;
• risk that participantspatients enrolled in our clinical trials will contract COVID-19 while the clinical trial is ongoing,
which could impact the results of the clinical trial, including by increasing the number of observed adverse
events;
• interruptions or delays in the operations of the FDA and similar regulatory authorities, which may impact review and approval timelines;
• interruptions of, or delays in, receiving supplies of our product candidates from our CMOs due to staffing
shortages, production slowdowns or stoppages and disruptions in delivery systems;
• limitations on employee resources that would otherwise be focused on the conduct of our preclinical studies
and clinical trials, including because of sickness of employees or their families or the desire of employees to
avoid contact with large groups of people;
• refusal of the FDA or similar foreign regulatory authorities to accept data from clinical trials in affected geographies;
• impacts from prolongedthe new hybrid remote work arrangements, such as increased cybersecurity risks and strains on
our business continuity plans; and
• delays or difficulties with equitysecurities offerings due to disruptions and uncertainties in securities markets.markets and global economic slowdown.
The COVID-19 pandemic continues to evolve. The extent to which the outbreak impacts our business, preclinical studies and clinical trials will depend on future developments which are highly uncertain and cannot be predicted with confidence, such as the ultimatevarying geographic spread and severity of the disease and its variants, the duration of the pandemic, the emergence of new variants, whether travel restrictions and social distancing in the United States and other countries are lifted or reinstated, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. While the continued potential economic impact brought by and the duration of the COVID-19 pandemic may be difficult to assess or predict, the widespread pandemic has resulted in, and may continue to result in, significant disruption of global financial markets reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession orrecessions and market correctioncorrections resulting from the COVID-19 pandemic have and could materially affectcontinue to detrimentally impact our business.business and stock price.
We have conducted and may continue to conduct clinical trials for our product candidates in sites outside the United States, and the FDA may not accept data from trials conducted in foreign locations.
We have in the pastconducted and may in the future choosecontinue to conduct clinical trials outside the United States for our product candidates. Although the FDA may acceptThe acceptance of study data from clinical trials conducted outside the United States not conducted under IND, acceptance of this data isU.S. or another jurisdiction by the FDA or comparable foreign regulatory authority may be subject to certain conditions imposedor may not be accepted at all. In cases where data from foreign clinical trials are intended to serve as the sole basis for marketing approval in the U.S., the FDA will generally not approve the application on the basis of foreign data alone, unless: (i) the data are applicable to the U.S. population and U.S. medical practice; (ii) the trials were performed by clinical investigators of recognized competence and pursuant to GCP regulations; and (iii) the data may be considered valid without the need for an on-site inspection by the FDA. For example,FDA, or if the clinical trial mustFDA considers such inspection to be conductednecessary, the FDA is able to validate the data through an on-site inspection or other appropriate means. In addition, even where the foreign study data are not intended to serve as the sole basis for approval, the FDA will not accept the data as support for an application for marketing approval unless the study is well-designed and well-conducted in accordance with Good Clinical Practice,GCP requirements and the FDA must also beis able to validate the data from the study through an on-siteonsite inspection, if deemed necessary. In general, the patient population for any clinical trials conducted outside of the United States must be representative of the population for which we intend to seekMany foreign regulatory authorities have similar approval for the product in the United States.requirements. In addition, while these clinicalsuch foreign trials arewould be subject to the applicable local laws FDA acceptance of the data will be dependent upon its determination thatforeign jurisdictions where the trials also complied with all applicable U.S. laws and regulations.are conducted. There can be no assurance that the FDA or any comparable foreign regulatory authority will accept data from trials conducted
outside of the United States.U.S. or the applicable jurisdiction. If the FDA or any comparable foreign regulatory authority does not accept thesuch data, from our clinical trials of our product candidates, it would likely result in the need for additional trials, which wouldcould be costly and time-consuming, and delaywhich may result in current or permanently halt our development of ourfuture product candidates.
Interim, "topline" and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publicly disclose preliminary or topline data from our preclinical studies and clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline or preliminary results that we report may differ from future results of the same trials, or different conclusions or considerations may qualify such results once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. For example, we previously disclosed certain SCORAD figures from a Phase 1b clinical trial that, upon further review and analysis, required modification in subsequent disclosure. As a result, topline and other preliminary data should be viewed with caution until the final data are available.
From time to time, we may also disclose interim data from our preclinical studies and clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse differences between topline, preliminary or interim data and final data could significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our common stock.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular preclinical study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize our product candidates or will not be able to do so as soon as anticipated, and our ability to generate revenue will be materially impaired.
Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation and requirements by the FDA and other regulatory
agencies in the United States, by the legislative bodies in the European Union (the "EU")EU and EU member states and by other regulatory authorities outside the United States. Failure to obtain marketing approval for a product candidate in any jurisdiction will prevent us from commercializing the product candidate in that jurisdiction and may affect our plans for commercialization in other jurisdictions as well. We have not received approval to market any of our product candidates from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing approvals and we expect to rely on third parties to assist us in this process.
Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy to such regulatory authorities’ satisfaction. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.
The process of obtaining marketing approvals, both in the United States and abroad, is expensive and may take many years. The scope and amount of clinical data required to obtain marketing approvals can vary substantially from jurisdiction to jurisdiction, and it may be difficult to predict whether a particular regulatory body will require additional or different clinical trials than those conducted by a sponsor, especially for novel product candidates such
as our product candidates. The FDA or other foreign regulatory authorities may delay, limit, or deny the approval of our product candidates for many reasons, including:
• our inability to demonstrate that the clinical benefits of our product candidates outweigh any safety or other perceived risks;
• the regulatory authority’s disagreement with the interpretation of data from nonclinical or clinical studies;studies or trials;
• the regulatory agency’s requirement that we conduct additional preclinical studies and clinical trials;
• changes in marketing approval policies during the development period;
• changes in or the enactment of additional statutes or regulations, or changes in regulatory review process for each submitted product application; or
• the regulatory authority’s failure to approve the manufacturing processes or third-party manufacturers with which we contract.
Regulatory authorities have substantial discretion in the approval process and may refuse to accept a marketing application as deficient. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable. Of the large number of drugs in development, only a small percentage successfully complete the FDA or other regulatory approval processes and are commercialized.
Furthermore, our product candidates may not receive marketing approval even if they achieve their specified endpoints in clinical trials. Clinical data are often susceptible to varying interpretations, and many companies that have believed that their products performed satisfactorily in clinical trials have nonetheless failed to obtain FDA or the applicable foreign regulatory agency approval for their products. The FDA or foreign regulatory authorities may disagree with our trial design and our interpretation of data from nonclinical and clinical studies.studies and trials. Upon the review of data from any pivotal trial, the FDA or applicable foreign regulatory agency may request that the sponsor conduct additional analyses of the data and, if it believes the data are not satisfactory, could advise the sponsor to delay filing a marketing application.
Even if we eventually complete clinical testing and receive approval of a Biologics License Application ("BLA")BLA or foreign marketing authorization for one of our product candidates, the FDA or applicable foreign regulatory agency may grant approval contingent on the performance of costly additional clinical trials which may be required after approval. The FDA or the applicable foreign regulatory agency may also approve our products for a more limited indication and/or a narrower patient population than we originally request, and the FDA or applicable foreign regulatory agency may not approve the labeling that we believe is necessary or desirable for the successful commercialization of our products. Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent commercialization of our product candidates and would materially adversely impact our business and prospects.
The development of SINTAX medicines and their interactions with cells in the small intestine is an emerging field, and it is possible that the FDA or other regulatory authorities or bodies could issue regulations or new policies in the future affecting our product candidates.
If we experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate revenues will be materially impaired.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we intend to focus on developing product candidates for multiple initial indications that we identify as most likely to succeed in terms of both regulatory approval and commercialization. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that may prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and product development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements, in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.
A fast track designation by the FDA may not actually lead to a faster development or regulatory review or approval process.
We may seek fast track designation for some of our product candidates. If a drug or biologic is intended for the treatment of a serious or life-threatening condition and nonclinical or clinical data demonstrate the potential to address unmet medical needs for this condition, the drug or biologic sponsor may apply for FDA fast track designation. Fast track designation provides increased opportunities for sponsor meetings with the FDA during preclinical and clinical development in addition to the potential for rolling review once a marketing application is filed. The FDA has broad discretion whether or not to grant this designation, and even if we believe a particular product candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we do receive fast track designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures. Fast track designation does not assure ultimate approval by the FDA. The FDA may withdraw fast track designation if it believes that the designation is no longer supported by data from our product development program.
A breakthrough therapy designation by the FDA for our product candidates may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval.
We may seek a breakthrough therapy designation for our product candidates. A breakthrough therapy is defined as a drug or biologic that is intended to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug or biologic may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. For drugs that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor can help to identify the most efficient path for clinical development. Drugs designated as breakthrough therapies by the FDA may also be eligiblereceive all the Fast Track program features, including eligibility for accelerated approval.
Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that the products no longer meet the conditions for qualification and rescind the designation. Additionally, similar considerations and concerns exist with respect to the pursuit of expedited regulatory approval pathways in jurisdictions outside of the U.S.
Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, which could negatively impact our business.
The ability of the FDA and comparable foreign regulatory authorities to review and and/or approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s and comparable foreign regulatory authorities’ ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s and comparable foreign regulatory authorities’ ability to perform routine functions. Average review times at the agencyFDA and comparable foreign regulatory authorities have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies such as the EMA, following its relocation to Amsterdam and resulting staff changes, may also slow the time necessary for new drugs and biologics to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times, and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.
Separately, in response to the globalCOVID-19 pandemic, of COVID-19, onin March 10, 2020 the FDA temporarily postponed most foreign inspections of manufacturing facilities and products. Subsequently, on July 10, 2020, the FDA announced its intention to resumepostpone most inspections of foreign manufacturing facilities, and on March 18, 2020, the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities. Subsequently, in July 2020, the FDA resumed certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system. The FDA intends to useutilized this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspectionsassist in determining when and where it was safest to resumption of all regulatory activities.conduct prioritized domestic inspections. Additionally, on April 15, 2021, the FDA issued a guidance document in which the FDA described its plans to conductbegan conducting voluntary remote interactive evaluations of certain drug manufacturing facilities and clinical research sites. According to the guidance, the FDA intends to request such remote interactive evaluationssites, among other facilities, in situations where an in-person inspection would not be prioritized, deemed mission-critical, or where direct inspection is otherwise limited by travel restrictions, butcircumstances where the FDA determines that such remote evaluation
would be appropriate.appropriate based on mission needs and travel limitations. In July 2021, the FDA resumed standard inspectional operations of domestic facilities. Since that time, the FDA has continued to monitor and implement changes to its inspectional activities to ensure the safety of its employees and those of the firms it regulates, as it adapts to the evolving COVID-19 pandemic. Regulatory authorities outside the United States may adopthave adopted similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
Risks Related to our Dependence on Third Parties and Manufacturing
We rely, and expect to continue to rely, on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials.
We rely, and expect to continue to rely, on third parties, such as CROs, clinical data management organizations, medical institutions, clinical investigators and potential pharmaceutical partners, to conduct and manage our clinical trials.
