UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO
Commission File Number 001-39122
89bio, Inc.
(Exact name of Registrant as specified in its Charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
142 Sansome Street, Second Floor
San Francisco, California 94104
(Address of principal executive offices)
36-4946844
(I.R.S. Employer
Identification No.)
94104
(Zip Code)
Registrant’s telephone number, including area code: (415) 500-4614
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common stock, par value $0.001 per share
Trading
Symbol(s)
ETNB
Name of each exchange on which registered
Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Smaller reporting company
☐
☒
Non-accelerated filer
Emerging growth company
☐
☒
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of June 30, 2020, the last business day of the Registrant’s most recently
completed second fiscal quarter, was approximately $72,707,052, based on the closing price on The Nasdaq Global Market reported for such date. Shares of common stock held by each officer
and director and by each person who is known to own 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates of the Registrant.
This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of March 1, 2021, there were 19,946,426 shares of the Registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement relating to its 2021 Annual Meeting of Stockholders, to be held on or about June 2, 2021, are incorporated by reference into Part III of this
Annual Report on Form 10-K where indicated. Such proxy statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this
report relates.
Table of Contents
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
SIGNATURES
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the federal securities laws, which statements
involve substantial risks and uncertainties. All statements, other than statements of historical facts included in this Annual Report on Form 10-K, including
statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, financing needs, plans or intentions relating to
acquisitions, business trends and other information referred to in “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” are forward-looking statements. Forward-looking statements generally relate to future events or our future financial
or operating performance. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,”
“should,” “could,” “can,” “would,” “expect,” “believe,” “design,” “estimate,” “predict,” “potential,” “plan,” “anticipate,” “target,” “forecast,” or the
negative of these terms, and similar expressions intended to identify forward-looking statements. Forward-looking statements are not historical facts and
reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you
should not place undue reliance on these forward-looking statements.
There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-
looking statements contained in this Annual Report on Form 10-K. Such risks, uncertainties and other important factors include, among others, the risks,
uncertainties and factors set forth in “Risk Factors,” and the following risks, uncertainties and factors:
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our plans to develop and commercialize BIO89-100 or any future product candidates;
our ongoing and planned clinical trials;
the timing of and our ability to obtain regulatory approvals for BIO89-100 or any future product candidates;
the effect of the ongoing COVID-19 pandemic on our business;
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
our ability to identify additional products or product candidates with significant commercial potential that are consistent with our
commercial objectives;
the rate and degree of market acceptance and clinical utility of BIO89-100 or any future product candidates, if approved;
our commercialization, marketing and manufacturing capabilities and strategy;
significant competition in our industry;
our intellectual property position;
loss of key members of management;
failure to successfully execute our growth strategy, including any delays in our planned future growth; and
our failure to maintain effective internal controls.
There may be other factors that may cause our actual results to differ materially from the forward-looking statements, including factors disclosed in
“Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You should evaluate all forward-looking
statements made in this Annual Report on Form 10-K in the context of these risks and uncertainties.
We caution you that the risks, uncertainties and other factors referred to above may not contain all of the risks, uncertainties and other factors that
are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if
substantially realized, that they will result in the consequences or affect us or our business in the way expected. All forward-looking statements in this
Annual Report on Form 10-K apply only as of the date made and are expressly qualified in their entirety by the cautionary statements included in this
Annual Report on Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or
circumstances.
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PART I
In this Annual Report on Form 10-K, unless context otherwise requires or where otherwise indicated, the terms “89bio” “we,” “us,” “our,” “our
company,” “the company,” and “our business” refer to 89bio, Inc. and its consolidated subsidiaries.
Item 1. Business.
Overview
89bio is a clinical-stage biopharmaceutical company focused on the development and commercialization of innovative therapies for the treatment
of liver and cardio-metabolic diseases. Our lead product candidate, BIO89-100, a specifically engineered glycoPEGylated analog of fibroblast growth
factor 21 (“FGF21”), is currently being developed for the treatment of nonalcoholic steatohepatitis (“NASH”) and for the treatment of severe
hypertriglyceridemia (“SHTG”). NASH is a severe form of nonalcoholic fatty liver disease (“NAFLD”), characterized by inflammation and fibrosis in the
liver that can progress to cirrhosis, liver failure, hepatocellular carcinoma (“HCC”) and death. There are currently no approved products for the treatment of
NASH. In September 2020, we announced positive topline data from the Phase 1b/2a trial of BIO89-100 in NASH. We plan to initiate a Phase 2b trial in
NASH patients in the first half of 2021. In December 2020, we initiated a paired-biopsy open-label cohort as part of the Phase 1b/2a trial in NASH patients
assessing histology endpoints with topline data anticipated by the end of 2021. SHTG is a condition identified by severely elevated levels of triglycerides
(greater than or equal to 500 mg/dL), which is associated with an increased risk of NASH, cardiovascular events and acute pancreatitis. We initiated our
Phase 2 trial (ENTRIGUE) in SHTG patients in the third quarter of 2020 and expect to report topline data in the second half of 2021.
FGF21 is a metabolic hormone that regulates energy expenditure and glucose and lipid metabolism. FGF21 analogs represent a promising class of
drugs to treat NASH, because they not only address the liver manifestations, but also have an effect on the multiple co-morbidities that worsen NASH.
FGF21 is a clinically-validated mechanism that has been shown in humans to reduce steatosis, improve the histological features of NASH and address
cardio-metabolic dysregulation. It is thought to exert effects on liver fibrosis by improving metabolic regulation, which reduces ongoing liver injury thus
giving the liver time to heal. FGF21 also generates an on-target effect to increase adiponectin, a hormone released from adipose tissue that, among other
functions, can suppress development and progression of hepatic fibrosis. However, FGF21 in its native form suffers from a short half-life and a tendency to
aggregate in solution, both of which impact its suitability as a viable drug. To address these challenges, we have specifically engineered BIO89-100 to
extend the half-life of the molecule while maintaining potency and thereby the clinical benefits of FGF21.
BIO89-100 may be a differentiated FGF21 therapy based on its robust and durable biological effects, a favorable tolerability profile and its
potential for every two-week dosing. Combining these characteristics with the ability to address the key liver pathologies in NASH, as well as the
underlying metabolic dysregulation in NASH patients, BIO89-100 has the potential to become a backbone of treatment in NASH. BIO89-100 also has a
long half-life which allows convenient weekly or every-two-week dosing that will support adoption and compliance amongst patients living with this
chronic, progressive and generally asymptomatic liver disease. It is currently the only FGF21 analog being tested for every-two-week dosing. BIO89-100 is
also being developed as a liquid formulation, which will be convenient for patients to administer.
BIO89-100 has been evaluated in multiple animal studies of NASH, diabetes and obesity, including studies in mice and non-human primates and
has completed a Phase 1a first-in-human single ascending dose (“SAD”) clinical trial in 58 healthy volunteers. In these preclinical studies and in the SAD
trial, consistent beneficial effects across a range of relevant endpoints were observed. In the SAD trial, BIO89-100 demonstrated a favorable tolerability
profile and a half-life of 55 to 100 hours. At doses of 9.1 mg and higher, significant improvements in key lipid parameters were observed at Day 8 and Day
15 after dosing on Day 1. BIO89-100 was well tolerated across the dose range in this trial. There were no deaths, serious adverse events or discontinuations
due to adverse events. The most commonly observed treatment-related adverse events, occurring in at least two subjects in the pooled BIO89-100 group,
were injection site reactions and headache, all of which were reported as mild. In April 2020, we announced data from a preclinical study with BIO89-
100 demonstrating low nanomolar potency against FGF receptors 1c, 2c and 3c similar to recombinant human FGF21 (“rhFGF21”).