Our reliance on these third parties for research and development activities will reduce our control over these activities but does not relieve us of our responsibilities. For example, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with regulatory standards, commonly referred to as good clinical practices, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, safety and welfare of trial participantspatients are protected. Other countries’ regulatory agencies also have requirements for clinical trials with which we must comply. We also may be required in certain instances to register ongoing clinical trials and post the results of completed clinical trials on government-sponsored databases such as as ClinicalTrials.gov or similar foreign databases within specified timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.
Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, do not meet expected deadlines, experience work stoppages, terminate their agreements with us or need to be replaced, or do not
conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we may need to enter into new arrangements with alternative third parties, which could be difficult, costly or impossible, and our clinical trials may be extended, delayed or terminated or may need to be repeated. If any of the foregoing occur, we may not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and may not be able, to, or may be delayed in our efforts, to successfully commercialize our product candidates.
We also expect to rely on other third parties to store and distribute drug product required by our clinical trials. Any performance failure on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of our products, thereby producing additional losses and depriving us of potential product revenue.
We rely on third parties for the manufacture of our product candidates for preclinical and clinical testing and expect to continue to do so for the foreseeable future. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or that such quantities may not be available at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for preclinical and clinical testing, as well as for commercial manufacture, if any, of our product candidates receive marketing approval.
Reliance on third parties for the manufacture of our product candidates increases the risk that we will not have sufficient quantities of our product candidates on a timely basis or at all, or that such quantities will be available at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.
We may be unable to establish agreements with third-party manufacturers on acceptable terms or at all. Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:
• failure of third-party manufacturers to comply with regulatory requirements and maintain quality assurance;
• breach of manufacturing agreements by the third-party manufacturers;
• failure to manufacture our product according to our specifications;
• failure to manufacture our product according to our schedule or at all;
• misappropriation or disclosure of our proprietary information, including our trade secrets and know-how; and
• termination or nonrenewalnon-renewal of agreements by third-party manufacturers at times that are costly or
inconvenient for us.
Third-party manufacturers may not be able to comply with current Good Manufacturing Practice (“cGMP”)cGMP regulations or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocations, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products. Some of the contract manufacturers we rely on to produce our product candidates have never produced aan FDA-approved therapeutic. If our contract manufacturers are unable to comply with cGMP regulationor similar foreign regulations or if the FDA doesor foreign regulatory authorities do not approve their facility upon a pre-approval inspection, our product candidates may not be approved or may be delayed in obtaining approval. In addition, there are a limited number of manufacturers that operate under cGMP or similar foreign regulations and that might be capable of manufacturing our products. Therefore, our product candidates and any future product candidates that we may develop may compete with other products for access to manufacturing facilities. Any failure to gain access to these limited manufacturing facilities could severely impact the clinical development, marketing approval and commercialization of our product candidates.
Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. We do not currently have arrangements in place for redundant sources of all clinical supplies for both drug substance and drug product. If our current contract manufacturers cannot perform as agreed, we may be required to replace such manufacturers and we may be unable to replace them on a timely basis or at all. Our current and anticipated future dependence upon others for the manufacture of our product candidates or products could delay, prevent or impair our development and commercialization efforts. Moreover, as a result of the
COVID-19 pandemic, third-party manufacturers may be affected, which could disrupt their activities and, as a result, we could face difficulties and delays in the manufacture of our product candidates, which may negatively affect our preclinical and clinical development activities.
We have no experience manufacturing our product candidates at commercial scale, and if we decide to establish our own manufacturing facility, we cannot assure you that we can manufacture our product candidates in compliance with regulations at a cost or in quantities necessary to make them commercially viable.
We may establish aone or more manufacturing facilityfacilities for our product candidates for production at a commercial scale. We have no experience in commercial-scale manufacturing of our product candidates. We currently intend tomay develop our manufacturing capacity in part by expanding our current facility or building additional facilities. This activity willThese activities would require substantial additional funds and we would need to hire and train a significant number of qualified employees to staff these facilities. We may not be able to develop commercial-scale manufacturing facilities that are adequate to produce materials for additional later-stage clinical trials or commercial use.
The equipment and facilities employed in the manufacture of pharmaceuticals are subject to stringent qualification requirements by regulatory agencies, including validation of facility, equipment, systems, processes and analytics. We may be subject to lengthy delays and expense in conducting validation clinical trials, if we can meet the requirements at all.
Risks Related to Commercialization of Our Product Candidates and Other Legal Compliance Matters
Even if any of our product candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, hospitals, third-party payors and others in the medical community necessary for commercial success.
If any of our product candidates receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. For example, current psoriasis treatment involves the use of steroids and biologics that are well established in the medical community, and physicians may continue to rely on these treatments. If our product candidates receive approval but do not achieve an adequate level of acceptance, we may not generate significant product revenue and we may not become profitable. The degree of market acceptance of our approved product candidates, if any, will depend on a number of factors, including:
• their efficacy, safety and other potential advantages compared to alternative treatments;
• the clinical indications for which our products are approved;
• our ability to offer them for sale at competitive prices;
• their convenience and ease of administration compared to alternative treatments;
• the willingness of the target patient population to try new therapies and of physicians to prescribe these
therapies;
• the strength of marketing and distribution support;
• the availability of third-party coverage and adequate reimbursement for our product candidates;
• the prevalence and severity of their side effects and their overall safety profiles;
• any restrictions on the use of our products together with other medications;
• interactions of our products with other medicines patients are taking; and
• the inability of certain types of patients to take our product.
We currently have no sales organization. If we are unable to establish effective sales, marketing and distribution capabilities or we enter into agreements with third parties with such capabilities, we may not be successful in commercializing our product candidates if and when they are approved.
We do not have a sales or marketing infrastructure and have no experience in the sale, marketing or distribution of our product candidates. To achieve commercial success for any product candidate for which we may obtain marketing approval, we will need to establish a sales and marketing organization or make arrangements with third parties to perform sales and marketing functions, and we may not be successful in doing so.
In the future, we expect to build a focused sales and marketing infrastructure to market or promote our product candidates in the United States and potentially elsewhere, if and when they are approved. There are risks involved with establishing our own sales, marketing and distribution capabilities. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our efforts to commercialize our products on our own include:
• our inability to recruit, train and retain an adequate number of effective sales and marketing personnel;
• the inability of sales personnel to obtain access to or educate physicians on the benefits of our products;
• the lack of complementary products to be offered by sales personnel, which may put us at a competitive
disadvantage relative to companies with more extensive product lines;
• unforeseen costs and expenses associated with creating an independent sales and marketing organization;
and
• the inability to obtain sufficient coverage and reimbursement from third-party payors and governmental
agencies.
Outside the United States, we may rely on third parties to sell, market and distribute our product candidates. We may not be successful in entering into arrangements with such third parties or may be unable to do so on terms that are favorable to us. In addition, our product revenue and our profitability, if any, may be lower if we rely on third parties for these functions than if we were to market, sell and distribute any products that we develop ourselves. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates.
We face substantial competition, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.
The development and commercialization of new drug and biologic products is highly competitive and is characterized by rapid and substantial technological development and product innovations. We face competition with respect to our current product candidates and will face competition with respect to product candidates that we may seek to develop or commercialize in the future, including from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. We are aware of a number of large pharmaceutical and biotechnology companies, includingincluding: AbbVie Inc., AgenusAmgen Inc., AstraZeneca plc, Bristol-MyersBristol Myers Squibb Company, F. Hoffmann-La Roche A.G., Gilead Sciences, Inc., Incyte Corporation, Johnson & Johnson, Merck and Company, Inc., Novartis International A.G., Pfizer Inc. and, Regeneron Pharmaceuticals, Inc., and Sanofi S.A., as well as smaller, early-stage companies, that are pursuing the development of products, including microbial-based therapeutics, in some instances, for disease indications that we are targeting. Some of these competitive products and therapies are or may be based on scientific approaches that are the same as or similar to our approach, and others are or may be based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations.
Many of the companies and organizations against which we are competing or against which we may compete in the future have significantly greater financial resources, established presence in the market and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and reimbursement and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors.
These and other third parties also compete with us in recruiting and retaining qualified scientific, sales and marketing and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products
more rapidly than we may obtain approval for ours, which could delay us from obtaining FDA or other regulatory approval to market our product candidates and result in our competitors establishing a strong market position before we are able to enter the market, especially for any competitor developing a microbial-based therapeutic which will likely share our same regulatory approval requirements. For more information, please see "Risk Factors-OurFactors - Our product candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated, which may delay us from marketing our product candidates." In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic or biosimilar products.
Even if we are able to commercialize any product candidates, the products may become subject to unfavorable pricing regulations or third-party coverage and reimbursement policies, any of which could harm our business.
Our ability to commercialize any product candidates successfully will depend, in part, on the extent to which coverage and reimbursement for these products and related treatments will be available from government health
administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and impact reimbursement levels.
Obtaining and maintaining adequate reimbursement for our products may be difficult. We cannot be certain if and when we will obtain coverage and an adequate level of reimbursement for our products by third-party payors. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiringrequire that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for drugs. In addition, reimbursement rates from private health insurance companies vary depending on the insurance company, the insurance plan and other factors. We may also be required to conduct expensive pharmacoeconomic studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval, and the royalties resulting from the sales of those products may also be adversely impacted.
There may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or similar regulatory authorities outside the United States. Moreover, eligibility for reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
The regulations that govern marketing approvals, pricing, coverage and reimbursement for new drug products vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be reimbursed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription drug pricing remains subject to continuing governmental control, including possible price reductions even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, andthereby negatively impactimpacting the revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval. There can be no assurance that our product candidates, if they are approved for sale in the United States or in other countries, will be considered medically necessary or cost-effective for a specific indication, or that reimbursement coverage or an adequate level of reimbursement will be available.
Product liability lawsuits against us could cause us to incur substantial liabilities and limit commercialization of any products that we may develop.
We face an inherent risk of product liability exposure related to the testing of our product candidates in clinical trials and will face an even greater risk if we commercially sell any products that we develop. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
• regulatory investigations, product recalls or withdrawals, or labeling, marketing or promotional restrictions;
• decreased demand for any product candidates or products that we may develop;
• injury to our reputation and significant negative media attention;
• withdrawal of clinical trial participants;
• significant costs to defend the related litigation;
• substantial monetary awards to trial participants or patients;
• loss of revenue;
• reduced resources of our management to pursue our business strategy; and
• the inability to commercialize any products that we may develop.
Our current product liability insurance coverage and any product liability insurance coverage that we acquire in the future may not be adequate to cover all liabilities that we may incur. We may need to increase our insurance coverage as we expand our clinical trials or if we commence commercialization of our product candidates. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
Our product candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated, which may delay us from marketing our product candidates.
Even if we are successful in achieving regulatory approval to commercialize a product candidate faster than our competitors, we may face competition from biosimilars. The Biologics Price Competition and Innovation Act (“BPCIA”) created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their product. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological products.
We believe that any of our product candidates approved as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.
In Europe,the EU, the European Commission has granted marketing authorizations for biosimilars pursuant to a set of general and product class-specific guidelines for biosimilar approvals issued over the past few years. In the EU, upon receiving marketing authorization, new innovative products generally receive eight years of data exclusivity and an additional two years of market exclusivity. If granted, data exclusivity prevents regulatory authorities in the EU from referencing the innovator's data to assess a biosimilar application. During the additional two-year period of market exclusivity, a biosimilar marketing authorization can be submitted, and the innovator's data may be referenced, but no biosimilar product can be marketed until 10 years have elapsed from the expirationinitial authorization of the market exclusivity.reference product in the EU. The overall 10-year of market exclusivity period may be extended to a maximum of 11 years if, during the first eight of those 10 years, the marketing authorization holder obtains an approval for one or more new therapeutic indications that bring significant clinical benefits compared with existing therapies. In addition,
companies may be developing biosimilars in other countries that could compete with our products. If competitors are able to obtain marketing approval for biosimilars referencing our products, our products may become subject to competition from such biosimilars, with the attendant competitive pressure and consequences.