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In September 2020, we announced positive topline data from a Phase 1b/2a study in NASH patients, which has informed the advancement of our
clinical strategy in NASH. This 13-week phase 1b/2a multicenter, randomized, double-blind, placebo-controlled, multiple ascending dose-ranging trial
enrolled a total of 81 patients with biopsy-confirmed NASH and phenotypic NASH (“PNASH”). All dose groups in the trial demonstrated statistically
significant reductions in liver fat at week 13, with relative reduction of up to 60% versus baseline, and up to 70% versus placebo, as measured by magnetic
resonance imaging—proton density fat factor (“MRI-PDFF”). A majority of patients achieved a ≥ 30% (up to 88%) or a ≥ 50% (up to 71%) reduction in
liver fat from baseline. ALT, a liver enzyme, was significantly reduced (up to 44%) in these patients and key lipid markers like triglycerides, LDL, and
non-HDL were also significantly improved. Baseline characteristics were similar across the sub-populations of biopsy-confirmed NASH and PNASH
patients enrolled in the trial and results were also consistent across the two sub-groups. In this study, BIO89-100 presented a favorable safety and
tolerability profile with rates of gastrointestinal side effects such as nausea, diarrhea and vomiting similar to placebo. No adverse effects on blood pressure
or heart rate were observed and no hypersensitivity adverse events were reported. In March 2021, we presented a new analysis of data from this study that
showed that BIO89-100 treatment resulted in significant reductions in liver volume of up to 15% and liver fat volume of up to 65% in treated patients at 13
weeks compared to baseline, as measured by MRI-PDFF.
In December 2020, we initiated a paired-biopsy, open-label cohort as part of the Phase 1b/2a trial assessing histology endpoints, with data
anticipated by the end of 2021. This cohort is expected to enroll approximately 20 patients with biopsy-confirmed NASH who will be treated for 20 weeks
with 27 mg of BIO89-100 once weekly. The cohort will build on the recent data from 89bio’s Phase 1b/2a trial and will provide an early opportunity to
demonstrate BIO89-100’s benefits on histology endpoints.
Given the potential of FGF21 to meaningfully reduce triglycerides and provide other metabolic benefits, and the established regulatory path for
approval, we are developing BIO89-100 for the treatment of SHTG. We initiated our Phase 2 trial (ENTRIGUE) in SHTG patients in the third quarter of
2020 and expect to enroll approximately 90 patients, who could be on stable background medications. ENTRIGUE is a Phase 2 multi-center, randomized,
double-blind, placebo-controlled study designed to evaluate safety, efficacy and tolerability in patients who will receive BIO89-100 administered weekly (9
mg, 18 mg or 27 mg) or every two weeks (36 mg) or placebo. The primary endpoint is the reduction in fasting triglycerides from baseline. Key secondary
endpoints include other lipid and metabolic markers and change in liver fat measured by MRI-PDFF. Topline data from ENTRIGUE are expected in the
second half of 2021. We have recently expanded ENTRIGUE with an additional cohort of patients on fibrates to assess the benefit of 27 mg weekly BIO89-
100 when added to background fibrates. In this cohort, a total of 36 patients will be randomized to either receive BIO89-100 or placebo. The primary
endpoint and key secondary endpoint are the same as in ENTRIGUE. We also expect to initiate registrational trials in SHTG in 2022, pending positive data
from ENTRIGUE.
Impact of COVID-19 Pandemic
The ongoing COVID-19 pandemic has disrupted and may continue to disrupt our business and delay our preclinical and clinical programs and
timelines. The extent to which the COVID-19 pandemic may impact our future operating results and financial condition is uncertain. We initiated our Phase
2 trial (ENTRIGUE) in SHTG patients in the third quarter of 2020 as well as a new paired-biopsy open-label histology cohort as part of the Phase 1b/2a
trial in the fourth quarter of 2020. The COVID-19 surge observed late in the fourth quarter of 2020 and the first quarter of 2021 has impacted enrollment in
these studies. We plan to initiate a Phase 2b trial in NASH patients in the first half of 2021. We do not yet know the full extent of potential delays, which
could prevent or delay us from obtaining approval for BIO89-100. For more information regarding risks related to the ongoing COVID-19 pandemic,
please see the risk factor entitled “The ongoing COVID-19 pandemic has resulted and may in the future result in significant disruptions to our clinical trials
or other business operations, which could have a material adverse effect on our business,” in Part I. Item 1A of this Annual Report on Form 10-K. To the
extent the ongoing COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other
risks set forth under “Risk Factors” in this Annual Report on Form 10-K.