Failure to obtain marketing approval in international jurisdictions would prevent our product candidates from being marketed abroad.
In order to market and sell our product candidates in the EU and many other jurisdictions, we or our collaborators must obtain separate marketing approvalsauthorizations and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval in foreign countries may differ substantially from that required to obtain FDA or other applicable regulatory approval. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA or other applicable regulatory approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We or our collaborators may not obtain approvals for our product candidates from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. However, a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market.
Any product candidate for which we obtain marketing approval could be subject to post-marketing restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved.
Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to the continual requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP and similar requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. We and our contract manufacturers will also be subject to continual review and periodic inspections to assess compliance with cGMP and similar requirements. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control.
Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to specific conditions of approval, including a requirement to implement a risk evaluation and mitigation strategy, which could include requirements for a medication guide, communication plan or restricted distribution system. If any of our product candidates receives marketing approval, the accompanying label may limit the approved use of our drug, which could limit sales of the product.
The FDA and foreign regulatory authorities may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of our approved products. The FDA and foreign regulatory authorities closely regulatesregulate the post-approval marketing and promotion of drugs and biologics to ensure they are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposesand foreign regulatory authorities impose stringent restrictions on manufacturers’ communications regarding off-label use, and if we market our products outside of their approved indications, we may be subject to enforcement action for off-label marketing. Violations of the FDA’s or foreign regulatory authorities’ restrictions
relating to the promotion of prescription drugs may also lead to investigations alleging violations of federal, and state, local or foreign health care fraud and abuse laws, as well as state consumer protection laws.
In addition, if a regulatory agency or we later discover previously unknown problems with our products, such as adverse events of unanticipated severity or frequency, problems with manufacturers or manufacturing processes, or failure to comply with regulatory requirements, the regulatory agency may impose restrictions on the products or us, including requiring withdrawal of the product from the market. Any failure to comply with applicable regulatory requirements may yield various problematic results, including:
• litigation involving patients taking our products;
• restrictions on such products, manufacturers or manufacturing processes;
• restrictions on the labeling or marketing of a product;
• restrictions on product distribution or use;
• requirements to conduct post-marketing studies or clinical trials;
• warning letters;
• withdrawal of products from the market;
• suspension or termination of ongoing clinical trials;
• refusal to approve pending applications or supplements to approved applications that we submit;
• recall of products;
• fines, restitution or disgorgement of profits or revenues;
• suspension or withdrawal of marketing approvals;
• damage to relationships with potential collaborators;
• unfavorable press coverage and damage to our reputation;
• refusal to permit the import or export of our products;
• product seizure or detention;
• injunctions; or
• imposition of civil or criminal penalties.
Noncompliance with similar EU requirements regarding safety monitoring or pharmacovigilance can also result in significant financial penalties. Similarly, failure to comply with U.S. and foreign regulatory requirements regarding the development of products for pediatric populations and the protection of personal health information can also lead to significant penalties and sanctions.
Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. In addition, the FDA’s and foreign regulatory authorities' regulations, policies or guidance may change and new or additional statutes or government regulations may be enacted that could prevent or delay regulatory approval of our product candidates or further restrict or regulate post-approval activities. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenues. If regulatory sanctions are applied or if regulatory approval is withheld or withdrawn, the value of our company and our operating results will be adversely affected.
Our relationships with customers, physicians and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, exclusion from governmental healthcare programs, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we may obtain marketing approval. Our future arrangements with third-party payors, physicians and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may restrict the business or financial arrangements and relationships through which we market, sell and distribute any products for which we obtain marketing approval. Restrictions under applicable federal, state and stateforeign healthcare laws and regulations include the following:
• the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully
soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or
reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of,
any good or service, for which payment may be made under a federal healthcare program, such as
Medicare and Medicaid; a person or entity does not need to have actual knowledge of the statute or specific
intent to violate the statute to have committed a violation;
• the false claims and civil monetary penalties laws, including the federal False Claims Act, which, among
other things, impose criminal and civil penalties, including through civil whistleblower or qui tam actions,
against individuals or entities for knowingly presenting, or causing to be presented, to the federal
government, claims for payment that are false or fraudulent, knowingly making, using or causing to be
made or used, a false record or statement material to a false or fraudulent claim or from knowingly or
making a false statement to avoid, decrease or conceal an obligation to pay money to the federal
government. In addition, the government may assert that a claim including items or services resulting from a
violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the
federal False Claims Act;
• the federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA") imposes criminal and civil
liability for executing a scheme to defraud any healthcare benefit program or making false statements
relating to healthcare matters; similar to the federal Anti-Kickback Statute, a person or entity does not need
to have actual knowledge of these statutes or specific intent to violate them to have committed a violation;
• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its
implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to
safeguarding the privacy, security and transmission of individually identifiable health information;
• the federal Physician Payment Sunshine Act requires applicable manufacturers of covered drugs to report
payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals beginning in
2022,non-physician practitioners (physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiologist assistants and certified nurse midwives), teaching hospitals and ownership and investment interests held by physicians and their
immediate family members; manufacturersmembers. Manufacturers are required to submit reports to the government by the 90th
day of each calendar year;
• analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may
apply to our business practices, including but not limited to,to: research, distribution, sales or marketing
arrangements and claims involving healthcare items or services reimbursed by non- governmental third-
partynon-governmental third-party payors, including private insurers; stateinsurers. State laws that require pharmaceutical companies to comply with
the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance
promulgated by the federal government and may require drug manufacturers to report information related to
payments and other transfers of value to physicians and other healthcare providers, pricing information or
marketing expenditures; and
• state and foreign laws that govern the privacy and security of health information in some circumstances,
many of which differ from each other in significant ways and often are not preempted by HIPAA, thus
complicating compliance efforts.
The risk of our being found in violation of these laws and regulations is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action against us for violation of these laws and regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. The shifting compliance environment and the need to build and maintain a robust system to comply with multiple jurisdictions with different compliance and reporting requirements increases the possibility that a healthcare company may violate one or more of the requirements.
Efforts to ensure that our business arrangements with third parties do and will comply with applicable healthcare laws and regulations will involveinvolves substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental laws and regulations that may apply to us, we may be subject to significant civil, criminal
and administrative penalties, damages, fines, imprisonment, exclusion from government funded healthcare programs such as Medicare and Medicaid and the curtailment or restructuring of our operations.
Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval for and commercialize our product candidates and affect the prices we may obtain.
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval.
In the United States, the Patient Protection and Affordable Care Act (“ACA”("ACA") was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.
Among the provisions of the ACA that are of importance to our potential product candidates are the following:
• establishment of a new pathway for approval of lower cost biosimilars to compete with biologic products,
such as those we are developing;
• an annual, nondeductible fee payable by any entity that manufactures or imports specified branded
prescription drugs and biologic agents;
• an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate
Program;
• a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70%
point-of-sale discounts off negotiated prices;
• extension of manufacturers’ Medicaid rebate liability;
• expansion of eligibility criteria for Medicaid programs;
• expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing
program;
• a new requirement to annually report drug samples that manufacturers and distributors provide to
physicians; and
• a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct
comparative clinical effectiveness research, along with funding for such research.
Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Prior to the Supreme Court’s decision, President Biden issued an executive order initiating a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace.The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare. It is unclear how healthcare reform measures enacted by Congress or implemented by the Biden administration, or other challenges to the ACA, if any, will impact the ACA or our business.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, included aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through DecemberMarch 31, 2021,2022, unless additional Congressional action is taken. Under current legislation, the actual reduction in Medicare payments varies from 1% from April 1, 2022 through June 30, 2022, to up to 3% in the final fiscal year of this sequester. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals, and an increase inincreased the statute of limitations period for the
government to recover overpayments to providers from three to five years. Further, in March 2021, the American Rescue Plan Act of 2021 was signed into law, which, among other things, eliminated the statutory cap on drug manufacturers’ Medicaid Drug Rebate Program rebate liability effective January 1, 2024. Under current law enacted as part of the ACA, drug manufacturers’ Medicaid Drug Rebate Program rebate liability is capped at 100% of the average manufacturer price for a covered outpatient drug. These new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain.
We expect that other healthcare reform measures that may be adopted in the future may result in additional reductions in Medicare and other healthcare funding, in more rigorous coverage criteria, in new payment methodologies and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product candidates, if approved.
Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products. Individual states in the United States have become increasingly active in implementing regulations designed to contain pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our product candidates, if approved, or put pressure on our product pricing, which could negatively affect our business, results of operations, financial condition and prospects.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.
In addition, the EU adopted the Clinical Trials Regulation, or CTR, in April 2014, which will become applicable as of January 31, 2022. The CTR will be directly applicable in all EU member states, repealing the current Clinical Trials Directive. Conduct of all clinical trials performed in the EU will continue to be bound by currently applicable provisions until the new CTR becomes applicable. The extent to which ongoing clinical trials will be governed by the CTR will depend on when the CTR becomes applicable and on the duration of the individual clinical trial. If a clinical trial continues for more than three years from the day on which the CTR becomes applicable the CTR will at that time begin to apply to the clinical trial. The CTR harmonizes the assessment and supervision processes for clinical trials throughout the EU via a Clinical Trials Information System, which will notably contain a centralized EU portal and database.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be subject to enforcement action and we may not achieve or sustain profitability.
We may be subject to the U.K. Bribery Act 2010 (the "Bribery Act"), the U.S. Foreign Corrupt Practices Act of 1977, as amended (the "FCPA"), and other anti-corruption laws, as well as export control laws, import and customs laws, trade and economic sanctions laws and other laws governing our operations.
Our operations may be subject to anti-corruption laws, including the Bribery Act, the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. §201, the U.S. Travel Act and other anti-corruption laws that apply in countries where we do business. The Bribery Act, the FCPA and these other laws generally prohibit us, our employees and our intermediaries from authorizing, promising, offering or providing, directly or indirectly, improper or prohibited payments or anything else of value to government officials or other persons to obtain or retain business or gain some other business advantage. Under the Bribery Act, we may also be liable for failing to prevent a person associated with us from committing a bribery offense. We and our partners may operate in jurisdictions that pose a high risk of potential Bribery Act or FCPA violations, and we may participate in collaborations and relationships with third parties whose corrupt or illegal activities could potentially subject us to liability under the Bribery Act, FCPA or local anti-corruption laws, even if we do not explicitly authorize or have actual knowledge of such activities. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.
We may also be subject to other laws and regulations from time to time governing our international operations, including regulations administered by the governments of the United States, the United Kingdom or elsewhere and authorities in the European Union or elsewhere, including applicable export control regulations, economic sanctions and embargoes on certain countries and persons, anti-money laundering laws, import and customs requirements and currency exchange regulations, collectively referred to as the Trade Control laws.