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Strategy
Our goal is to become a leading biopharmaceutical company focused on the development and commercialization of innovative therapies for the
treatment of liver and cardio-metabolic diseases. The key components of our strategy are to:
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Rapidly advance BIO89-100 through clinical development for the treatment of NASH. We believe BIO89-100 may be a differentiated
FGF21 therapy based on its robust and durable biological effects, a favorable tolerability profile and its potential for every two-week
dosing. Following positive results in September 2020 from our Phase 1b/2a trial in NASH patients we plan to initiate a Phase 2b trial in
NASH patients with F2 and F3 fibrosis in the first half of 2021. Additionally, we recently initiated a paired-biopsy, open-label histology
cohort in NASH patients and are also evaluating the opportunity to test BIO89-100 in NASH patients with cirrhosis while we analyze and
await data in cirrhotic patients from other FGF21 analogs.
Pursue SHTG as a second indication with BIO89-100 given its unique profile and its potential for a quicker path to market. While
we are focused on becoming a leader in the treatment of NASH, BIO89-100’s mechanism of action supports its potential to become the
treatment leader in other cardio-metabolic and liver diseases. In the third quarter of 2020, we initiated our Phase 2 trial (ENTRIGUE) in
SHTG. Based on U.S. Food and Drug Administration (“FDA”) guidance for the development of SHTG treatments, as well as the
regulatory path followed by other companies that have successfully developed SHTG therapies, we believe that a combination of smaller
clinical trials and shorter development timelines could mean that SHTG potentially represents a quicker path to market for BIO89-100.
Scale-up and optimize the manufacturing of BIO89-100. We currently use an external contract manufacturing organization (“CMO”) to
manufacture BIO89-100 for our ongoing and planned clinical trials. While these trials are ongoing, we plan to work with our CMO to
optimize and scale-up the manufacturing process for BIO89-100 to support the increased production that will be needed for later-stage
clinical trials and commercialization, if BIO89-100 is approved.
Establish a commercial infrastructure in key geographies. We have worldwide rights to BIO89-100 and intend to develop the sales
infrastructure required for commercialization in the United States. We also plan to evaluate options, including strategic collaborations, for
commercializing BIO89-100, if approved, in other key markets, such as Europe and China.
Build a diversified multi-asset pipeline of novel therapies. We intend to employ a value-driven strategy to identify, acquire, develop and
commercialize product candidates for liver and cardio-metabolic diseases. We intend to focus on product candidates that we believe have
attractive profiles and address a clear unmet medical need and can advance quickly and efficiently into late-stage development.
Our Focus on Liver and Cardio-Metabolic Disease
We are focused on developing and commercializing therapeutic interventions that have a clinically meaningful impact on patients with liver and
cardio-metabolic diseases. These diseases, including NASH and SHTG, represent leading global causes of morbidity and mortality. Despite a wave of
public health campaigns to promote better diet and exercise habits and a range of treatment options available for many of these diseases, there is a
significant unmet medical need for more effective therapies to improve patient outcomes and reduce the burden on global healthcare systems.
We are currently developing our lead product candidate, BIO89-100, a specifically engineered glycoPEGylated analog of FGF21, for the treatment
of NASH and SHTG. We believe BIO89-100 is an ideal candidate for the treatment of NASH based on its ability to address the key liver pathologies in
NASH, its ability to address the underlying metabolic dysregulation in NASH patients, its favorable tolerability profile, and its potential for a longer dosing
interval. Multiple epidemiological studies have linked NAFLD to increased cardiovascular disease, concluding that the majority of deaths among NAFLD
patients are attributable to cardiovascular disease. As a result, we believe it is important that new therapeutics options for NASH address the underlying
cardiovascular and metabolic dysregulations in these patients.
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Given the potential of BIO89-100 to meaningfully reduce triglycerides, we are also developing BIO89-100 for the treatment of SHTG. BIO89-100
may have a competitive differentiation from approved therapies and other molecules in development based on its impact on improving liver fat and other
metabolic markers in addition to triglyceride reduction. There is regulatory precedence for the approval of therapies for the treatment of SHTG in the
United States based on the reduction in triglycerides from baseline as the primary endpoint for full approval. Based on the regulatory path followed by
other companies that have successfully developed SHTG therapies, we believe that a combination of smaller clinical trials and shorter development
timelines could mean that SHTG potentially represents a quicker path to market for BIO89-100.
Disease Overview - NASH
NASH, a severe form of NAFLD, is characterized histologically by the additional presence of inflammation and hepatocellular injury such as
visible ballooning and has a significantly worse prognosis, with the potential to progress to liver fibrosis, cirrhosis or HCC.
NASH represents a large and rapidly growing problem in the United States and worldwide. Diagnoses have been on the rise and are expected to
increase dramatically in the next decade. The prevalence of NAFLD, which affects approximately 25% of the global population, and NASH, which
develops in approximately 20% to 25% of NAFLD patients, is driven primarily by the worldwide obesity epidemic. As a result, the prevalence of NASH
has increased significantly in recent decades, paralleling similar trends in the prevalence of obesity, insulin resistance and Type 2 diabetes. The prevalence
of these conditions is expected to increase further in view of the unhealthy nutrition habits, such as consumption of a diet high in fructose, sucrose and
saturated fats, and sedentary behavior that characterize modern lifestyle.
The number of NASH cases in the United States is projected to expand from 16.5 million in 2015 to 27 million in 2030, with similar prevalence
growth expected in Europe, yet there are no approved treatments. Approximately 20% of the 16.5 million NASH cases in 2015 had F3 or F4 fibrosis, a
number that is expected to increase to 7.9 million by 2030, which will be approximately 30% of the total NASH population. Similar growth trends for
NASH cases are expected in Europe (12.6 million in 2016 to 18.3 million in 2030 within France, Germany, Italy, Spain and the United Kingdom) as well as
China (32.6 million in 2016 to 48.3 million in 2030). Figure 1 below shows the increase in prevalence and liver-related mortality rates by fibrosis stage.
The expected lifetime economic burden of all patients with NASH in the United States in 2017 was estimated at $223 billion. Diet and exercise are
currently the standard of care for NAFLD and NASH, but adherence to this treatment regimen is poor and there remains a high unmet need in the treatment
of NASH.
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Figure 1: Prevalence and Liver-Related Mortality Rate by Fibrosis Stage
The critical pathophysiologic mechanisms underlying the development and progression of NASH include reduced ability to handle lipids, increased
insulin resistance, injury to hepatocytes and liver fibrosis in response to hepatocyte injury. NASH patients have an excessive accumulation of fat in the liver
resulting primarily from a caloric intake above and beyond energy needs. A healthy liver contains less than 5% fat, but a liver in someone with NASH can
contain more than 20% fat. This abnormal liver fat contributes to the progression to NASH, a liver necro-inflammatory state, that can lead to scarring, also
known as fibrosis, and, for some, can progress to cirrhosis and liver failure—cirrhosis develops in approximately 20% and 45% of patients. In some cases,
cirrhosis progresses to decompensated cirrhosis, which results in permanent liver damage that can lead to liver failure. In addition, it is estimated that 8% of
patients with advanced fibrosis will develop HCC. NASH is a complex, multifaceted disease that doesn’t just affect the liver. Patients with NASH
frequently have other significant metabolic co-morbidities such as obesity, hyperglycemia, dyslipidemia and systemic hypertension (a constellation of
which is commonly referred to as metabolic syndrome) and these further contribute to the risk of cardiovascular disease.
Disease Overview - SHTG
We are also developing BIO89-100 for the treatment of SHTG. Hypertriglyceridemia (“HTG”) is characterized by elevated fasting plasma
triglyceride levels higher than 200 mg/dL and SHTG is typically defined as triglyceride levels of greater than or equal to 500 mg/dL. SHTG is associated
with an increased risk of NAFLD, NASH and cardiovascular diseases, as well as acute pancreatitis, accounting for up to 10% of all acute pancreatitis
episodes. A recent third-party study utilizing an omega-3 fatty acid (“omega-3 FA”) demonstrated the linkage between a reduction in triglycerides and
favorable cardiovascular clinical outcomes. Additionally, SHTG increases the risk of developing NAFLD, NASH and cardiovascular disease.