There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws, including the Bribery Act, the FCPA or other legal requirements, including Trade Control laws. If we are not in compliance with the Bribery Act, the FCPA and other anti-corruption laws or Trade Control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity. Likewise, any investigation of any potential violations of the Bribery Act, the FCPA, other anti-corruption laws or Trade Control laws by the United Kingdom, United States or other authorities could also have an adverse impact on our reputation, our business, results of operations and financial condition.
We may be subject to various laws relating to foreign investment and the export of certain technologies, and our failure to comply with these laws or adequately monitor the compliance of our suppliers and others with which we do business with could subject us to substantial fines, penalties and injunctions, the imposition of which on us could have a material adverse effect on the success of our business.
We may be subject to U.S. laws that regulate foreign investments in U.S. businesses and access by foreign persons to technology developed and produced in the United States. These laws include section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment Risk Review Modernization Act of 2018, and the regulations at 31 C.F.R. Parts 800 and 801, as amended, administered by the Committee on Foreign Investment in the United States, and the Export Control Reform Act of 2018, which is being implemented in part through Commerce Department rule-making to impose new export control restrictions on “emerging and foundational technologies” yet to be fully identified. Application of these laws, including as they are implemented through regulations being developed, may negatively impact our business in various ways, including by:
• restricting our access to capital and markets;
• limiting the collaborations we may pursue;
• regulating the export our products, services, and technology from the United States and abroad; increasing our costs and the time necessary to obtain required authorizations and to ensure compliance; and
• threatening monetary fines and other penalties for non-compliance.
Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.
In some countries, particularly the countries of the European Union,EU member states, the pricing of prescription drugs is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after coverage and reimbursement have been obtained. Reference pricing used by various European UnionEU member states, and parallel distribution or arbitrage between low-priced and high-priced member states, can further reduce prices. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other
available therapies. If coverage and reimbursement of our products are unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed, possibly materially.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials such as human stool.materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.
Although we maintain workers’ compensation insurance to cover us for costs and expenses that we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against all potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Risks Related to Our Intellectual Property
If we are unable to adequately protect our proprietary technology, or obtain and maintain issued patents which are sufficient to protect our product candidates, others could compete against us more directly, which would have a material adverse impact on our business, results of operations, financial condition and prospects.
Our success depends in large part on our ability to obtain and maintain patent and other intellectual property protection in the United States and other countries with respect to our proprietary technology and products. We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies and product candidates. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.
The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost, in a timely manner or in all jurisdictions. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. It is possible that defects of form in the preparation or filing of our patents or patent applications may exist or may arise in the future, such as, with respect to proper priority claims, inventorship, claim scope or patent term adjustments. If there are material defects in the form or preparation of our patents or patent applications, such patents or applications may be invalid and unenforceable. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business, financial condition and operating results.
Pursuant to our current and future license agreements with third parties, in some circumstances we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties. We may also require the cooperation of our licensors to enforce any licensed patent rights, and such cooperation may not be provided.provided or may be deficient. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
Although we have numerous patent applications pending, we cannot provide any assurances that any of our pending patent applications will mature into issued patents and, if they do, that such patents or our current patents will include claims with a scope sufficient to protect our product candidates or otherwise provide any competitive
advantage. For example, we are pursuing claims to compositions of certain bacterial populations. Any claims that are issued may provide coverage for such compositions and/or their use. However, such claims would not prevent a third party from commercializing alternative compositions that do not include the bacterial populations claimed in pending applications, potential applications or patents that have issued or may issue. There can be no assurance that any such alternative composition will not be equally effective. These and other factors may provide opportunities for our competitors to design around our patents, should they issue.
Moreover, other parties have developed or may develop technologies that may be related or competitive to our approach, and may have filed or may file patent applications and may have received or may receive patents that may overlap or conflict with our patent applications, either by claiming similar methods or by claiming subject matter that could dominate our patent position. In addition, the standards that the United States Patent and Trademark Office (“USPTO”("USPTO") and other jurisdictions use to grant patents are not always applied predictably or uniformly and can change. Similarly, the ultimate degree of protection that will be afforded to biotechnology inventions, including ours, in the United States and other jurisdictions remains uncertain and is dependent upon the scope of the protection decided upon by patent offices, courts and lawmakers.
Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18eighteen months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in any issued patents or pending patent applications, or that we were the first to file for patent protection of such inventions, nor can we know whether those from whom we may license patents were the first to make the inventions claimed or were the first to file. For these and other reasons, the issuance, scope, validity, enforceability and commercial value of our patent rights are subject to a level of uncertainty. Our pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in the patent
laws and/or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.
We may be subject to a third-party pre-issuance submission of prior art to the USPTO or become involved in derivation, reexamination, inter partes review, ex partes reexamination, post-grant review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. For example, in February 2021, the European Patent Office informed us of a notice of opposition by a third party for a patent issued to us. In July 2021,2022, we filed a reply to the notice of opposition.our final written submission and oral proceedings are scheduled in September 2022. The patent at issue does not relate to our current product candidates.
Any limitation on the protection of the subject technology could hinder our ability to develop and commercialize applicable product candidates.
In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates. Furthermore, an adverse decision in an interference proceeding can result in a third party receiving the patent right sought by us, which in turn could affect our ability to develop, market or otherwise commercialize our product candidates. The issuance, scope, validity, enforceability and commercial value of our patents are subject to a level of uncertainty.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. Due to legal standards relating to patentability, validity, enforceability and claim scope of patents covering biotechnological and pharmaceutical inventions, our ability to obtain, maintain and enforce patents is uncertain and involves complex legal and factual questions. Even if issued, a patent’s validity, inventorship, ownership or enforceability is not conclusive. Accordingly, rights under any existing patent or any patents we might obtain or license may not cover our product candidates, or may not provide us with sufficient protection for our product candidates to afford a commercial advantage against competitive products or processes, including those from branded and generic pharmaceutical companies.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:
• any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our
product candidates or any other products or product candidates;
• any of our pending patent applications will issue as patents;
• we will be able to successfully commercialize our product candidates, if approved, before our relevant
patents expire;
• we were the first to make the inventions covered by any existing patent and pending patent applications;
• we were the first to file patent applications for these inventions;
• others will not develop similar or alternative technologies that do not infringe or design around our patents;
• others will not use pre-existing technology to effectively compete against us;
• any of our patents, if issued, will be found to ultimately be valid and enforceable;
• third parties will not compete with us in jurisdictions where we do not pursue and obtain patent protection;
• we will be able to obtain and/or maintain necessary or useful licenses on reasonable terms or at all;
• any patents issued to us will provide a basis for an exclusive market for our commercially viable products,
will provide us with any competitive advantages or will not be challenged by third parties;
• we will develop additional proprietary technologies or product candidates that are separately patentable; or
• our commercial activities or products will not infringe upon the patents or proprietary rights of others.
Any litigation to enforce or defend our patent rights, even if we were to prevail, could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded even if we were to prevail may not be commercially meaningful. Even if we are successful, domestic or foreign litigation, or USPTO or foreign
patent office proceedings, may result in substantial costs and distraction to our management. We may not be able, alone or with our licensors or potential collaborators, to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or other proceedings, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation or other proceedings. In addition, during the course of this kind of litigation or proceedings, there could be public announcements of the results of hearings, motions or other interim proceedings or developments or public access to related documents. If investors perceive these results to be negative, the market price for our common stock could be significantly harmed.
If we fail to comply with our obligations in the agreements under which we may license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose rights that are important to our business.
We have entered into, and may be required to enter into in the future, intellectual property license agreements that are important to our business. These license agreements may impose various diligence, milestone payment, royalty and other obligations on us. For example, we have entered into an exclusive license agreementsagreement with the University of Chicago and Mayo Clinic pursuant to which we are required to use efforts to engage in various development and commercialization activities with respect to licensed products, and we are required to satisfy specified milestone and royalty payment obligations. If we fail to comply with any obligations under our agreements with licensors, we may be subject to termination of the license agreement in whole or in part or increased financial obligations to our licensors, in which case our ability to develop or commercialize products covered by the license agreement will be impaired. Further, we may need to outsource and rely on third parties for many aspects of the clinical development, sales and marketing of our products covered under our current and future license agreements. Delay or failure by these third parties could adversely affect the continuation of our license agreements with our licensors.
In addition, disputes may arise regarding intellectual property subject to a license agreement, including:
• the scope of rights granted under the license agreement and other interpretation-related issues;
• the extent to which our technology and processes infringe intellectual property of the licensor that is not
subject to the licensing agreement; and
• our diligence obligations under the license agreement and what activities satisfy those obligations.
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.
The intellectual property which we have licensed from the University of Chicago and Mayo Clinic was discovered through government funded programs and thus may be subject to federal regulations such as "march-in" rights, certain reporting requirements and a preference for U.S. industry. Compliance with such regulations may limit our exclusive rights, subject us to expenditure of resources with respect to reporting requirements and limit our ability to contract with non-U.S. manufacturers.
We have licensed certain intellectual property from the University of Chicago and Mayo Clinic. These agreements indicateThe agreement indicates that the rights licensed to us are subject to the obligations to and the rights of the U.S. government, including those set forth in the Bayh-Dole Act of 1980. As a result, the U.S. government may have certain rights to intellectual property embodied in our current or future therapeutics based on the licensed intellectual property. These U.S. government rights in certain inventions developed under a government-funded program include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the U.S. government has the right to require us to grant exclusive, partially exclusive or nonexclusive licenses to any of these inventions to a third party if it determines that: (i) adequate steps have not been taken to commercialize the invention; (ii) government action is necessary to meet public health or safety needs; or (iii) government action is necessary to meet requirements for public use under federal regulations, also referred to as "march-in rights." While the U.S. government has sparingly used, and to our knowledge never successfully exercised, such march-in rights, any exercise of the march-in rights by the U.S. government could harm our competitive position, business, financial condition, results of operations and prospects. If the U.S. government exercises such march-in rights, we may receive compensation that is deemed reasonable by the U.S. government in its sole discretion, which may be less than what we might be able to obtain in
the open market. Intellectual property generated under a government funded program is also subject to certain reporting requirements, compliance with which may require us to expend substantial resources.
In addition, the U.S. government requires that any therapeutics embodying any invention generated through the use of U.S. government funding be manufactured substantially in the United States. The manufacturing preference requirement can be waived if the owner of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible. This preference for U.S. manufacturers may limit our ability to contract with non-U.S. therapeutic manufacturers for therapeutics covered by such intellectual property.
If we are unable to protect the confidentiality of our trade secrets and know-how, our business and competitive position would be harmed.
In addition to seeking patents for some of our technology and product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also seek to enter into confidentiality and invention or patent assignment agreements with our employees, advisors and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Our trade secrets may also be obtained by third parties by other means, such as breaches of our physical or computer security systems. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming,
and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. Moreover, if any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them or those to whom they communicate from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.
Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biotechnology industry involves both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain. Patent reform legislation in the United States, including the Leahy-Smith America Invents Act (the "Leahy-Smith(the" Leahy-Smith Act"), signed into law on September 16, 2011, could increase those uncertainties and costs. The Leahy-Smith Act included a number of significant changes to U.S. patent law. These changes included provisions that affect the way patent applications are prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents. In addition, the Leahy-Smith Act transformed the U.S. patent system into a “first to file” system. The first-to-file provisions however, only became effective on March 16, 2013. Accordingly, it is not yet clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, theThe Leahy-Smith Act and its implementation could make it more difficult to obtain patent protection for our inventions and increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could harm our business, results of operations and financial condition.
In addition, recent United States Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. From time to time, the U.S. Supreme Court, other federal courts, the United States Congress or the USPTO, may change the standards of patentability and any such changes could have a negative impact on our business. Additionally, there have been recent proposals for additional changes to the patent laws of the United States and other countries that, if adopted, could impact our ability to obtain patent protection for our proprietary technology or our ability to enforce our proprietary technology.
The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. For example, in Association for Molecular Pathology v. Myriad Genetics, Inc., the Supreme Court held that claims to isolated genomic DNA are not patentable, but claims to complementary DNA, or cDNA, molecules, which are not genomic sequences, may be patent eligible because they are not a natural product. The effect of the decision on
patents for other isolated natural products is uncertain. Our current product candidates include natural products, therefore,products. Therefore, this decision and its interpretation by the courts and the USPTO may impact prosecution, defense and enforcement of our patent portfolio. Depending on future actions by the U.S. Congress, the U.S. courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.
Furthermore, Europe’s planned Unified Patent Court may in particular present uncertainties for our ability to protect and enforce our patent rights against competitors in Europe. While that new court is being implemented to provide more certainty and efficiency to patent enforcement throughout Europe, it will also provide our competitors with a new forum to use to centrally revoke our European patents. It will be several years before we will understand the scope of patent rights that will be recognized and the strength of patent remedies that will be provided by that court. We will have the right to opt our patents out of that system over the first seven years of the court, but doing so may preclude us from realizing the benefits of the new unified court.
In addition to increasing uncertainty with regard to our ability to obtain future patents, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on these and other decisions by Congress, the federal courts and the USPTO, the laws and regulations governing patents could change or be interpreted in unpredictable ways that would weaken our ability to obtain new patents or to enforce any patents that may issue to us in the future. In addition, these events may adversely affect our ability to defend any patents that may issue in procedures in the USPTO or in courts.
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.
Our commercial success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing the proprietary rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries. While no such litigation has been brought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology, products or use of our products do not infringe third-party patents.
Numerous patents and pending applications are owned by third parties in the fields in which we are developing product candidates, both in the United States and elsewhere. It is also possible that we have failed to identify relevant third-party patents or applications. For example, applications filed before November 29, 2000 and certain applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Moreover, it is difficult for industry participants, including us, to identify all third-party patent rights that may be relevant to our product candidates and technologies because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. We may fail to identify relevant patents or patent applications or may identify pending patent applications of potential interest but incorrectly predict the likelihood that such patent applications may issue with claims of relevance to our technology. In addition, we may be unaware of one or more issued patents that would be infringed by the manufacture, sale or use of a current or future product candidate, or we may incorrectly conclude that a third-party patent is invalid, unenforceable or not infringed by our activities. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our technologies, our products or the use of our products. We are aware of several pending patent applications containing one or more claims that could be construed to cover some of our product candidates or technology, should those claims issue in their original form or in the form presently being pursued.
The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may allege that our product candidates or the use of our technologies infringe patent claims or other intellectual property rights held by them, or that we are employing their proprietary technology without authorization. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology, including interference or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assert infringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future. If we were to challenge the validity of an issued U.S. patent in court, such as an issued U.S. patent of potential relevance to some of our product candidates or methods of use, we would need to
overcome a statutory presumption of validity that attaches to every U.S. patent. This means that in order to prevail, we would have to present clear and convincing evidence as to the invalidity of the patent’s claims. There is no assurance that a court would find in our favor on questions of infringement or validity.
Patent and other types of intellectual property litigation can involve complex factual and legal questions, and their outcome is uncertain. If we are found, or believe there is a risk we may be found, to infringe a third party’s intellectual property rights, we could be required or may choose to obtain a license from such third party to continue developing and marketing our products and technology. However, we may not be able to obtain any such license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.
Even if we are successful in these proceedings defending our intellectual property, we may incur substantial costs and divert management time and attention in pursuing these proceedings, which could have a material adverse effect on us. If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court, or redesign our products. Patent litigation is costly and time-consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, intellectual property litigation or claims could force us to do one or more of the following:
• cease developing, selling or otherwise commercializing our product candidates;
• pay substantial damages for past use of the asserted intellectual property;
• obtain a license from the holder of the asserted intellectual property, which license may not be available on
reasonable terms, if at all; and
• in the case of trademark claims, redesign or rename some or all of our product candidates or other brands
to avoid infringing the intellectual property rights of third parties, which may not be possible and, even if
possible, could be costly and time-consuming.
Any of these risks coming to fruition could have a material adverse effect on our business, results of operations, financial condition and prospects.
Issued patents covering our product candidates could be found invalid or unenforceable or could be interpreted narrowly if challenged in court.
Competitors may infringe our intellectual property, including our patents or the patents of our licensors. As a result, we may be required to file infringement claims to stop third-party infringement or unauthorized use. This can be expensive, particularly for a company of our size, and time-consuming. If we initiated legal proceedings against a third party to enforce a patent, if and when issued, covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge include alleged failures to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement, or failure to claim patent eligible subject matter. Grounds for unenforceability assertions include allegations that someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review and equivalent proceedings in foreign jurisdictions, such as opposition proceedings. Such proceedings could result in revocation or amendment of our patents in such a way that they no longer cover our product candidates or competitive products. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to validity, for example, we cannot be certain that there is no invalidating prior art of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Moreover, even if not found invalid or unenforceable, the claims of our patents could be construed narrowly or in a manner that does not cover the allegedly infringing technology in question. Such a loss of patent protection would have a material adverse impact on our business.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.
Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent and, in some jurisdictions, during the pendency of a patent application. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business.
We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.
It is our policy to enter into confidentiality and intellectual property assignment agreements, including with our employees, consultants, contractors and advisors. These agreements generally provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property. However, these agreements may not be honored and may not effectively assign intellectual property rights to us. For example, even if we have a consulting agreement in place with an academic advisor pursuant to which such academic advisor is required to assign any inventions developed in connection with providing services to us, such academic advisor may not have the right to assign such inventions to us, as it may conflict with his or her obligations to assign all such intellectual property to his or her employing institution.
Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.
Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We may also engage advisors and consultants who are concurrently employed at universities or other organizations or who perform services for other entities. Although we try to ensure that our employees, advisors and consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, advisors or consultants have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such party’s former or current employer or in violation of an agreement with another party. Although we have no knowledge of any such claims being alleged to date, if such claims were to arise, litigation may be necessary to defend against any such claims.
In addition, while it is our policy to require our employees, consultants, advisors and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property. Similarly, we may be subject to claims that an employee, advisor or consultant performed work for us that conflicts with that person’s obligations to a third party, such as an employer, and thus, that the third party has an ownership interest in the intellectual property arising out of work performed for us. Litigation may be necessary to defend against these claims. Although we have no knowledge of any such claims being alleged to date, if such claims were to arise, litigation may be necessary to defend against any such claims.
If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.
Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing other marks. We may not be able to protect our rights to these trademarks and trade names which we need to build name recognition among potential collaborators or customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade names, domain names or other intellectual property may be ineffective and could
result in substantial costs and diversion of resources, and could adversely impact our financial condition or results of operations.
We will not seek to protect our intellectual property rights in all jurisdictions throughout the world and we may not be able to adequately enforce our intellectual property rights even in the jurisdictions where we seek protection.
Filing, prosecuting and defending patents on product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than in the United States, assuming that rights are obtained in the United States and assuming that rights are pursued outside the United States. The statutory deadlines for pursuing patent protection in individual foreign jurisdictions are based on the priority date of each of our patent applications. For some of the patent families in our portfolio, including the families that may provide coverage for our lead product candidates, the relevant statutory deadlines have not yet expired. Therefore, for each of the patent families that we believe provide coverage for our lead product candidates, we will need to decide whether and where to pursue protection outside the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, even if we do elect to pursue patent rights outside the United States, we may not be able to obtain relevant claims and/or we may not be able to prevent third parties from practicing our inventions in all countries outside the United States or from selling or importing products made using our inventions in and into the United States or other jurisdictions.
Competitors may use our technologies in jurisdictions where we do not pursue and obtain patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection but enforcement is not as strong as that in the United States. These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Even if we pursue and obtain issued patents in particular jurisdictions, our patent claims or other intellectual property rights may not be effective or sufficient to prevent third parties from so competing.
The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to biotechnology. This could make it difficult for us to stop the infringement of our patents, if obtained, or the misappropriation of our other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries.
If our ability to obtain and, if obtained, enforce our patents to stop infringing activities is inadequate, third parties may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Accordingly, our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property we develop or license.
Risks Related to Employee Matters and Managing Growth and Other Risks Related to Our Business
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
We are highly dependent on Balkrishan (Simba) Gill, our President and Chief Executive Officer, as well as the other principal members of our management, scientific and clinical team.teams. Although we have entered into agreements with some of our executive officers, each of them may terminate their employment with us at any time. We do not maintain "key person" insurance for any of our executives or other employees.
Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also be critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives, and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time due to the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.
We expect to expand our development and regulatory capabilities and potentially implement sales, marketing and distribution capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of product development, regulatory affairs, clinical affairs and manufacturing and, if any of our product candidates receives marketing approval, sales, marketing and distribution. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.
A variety of risks associated with operating internationally could materially adversely affect our business.
We currently have limited international operations, but our business strategy incorporates potentially expanding internationally if any of our product candidates receive regulatory approval. Doing business internationally involves a number of risks, including but not limited to:
• multiple, conflicting and changing laws and regulations, such as privacy regulations, tax laws, export and
import restrictions, employment laws, regulatory requirements and other governmental approvals, permits
and licenses;
• failure by us to obtain and maintain regulatory approvals for the use of our products in various countries;
• additional potentially relevant third-party patent rights;
• complexities and difficulties in obtaining protection and enforcing our intellectual property;
• difficulties in staffing and managing foreign operations;
• complexities associated with managing multiple payor reimbursement regimes, government payors or
patient self-pay systems;
• limits in our ability to penetrate international markets;
• financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local
and regional financial crises on demand and payment for our products and exposure to foreign currency
exchange rate fluctuations;
• natural disasters, political and economic instability, including wars, terrorism and political unrest (for example, the ongoing conflict between Russia and Ukraine), outbreak of
disease (e.g.(for example, the COVID-19 pandemic), boycotts, curtailment of trade and other business restrictions;
• certain expenses including, among others, expenses for travel, translation and insurance; and
• regulatory and compliance risks that relate to maintaining accurate information and control over sales and
activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act, its books and records
provisions, or its anti-bribery provisions or other anti-bribery and anti-corruption laws.
Any of these factors could significantly harm our future international expansion and operations and, consequently, our results of operations.
The United Kingdom’s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.
FollowingThe UK left the EU on January 31, 2020, following which existing EU legislation continued to apply in the UK during a national referendum and enactment of legislation bytransition period under the government of the United Kingdom, the United Kingdom formally withdrew from the European Union and ratified a trade and cooperation agreement governing its future relationship with the European Union. The agreement addresses trade, economic arrangements, law enforcement, judicial cooperation and a governance framework including procedures for dispute resolution, among other things. Because the agreement merely sets forth a framework in many respects and will require complex additional bilateral negotiations between the United Kingdom and the European Union as both parties continue to work on the rules for implementation, significant political and economic uncertainty remains about how the precise terms of the relationship betweenEU-UK Withdrawal Agreement. The transition period, which ended on December 31, 2020, maintained access to the parties will differ fromEU single market and to global trade deals negotiated by the terms before withdrawal.
These developments, or the perception that any related developments could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factors could depress economic activity and restrict our access to capital, which could have a material adverse effect on our business, financial condition and results of operations and reduce the price of common stock.
WhileThe long term effects of Brexit will depend on the tradeimplementation and cooperation agreementapplication of the TCA and any other relevant agreements between the UK and the EU. EU laws which have been transposed into UK law through secondary legislation continue to be applicable as “retained EU law”. However, new legislation will not be applicable. The UK government has avoidedpassed a “no deal” Brexit scenario,new Medicines and provides for quota and tariff free tradingMedical Devices Act 2021, which introduces delegated powers in favor of goods in principle, it is nevertheless expected that the agreement will resultSecretary of State or an ‘appropriate authority’ to amend or supplement existing regulations in the creationarea of non-tariff barriers (such as increased shippingmedical devices. This allows new rules to be introduced in the future by way of secondary legislation, which aims to allow flexibility in addressing regulatory gaps. There is a possibility that, over time, national laws will be amended and that consequently the regulatory costs and complexities) to the tradeframework in goods between the United Kingdom and EU. Further, the agreement does not provide for the continued free movement of services between the United Kingdom and EU and also grants eachGreat Britain will diverge from that of the United KingdomEU. As of January 1, 2021, the MHRA is the UK’s standalone medicines and EU the ability, in certain circumstances, to unilaterally impose tariffs on one another. The agreement does provide for the mutual recognition of GMP, inspections of manufacturing facilities for medicinal products and GMP documents issued. However, it is important to note that significant regulatory gaps still exist and the agreement does not contain wholesale mutual recognition of United Kingdom and EU pharmaceutical regulations and product standards between the parties, for example, in relation to batch testing and pharmacovigilance, which remain subject to further discussions.
For marketing authorizations, an applicant formedical devices regulator. As a centralized procedure marketing authorization must be established in the EU. After the withdrawalresult of the United Kingdom fromNorthern Ireland protocol, different rules will apply in Northern Ireland than in England, Wales and Scotland, together, Great Britain. Broadly, Northern Ireland will continue to follow the EU companies established inregulatory regime, but its national competent authority will remain the United Kingdom cannot use the centralized procedure and instead must follow one of the United Kingdom national authorization procedures or one of the remaining post-Brexit international cooperation procedures to obtain an authorization to market products in the United Kingdom. The United Kingdom regulatory authority, the Medicines and Healthcare products Regulatory Agency, or MHRA, may rely on a decision taken by the European Commission on the approval of a new centralized procedure marketing authorization when determining an application for a Great Britain authorization or use the MHRA’s decentralized or mutual recognition procedures which enable marketing authorizations approved in EU member states (or Iceland, Liechtenstein, Norway) to be granted in Great Britain.
The uncertainty regarding new or modified arrangements between the United Kingdom and other countries following the withdrawal may have a material adverse effect on the movement of personnel, goods, information or data between the United Kingdom and members of the European UnionEU and the United States, including the interruption of or delays in imports into the United Kingdom of goods originating within the European UnionEU and exports from the United Kingdom of goods originating there. For example, shipments into the United Kingdom of drug substance manufactured for us in the European UnionEU may be interrupted or delayed and thereby prevent or delay the manufacture in the United Kingdom of drug product. Similarly, shipments out of the United Kingdom of drug product to the United States or the European UnionEU may be interrupted or delayed and thereby prevent or delay the delivery
of drug product to clinical sites. Such a situation could hinder our ability to conduct current and planned clinical trials and have an adverse effect on our business.
Our business and operations wouldmay suffer in the event of information technology and other system failures or security breaches of or unauthorized access to our systems.
Despite the implementation of security measures, our internal computerinformation technology systems and those of our current and future partners, service providers, contractors and consultants are vulnerable to attack and damage from computer viruses, unauthorized access, malware (e.g. ransomware), malicious code, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attackscyberattacks or cyber-intrusions, over the Internet,phishing attacks and other social engineering schemes, employee theft or to attachments to emailsmisuse, human error, fraud, denial or degradation of service attacks, and other security breaches or unauthorized access by persons inside our organization or with access to our internal systems. The risk of a security breach or disruption, particularly through cyber-attackscyberattacks or cyber-intrusions, including by computer hackers, foreign governments and cyber terrorists, generally has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.In addition, our information technology systems safeguard important confidential data, including personal data regarding patients enrolled in our clinical trials. As a result of the COVID-19 pandemic, we may also face increased cybersecurity risks due to our greater reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended period. Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection and to remove or obfuscate forensic evidence.
We and certain of our service providers are from time to time subject to cyberattacks and security incidents. While we aredo not aware ofbelieve that we have experienced any such materialsignificant system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption to our product development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on third parties to manufacture our product candidates and conduct clinical trials, and we have also outsourced elements of our information technology infrastructure. Similar events relating to the computerinformation technology systems of our third-party service providers and vendors could make us vulnerable to disruptions in service and unauthorized access to our confidential or proprietary information, and we could incur liability and reputational damage. Though immaterial to date and despite stringent precautions, we have in the past experienced, and may in the future experience, the inadvertent disclosure of information by our third party service providers. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our product candidates could be delayed. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our business. Furthermore, federal, state and international laws and regulations can expose us to enforcement actions and investigations by regulatory authorities, and potentially result in regulatory penalties, fines and significant legal liability, if our information technology security efforts fail. We may also be exposed to a risk of loss or litigation and potential liability, which could materially and adversely affect our business, results of operations or financial condition and prospects.
We rely on a set of cloud-based software services and access these services via the Internet for the vast majority of our computing, storage, bandwidth and other services. Any disruption of or interference with our use of our cloud-based services would negatively affect our operations and could seriously harm our business.
We use several distributed computing infrastructure platforms for business operations, or what is commonly referred to as "cloud" computing services, and we access these services via the Internet. Any transition of the cloud services currently provided by an existing vendor to another cloud provider would be difficult to implement and will cause us to incur significant time and expense. Given this, any significant disruption of or interference with our use of these cloud computing services would negatively impact our operations and our business would be seriously harmed. If our employees or partners are not able to access our cloud computing services or encounter difficulties in doing so, we may experience business disruption. The level of service provided by our cloud computing vendors, including the ability to secure our confidential information and the confidential information of third parties that is shared with us, may also impact the perception of our company and could seriously harm our business and reputation and create liability for us. If a cloud computing service that we use experiences interruptions in service regularly or for a prolonged basis, or other similar issues, our business could be seriously harmed.
In addition, a cloud computing service may take actions beyond our control that could seriously harm our business, including:
• discontinuing or limiting our access to its platform;
• increasing pricing terms;
• terminating or seeking to terminate our contractual relationship altogether;
• establishing more favorable relationships with one or more of our competitors; or
• modifying or interpreting its terms of service or other policies in a manner that impacts our ability to run our
business and operations.
Our cloud computing service providers have broad discretion to change and interpret their terms of service and other policies with respect to us, and those actions may be unfavorable to us. Our cloud computing service providers may also alter how we are able to process data on the platform. If a cloud computing service provider makes changes or interpretations that are unfavorable to us, our business could be seriously harmed.
Our efforts to protect the information shared with us may be unsuccessful due to the actions of third parties, software bugs or other technical malfunctions, employee error or malfeasance or other factors. In addition, third parties may attempt to fraudulently induce employees or users to disclose information to gain access to our data or third-party data entrusted to us. If any of these events occur, our or third-party information could be accessed or disclosed improperly. Some partners or collaborators may store information that we share with them on their own computing system. If these third parties fail to implement adequate data-security practices or fail to comply with our policies, our data may be improperly accessed or disclosed. And even if these third parties take all these steps, their networks may still suffer a breach, which could compromise our data.
Any incidents where our information is accessed without authorization, or is improperly used, or incidents that violate our policies, could damage our reputation and our brand and diminish our competitive position. In addition, affected parties or government authorities could initiate legal or regulatory action against us over those incidents, which could cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our business practices. Concerns over our privacy practices, whether actual or unfounded, could damage our reputation and brand and deter users, advertisers and partners from using our products and services. Any of these occurrences could seriously harm our business.
Risks associatedActual or perceived failures to comply with applicable data protection, privacy issues, including evolvingand security laws, regulations, standards and associated compliance efforts, mayother requirements could adversely impactaffect our business, results of operations, financial condition and financial results.
Legislation in various countries around the world with regard to cybersecurity, privacy and data protection is rapidly expanding and creating a complex compliance environment. We are subject to many federal, state and foreign laws and regulations, including those related to privacy, rights of publicity, data protection, content regulation, intellectual property, health and safety, competition, protection of minors and consumer protection. In the United States, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and regulations promulgated thereunder (collectively, “HIPAA”),
imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of individually identifiable health information. Most healthcare providers, including research institutions from which we obtain patient health information, are subject to privacy and security regulations promulgated under HIPAA. While we do not believe that we are currently acting as a covered entity or business associate under HIPAA and thus are not directly regulated under HIPAA, any person may be prosecuted under HIPAA’s criminal provisions either directly or under aiding-and-abetting or conspiracy principles. Consequently, depending on the facts and circumstances, we could face substantial criminal penalties if we knowingly receive individually identifiable health information from a HIPAA-covered healthcare provider or research institution that has not satisfied HIPAA’s requirements for disclosure of individually identifiable health information.
Certain U.S. states have also adopted comparable privacy and security laws and regulations which govern the privacy, processing and protection employment,of health-related and taxation. By wayother personal information. Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our future customers and strategic partners. For example, California has enacted the California Consumer Privacy Act (the "CCPA"), which took effect on January 1, 2020. The CCPA creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. Additionally, the California Privacy Rights Act (the “CPRA”) was recently enacted in California. The CPRA significantly amends the CCPA and will impose additional data protection obligations on covered companies doing business in California, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data and opt outs for certain uses of sensitive data. It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. The majority of the provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required. Similar laws have passed in Virginia, Utah, Connecticut and Colorado, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.
We are also or may become subject to rapidly evolving data protection laws, rules and regulations in foreign jurisdictions. For example, the General Data Protection Regulation (the “GDPR”), which became effective in May 2018, has caused moreimposes stringent data protection requirements infor processing the EU and the European Economic Area (“EEA”). The GDPR imposes onerous accountability obligations requiring data controllers and processors to maintain a record of their data processing and implement policies as part of its mandated privacy governance framework. It also requires data controllers to be transparent and disclose to data subjects how their personal data is to be used; imposes limitations on retention of personal data; introduces mandatory data breach notification requirements;individuals within the EEA. Companies that must comply with the GDPR face increased compliance obligations and sets higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities. We are subject to the supervisionrisk, including more robust regulatory enforcement of local data protection authorities in those EU jurisdictions where we have business operationsrequirements and potential fines for noncompliance of up to €20 million or are otherwise subject to4% of the GDPR.
In addition,annual global revenues of the noncompliant company, whichever is greater. Among other requirements, the GDPR prohibits the transfer of personal data from the EEA to the United States and other jurisdictions that the European Commission does not recognize as having “adequate” data protection laws unless a data transfer mechanism has been put in place. In July 2020, the Court of Justice of the European Union (the “CJEU”) limited how organizations could lawfully transfer personal data from the EEA to the United States by invalidating the EU-US Privacy Shield for purposes of international transfers. Whiletransfers and imposing further restrictions on the CJEU upheld the adequacyuse of the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, and potential alternative to the Privacy Shield), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances. Use of the standard contractual clauses must now be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals, and additional measures and/or contractual provisions may need to be put in place; however, the nature of these additional measures is currently uncertain. The CJEU went on to state that if a competent supervisory authority believes that the standard contractual clauses cannot be complied with in the destination country and the required level of protection cannot be secured by other means, such supervisory authority is under an obligation to suspend or prohibit that transfer.(“SCCs”). The European Commission has published revised standard contractual clausesSCCs for data transfers from the EEA.EEA on June 4, 2021. The revised clauses must be used for relevant new data transfers from September 27, 2021;2021 onward; existing standard contractual clausesSCC arrangements must be migrated to the revised clauses by December 27, 2022. The new SCCs apply only to the transfer of personal data outside of the EEA and not the United Kingdom. The United Kingdom’s Information Commissioner’s Office has published new data transfer standard contracts for transfers from the United Kingdom under the United Kingdom GDPR (“UK GDPR”). This new documentation will be mandatory for relevant data transfers from September 21, 2022; existing standard contractual clauses arrangements must be migrated to the new documentation by March 21, 2024. We will be
required to implement the revised standard contractual clauses,SCCs, in relation to relevant existing contracts and certain additional contracts and arrangements, within the relevant time frames. There is some uncertainty around whether the revised clauses can be used for all types of data transfers, particularly whether they can be relied on for data transfers to non-EEA entities subject to the GDPR. These recent developments are likely to require us to review and amend the legal mechanisms by which we make and/or receive personal data transfers to/ in the United States. As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results. Certain breaches of the GDPR requirements could result in substantial fines, which can be up to four percent of worldwide revenue or 20 million Euros, whichever is greater. In addition to the foregoing, a breach of the GDPR could result in regulatory investigations, reputational damage, orders to cease/change our use of data, enforcement notices, as well as potential civil claims, including class action type litigation where individuals suffered harm.
Relatedly, following the United Kingdom’s withdrawal from the EEA and the EU and the expiration of the transition period, from January 1, 2021, companies have to comply with both the GDPR and the UK GDPR, as incorporated into United Kingdom national law, the latter regime
having the ability to separately fine up to the greater of £17.5 million or 4% of global turnover. On January 1, 2021, the United Kingdom became a third country for the purposes of the GDPR.
revenue. The relationship between the United Kingdom and the EU in relation to certain aspects of data protection law remains unclear, and it is unclear how United Kingdom data protection laws and regulations will develop in the medium to longer term. On June 28, 2021, the European Commission adopted an adequacy decision in favor of the United Kingdom enabling data transfers from EU member states to the United Kingdom without additional safeguards. However, the United Kingdom adequacy decision will automatically expire in June 2025 unless the European Commission renews or extends that decision and remains under review bydecision. In September 2021, the Commission during this period. Similarly, California has enacted the California Consumer Privacy Act (the "CCPA"), which took effectUnited Kingdom government launched a consultation on January 1, 2020. The CCPA creates individual privacy rightsits proposals for California consumers and increases the privacy and security obligationswide-ranging reform of entities handling certain personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. Additionally, the California Privacy Rights Act (the “CPRA”) was recently enacted in California. The CPRA will impose additionalUnited Kingdom data protection obligations on covered companies doing businesslaws following Brexit and the response to this consultation was published in California, including additional consumer rights processes, limitations on data uses, new audit requirements for higherJune 2022. There is a risk data, and opt outs for certain uses of sensitive data. It will also create a new Californiathat any material changes which are made to the United Kingdom data protection agency authorized to issue substantive regulations andregime could result in increased privacythe European Commission reviewing the United Kingdom adequacy decision, and information security enforcement. The majority of the provisions will go into effect on January 1, 2023,United Kingdom losing its adequacy decision if the European Commission deems the United Kingdom to no longer provide adequate protection for personal data.
Although we work to comply with applicable laws, regulations and additional compliance investmentstandards, our contractual obligations and potential business process changes may be required. The CCPA and CPRA may increase our compliance costs and potential liability, and similar laws have been proposed at the federal level and in other states. These laws and regulationslegal obligations, these requirements are constantly evolving and may be modified, interpreted and applied created,in an inconsistent manner from one jurisdiction to another, and may conflict with one another or amendedother legal obligations with which we must comply. Any failure or perceived failure by us or our employees, representatives, contractors, consultants, collaborators or other third parties to comply with such requirements or adequately address privacy and security concerns, even if unfounded, could result in a manner that could seriously harmadditional cost and liability to us, damage our reputation, and adversely affect our business
Acquisitions or joint ventures could disrupt our business, cause dilution to our stockholders and otherwise harm our business.
We may acquire other businesses, products or technologies as well as pursue strategic alliances, joint ventures, technology licenses or investments in complementary businesses. We have limited experience in completing such transactions. Any of these transactions could be material to our financial condition and operating results and expose us to many risks, including:
• disruption in our relationships with future customers or with current or future distributors or suppliers as a
result of such a transaction;
• unanticipated liabilities related to acquired companies;
• difficulties integrating acquired personnel, technologies and operations into our existing business;
• diversion of management time and focus from operating our business to acquisition integration challenges;
• increases in our expenses and reductions in our cash available for operations and other uses;
• possible write-offs or impairment charges relating to acquired businesses; and
• inability to develop a sales force for any additional product candidates.
Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries.
Also, the anticipated benefit of any acquisition may not materialize. Future acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses or write-offs of goodwill, any of which could harm our financial condition. We cannot predict the number, timing or size of future joint ventures or acquisitions, or the effect that any such transactions might have on our operating results.
Risks Related to Our Common Stock
The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock, and we could be subject to securities class action litigation as a result.
Our stock price is likely to be volatile. The stock market in general and the market for smaller biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies.companies, and more recently has been a result of disruptions in the global economy,
including rising inflation and interest rates, declines in economic growth, international conflict and continued uncertainty about the ongoing COVID-19 pandemic. As a result of this volatility, you may not be able to sell your shares of common stock at or above the price at which you purchase the shares. The market price for our common stock may be influenced by many factors, including:
• the success of competitive products or technologies;
• actual or anticipated changes in our growth rate relative to our competitors;
• results of clinical trials of our product candidates or those of our competitors;
• developments related to any future collaborations;
• regulatory or legal developments in the United States and other countries;
• adverse actions taken by regulatory agencies with respect to our preclinical studies or clinical trials,
manufacturing or sales and marketing activities;
• any adverse changes to our relationship with third party contractors or manufacturers;
• development of new product candidates that may address our markets and may make our existing product
candidates less attractive;
• changes in physician, hospital or healthcare provider practices that may make our product candidates less
useful;
• announcements by us, our collaborators or our competitors of significant acquisitions, strategic
partnerships, joint ventures, collaborations or capital commitments;
• developments or disputes concerning patent applications, issued patents or other proprietary rights;
• the recruitment or departure of key personnel;
• the level of expenses related to any of our product candidates or product development programs;
• failure to meet or exceed financial estimates and projections of the investment community or that we
provide to the public;
• press reports or other negative publicity, whether or not true, about our business;
• the results of our efforts to discover, develop, acquire or in-license additional product candidates or
products;
• actual or anticipated changes in estimates as to financial results, development timelines or
recommendations by securities analysts;
• variations in our financial results or those of companies that are perceived to be similar to us;
• changes in the structure of healthcare payment systems;
• market conditions in the pharmaceutical and biotechnology sectors;
• speculative trading in and short sales of our stock, as well as trading phenomena such as the “short
squeeze”;
• general economic, industry and market conditions; and
• the other factors described in this "Risk Factors" section.
Any of these factors may result in large and sudden changes in the volume and trading price of our common stock. In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biopharmaceutical companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.
Our executive officers, directors and principal stockholders, if they choose to act together, have the ability to control or significantly influence all matters submitted to stockholders for approval.
Based on the number of shares of common stock outstanding as of September 30,December 31, 2021, our executive officers, directors and stockholders who own more than 5% of our outstanding common stock and their respective affiliates hold, in the aggregate, shares representing approximately 67%70% of our outstanding voting stock. As a result, if these stockholders were to choose to act together, they would be able to control or significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would control or significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. They may also have interests that differ from yours and may vote in a way with which you disagree, and which may be adverse to your interests. This concentration of ownership control may have the effect of delaying, deferring or preventing a change in control of
our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.
A significant portion of our total outstanding shares are eligible to be sold into the market, which could cause the market price of our common stock to drop significantly, even if our business is doing well.
Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. Moreover, holders of an aggregate of approximately 18.418.8 million shares of our common stock as of September 30,December 31, 2021 have rights, subject to specified conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders, including entities affiliated with Flagship Pioneering, until such shares can otherwise be sold without restriction under Rule 144 of the Securities Act or until the rights terminate pursuant to the terms of the investors’ rights agreement between us and such holders. We have also registered and intend to continue to register all shares of common stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates.
Our management has broad discretion to use our cash reserves and could use our cash reserves in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest our cash reserves in a manner that does not produce income or that loses value.
We are an "emerging growth company" and a "smaller reporting company," and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.
We are an "emerging growth company" as that term is used in the Jumpstart Our Business Startups Act of 2012, (the “JOBS Act”) and may remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of the initial public offering of our common stock, or December 31, 2023, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our outstanding common stock that are held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three year period. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:
• being permitted to provide only two years of audited financial statements, in addition to any required
unaudited interim financial statements, with correspondingly reduced "Management’s Discussion and
Analysis of Financial Condition and Results of Operations" disclosure;
• not being required to comply with the auditor attestation requirements in the assessment of our internal
control over financial reporting;
• not being required to comply with 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;
• reduced disclosure obligations regarding executive compensation; and
• exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and
shareholder approval of any golden parachute payments not previously approved.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply to private companies. We have elected to take advantage of this extended transition period.
We are also a smaller reporting company, and we will remain a smaller reporting company until the fiscal year following the determination that our voting and non-voting common shares held by non-affiliates is more than $250
million measured on the last business day of our second fiscal quarter, orand our annual revenues are more than $100 million during the most recently completed fiscal year and our voting and non-voting common shares held by non-affiliates is more than $700 million measured on the last business day of our second fiscal quarter. Similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation disclosure, are exempt from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 ("Section 404") and have certain other reduced disclosure obligations, including, among other things, being required to provide only two years of audited financial statements and not being required to provide selected financial data, supplemental financial information or risk factors.
We have elected to take advantage of certain of the reduced reporting obligations, and may in the future take advantage of these or others. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be reduced or more volatile.
Provisions in our restated certificate of incorporation and amended and restated bylaws could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our restated certificate of incorporation and our amended and restated bylaws may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our
stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, thesesuch provisions include those establishing:
• a classified board of directors with three-year staggered terms, which may delay the ability of stockholders
to change the membership of a majority of our board of directors;
• no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect
director candidates;
• the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of
the board of directors or the resignation, death or removal of a director, which prevents stockholders from
filling vacancies on our board of directors;
• the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine
the terms of those shares, including preferences and voting rights, without stockholder approval, which
could be used to significantly dilute the ownership of a hostile acquirer;
• the ability of our board of directors to alter our bylaws without obtaining stockholder approval;
• the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of
directors to adopt, amend or repeal our bylaws or repeal the provisions of our restated certificate of
incorporation regarding the election and removal of directors;
• a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an
annual or special meeting of our stockholders;
• the requirement that a special meeting of stockholders may be called only by the chairman of the board of
directors, the chief executive officer, the president or the board of directors, which may delay the ability of
our stockholders to force consideration of a proposal or to take action, including the removal of directors;
and
• advance notice procedures that stockholders must comply with in order to nominate candidates to our
board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage
or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of
directors or otherwise attempting to obtain control of us.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Our restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, and our bylaws designate the federal district courts of the United States as the exclusive forum for actions arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Our restated certificate of incorporation specifies that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for most legal actions involving any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of fiduciary duty owed by any director, officer, employee or stockholder to us or our stockholders, any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware or any action asserting a claim governed by the internal affairs doctrine. In addition, our bylaws provide that the federal district courts of the United States are the exclusive forum for any complaint raising a cause of action arising under the Securities Act. We believe these provisions benefit us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolving corporate disputes and in the application of the Securities Act by federal judges, as applicable, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. The provision may limit a
stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes, and may have the effect of discouraging lawsuits, including those against our directors and officers. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation and bylaws has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our restated certificate of incorporation or bylaws to be inapplicable or unenforceable in such action. If a court were to find the choice of forum provision contained in our restated certificate of incorporation or bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our results of operations and financial condition.
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the operation and expansion of our business. Therefore, you should not rely on an investment in our common stock as a source for any future dividend income.
Our board of directors has significant discretion as to whether to distribute dividends. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our common stock will likely depend entirely on any future capital appreciation, if any, of our common stock. There is no guarantee that our common stock will appreciate in value or even maintain the price at which you purchased our common stock.
Our ability to use net operating losses and research and development tax credits to offset future taxable income or tax liabilities may be subject to certain limitations.
As of December 31, 2020,2021, our fiscal year end, we had approximately $133.7$189.7 million and $129.4$187.1 million of federal and state net operating losses ("NOLs"), respectively. The federal NOLs respectively.include $49.9 million of our federal NOLswhich expire at various dates through 2037,2036, and $83.8$139.7 million of our federal NOLswhich carry forward indefinitely, but ourindefinitely. Our ability to use such federal NOLs to offset taxable income is limited to 80% of taxable income with respect to taxable years beginning after December 31, 2020. Our state NOLs expire at various dates through 2040.2041. As of December 31, 2020,2021, we had federal and state research and development tax credits of $5.0$7.2 million and $2.6$3.3 million, respectively, which expire at various dates through 2040.2041. A portion of these NOLs and the tax credit carryforwards could expire unused and be unavailable to offset future taxable income or income tax liabilities, respectively. In addition, in general, under Sections 382 and 383 of the United States Internal Revenue Code of 1986, as amended (the "Code"), a corporation that undergoes an "ownership change" is subject to limitations on its ability to utilize its pre-change NOLs or tax credits to offset future taxable income or tax liabilities. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period. Our existing NOLs or tax credits may be subject to limitations arising
from previous ownership changes. In addition, future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Sections 382 and 383 of the Code. Our state NOLs or tax credits may also be limited or impaired under state law. Our ability to utilize our NOLs or tax credits is also conditioned upon our attaining profitability and generating federal and state taxable income and income tax liabilities. We have incurred significant net losses since our inception and, therefore, we do not know whether or when we will generate the federal or state taxable income or income tax liabilities necessary to utilize our NOLs or tax credits. Accordingly, we may not be able to utilize a material portion of our NOLs or tax credits. In addition, we may be required to pay federal income taxes due to the 80% limitation on utilization of certain federal NOLs to offset taxable income, even if we have federal NOLs that are otherwise available for use.
General Risk Factors
We have incurred and expect to continue to incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.
As a public company, and particularly after we are no longer an emerging growth company, we have incurred and expect to continue to incur significant legal, accounting and other expenses that we did not incur as a private company. These expenses will be even greater after we are no longer an emerging growth company and/or a smaller reporting company, The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the
listing requirements of The Nasdaq Global Select Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel need to devote a substantial amount of time to these compliance initiatives.
Moreover, these rules and regulations have increased our legal and financial compliance costs and made some activities more time consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to maintain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors.
We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to furnish a report by our management on our internal control over financial reporting. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we are engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our consolidated financial statements.
Our failure to maintain effective control over financial reporting and disclosure controls and procedures may not prevent or detect allcould result in errors or acts of fraud.in our financial statements, our failure to meet our reporting obligations, reduce investor confidence and adversely impact our stock price.
OurAs a public company, we are required to maintain effective disclosure controls and procedures and internal control over financial reporting, and to report any material weaknesses in such internal controls. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. In October 2021, we identified a material weakness relating to an insufficient process for
confirming final approvals for the release of reviewed and approved documentation prior to filing such documentation with the SEC. This material weakness did not result in any financial statement modifications, and there were no changes to our previously disclosed financial results. Additionally, in connection with the preparation of our financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 which we filed with the SEC on March 24, 2022, we identified a different material weakness relating to the review of certain financial transactions and the preparation and review of account reconciliations which were not performed using a sufficient level of precision and accuracy. No material financial statement misstatements were identified in relation to this material weakness in our internal control over financial reporting. The remediation efforts that we take to address a material weakness need to be completed and operating effectively for a sufficient period of time before we are designedable to reasonablydeem such material weakness fully remediated. See Part I, Item 4 “Controls and Procedures” for additional information about the material weakness and our remediation efforts.
If we identify other material weaknesses or identify deficiencies that individually or together constitute significant deficiencies or material weaknesses, or if the additional controls and processes that we implement to remediate any identified material weaknesses prove to be insufficient, our ability to accurately record, process and report financial information and, consequently, our ability to prepare financial statements within required time periods could be adversely affected and we may be unable to assure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.
We believe that anyFurthermore, disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls.
Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our business, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our preclinical studies or clinical trials and/or operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Unfavorable global economic or political conditions could adversely affect our business, financial condition or results of operations.
Various macroeconomic factors could adversely affect our business and financial condition, including changes in inflation, interest rates and foreign currency exchange rates specifically, and overall economic conditions and uncertainties generally. For instance, if inflation and the resulting increase in interest rates, such as that recently observed in the U.S. and elsewhere, or other factors were to significantly increase costs generally, it may increase our products development and other operating costs, having an adverse effect on our cash flows and results of operations.
Additionally, our results of operations could be adversely affected by general conditions in the global financial markets. For example, the global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, such as the global financial crisis, could result in a variety of risks to our business, including our ability to raise additional capital when needed on acceptable terms, if at all. There can be no assurance that further deterioration in credit and financial markets and confidence in economic
conditions will not occur. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services.
In addition, military conflict such as that between Russia and Ukraine could disrupt or otherwise adversely impact our operations and those of third parties upon which we rely. Related sanctions, export controls or other actions have and may in the future be initiated by nations including the U.S., the EU or Russia (e.g., potential cyberattacks, disruption of energy flows, etc.), which could adversely affect our business and/or our supply chain, our CROs, CMOs and other third parties with which we conduct business. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
Except as disclosed in our Current Report on Form 8-K filed with the SEC on February 2, 2021, thereThere were no sales of unregistered equity securities during the nine monthssix-month period ended SeptemberJune 30, 2021.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.On August 11, 2022, Evelo Biosciences, Inc. (the “Company”) announced the succession plan for Balkrishan “Simba” Gill, Ph.D. to transition from his roles as Chief Executive Officer and President of the Company to the role of Chair of the Company’s Board of Directors (the “Board”) and return to Flagship Pioneering as an Executive Partner. The Board has retained the executive search firm Spencer Stuart to initiate a comprehensive search led by its current Chair, Lord Ara Darzi, to identify Dr. Gill's successor. Dr. Gill will continue to serve as the Company’s Chief Executive Officer and President and, in these capacities, as principal executive officer until his successor joins the Company, at which time he will become Chair of the Board and Lord Darzi will become the Lead Independent Director of the Company.
As previously disclosed, Dr. Gill will serve as the Company’s principal financial officer on an interim basis until Marella Thorell commences employment as the Company’s Chief Financial Officer, which is expected to be on or about September 1, 2022.
Item 6. Exhibits
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Incorporated by Reference |
Exhibit
Number | | Exhibit Description | | Form | | File No. | | Exhibit | | Filing
Date | | Filed
Herewith |
| 3.1 | | | | 8-K | | 001-38473 | | 3.1 | | 5/11/2018 | | |
| 3.2 | | | | 8-K | | 001-38473 | | 3.1 | | 3/18/2021 | | |
| 31.1 | | | | | | | | | | | | * |
| 31.2 | | | | | | | | | | | | * |
| 32.1 | | | | | | | | | | | | ** |
| 32.2 | | | | | | | | | | | | ** |
| 101.INS | | Inline XBRL Instance Document- the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document | | | | | | | | | | * |
| | | | | | | | | | | | | | | | | | | | |
| | Incorporated by Reference |
Exhibit
Number | Exhibit Description | Form | File No. | Exhibit | Filing
Date | Filed
Herewith |
| | | | | | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | | | | | * |
| | | | | | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | | | | * |
| | | | | | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | | | | | * |
| | | | | | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | | | | | * |
| | | | | | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | | | | * |
| | | | | | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | | * |
| | | | | |
* | Filed herewith. |
** | Furnished herewith. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Incorporated by Reference |
Exhibit
Number | | Exhibit Description | | Form | | File No. | | Exhibit | | Filing
Date | | Filed
Herewith |
| 3.1 | | | | 8-K | | 001-38473 | | 3.1 | | 5/11/2018 | | |
| 3.2 | | | | 8-K | | 001-38473 | | 3.1 | | 3/18/2021 | | |
| 10.1# | | | | 10-K | | 001-38473 | | 10.5 | | 3/24/2022 | | |
| 10.2# | |
| | | | | | | | | | * |
| 10.3# | | | | | | | | | | | | * |
| 31.1 | | | | | | | | | | | | * |
| 32.1 | | | | | | | | | | | | ** |
| 101.INS | | Inline XBRL Instance Document- the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document | | | | | | | | | | * |
| 101.SCH | | Inline XBRL Taxonomy Extension Schema Document | | | | | | | | | | * |
| 101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | | | | | | | | | * |
| 101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document | | | | | | | | | | * |
| 101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document | | | | | | | | | | * |
| 101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | | | | | | | | | * |
| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | | | | | | | * |
| * Filed herewith | | | | | | | | | | |
| ** Furnished herewith | | | | | | | | | | |
| # Indicates management contract or compensatory plan | | | | | | | | | | |
| | | | | | | | | | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.
| | | | | | | | | | | |
| EVELO BIOSCIENCES, INC. |
| | | |
Date: October 28, 2021August 11, 2022 | By: | | /s/ Balkrishan (Simba) Gill, Ph.D. |
| | | Balkrishan (Simba) Gill, Ph.D. |
| | | President and Chief Executive Officer |
| | | (Principal Executive Officer and Principal Financial Officer) |
| | | |
| | | |
Date: October 28, 2021August 11, 2022 | By: | | /s/ Luca ScavoStephen J. Carriere |
| | | Luca ScavoStephen J. Carriere |
| | | Vice President and Chief FinancialAccounting Officer |
| | | (Principal FinancialAccounting Officer) |