It is estimated that there are 4 million patients in the United States with triglyceride levels of greater than or equal to 500 mg/dL. Of these patients,
it is estimated that 56% have hepatic fat and up to 72% have other dyslipidemias or Type 2 diabetes. This patient population is expected to increase due to
the triple epidemic of obesity, metabolic syndrome and Type 2 diabetes. In addition, the addressable market has the potential to expand as a result of
increasing awareness of the importance of treating elevated triglyceride levels, similar to the focus today of physicians on managing LDL levels, as well as
due to third party commercial efforts expected to promote triglyceride reduction.
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The treatment regimen for SHTG includes dietary restrictions and lipid-lowering drug treatment such as fibrates, omega-3 fish oils and niacin.
Some statins are indicated in HTG but do not have an indication for use in SHTG. Despite multiple agents approved for the treatment of SHTG, these
agents have limitations that may not make them ideal for all patients. For example, fibrates have demonstrated reductions in triglycerides of up to
approximately 55% at 12 weeks of treatment. However, they have also shown increases in LDL-C (up to 45%), a detrimental effect in this patient
population, risk of drug-drug interactions and increases in transaminases, as well as tolerability issues including myopathy. Omega 3 fish oils have shown
more modest benefits in reduction of triglycerides from baseline of approximately 25% to 45%. Some fish oils have also showed major increases in LDL-C
(up to 45%). Fish oils also have a significant pill burden given the high daily doses required. In addition, these agents fail to meaningfully address the
related co-morbidities of SHTG, including glycemic control, which, when left untreated, may further exacerbate the condition. In third-party studies, up to
50% of treated SHTG patients were unable to reduce their triglyceride levels to < 500 mg/dL despite using approved drugs and are considered refractory
patients. These refractory patients have substantial unmet medical need and represent a significant market opportunity. Despite these limitations, the
existing drugs have achieved commercial success with two third parties each generating peak sales of approximately $1 billion or greater. Given the
continuing unmet need in SHTG and limitations of current treatments, there are several agents in development for the treatment of SHTG, including a
fibrate, and novel drugs targeting aspects of HTG and SHTG, including ANGPTL3 and ApoC III inhibitors.
Etiology of NASH
Understanding of the pathophysiologic mechanisms that lead to NASH has evolved in recent years. Excessive caloric overload, metabolic
dysregulation, cardio-metabolic co-morbidities and genetic risk factors increase the likelihood of developing NASH, with a multitude of potential
mechanistic contributors to pathophysiology. In NASH, the liver’s capacity to handle the primary metabolic energy substrates, carbohydrates and fatty
acids, is overwhelmed. This occurs when there is an excess of free fatty acids deposited in the liver or their disposal from the liver is impaired. The
accumulation of surplus free fatty acids leads to the formation of toxic lipid species. These toxic lipids then induce endoplasmic reticulum stress, oxidative
stress and an inflammatory response, which can result in hepatocellular injury and death. This may lead to fibrosis and genomic instability, which may
worsen over time to cirrhosis and HCC, respectively.
The critical pathophysiologic mechanisms underlying development and progression of NASH include (1) reduced ability to handle lipids, (2)
increased insulin resistance, (3) injury to hepatocytes and (4) development and progression of liver fibrosis in response to hepatocyte injury.
Reduced Ability to Handle Lipids
Excess consumption of calories, poor diet and a sedentary lifestyle, each often associated with obesity, can burden the body with a surplus of
carbohydrates and lipids. This burden can be progressively more difficult for the liver to handle thereby resulting in steatosis in the liver. The problem is
compounded further as insulin resistance develops.
Free fatty acids (“FFA”) accumulate in the liver primarily from three sources, namely, through (1) the transfer from peripheral adipose tissues
where triglycerides are mobilized, (2) de-novo lipogenesis (“DNL”), and (3) direct dietary intake. The FFA that lead to NASH are believed to arise
primarily from the peripheral tissue pool and secondarily through DNL. The increase in the influx of FFA to the liver from the peripheral tissues is driven
by excessive caloric intake greater than the body’s demand and increased insulin resistance resulting in deposition of fat to the liver for processing. DNL is
a distinct process in the liver by which hepatocytes convert excess carbohydrates, especially fructose, to fatty acids.
The three main fates of fatty acids in the liver are (1) mitochondrial beta-oxidation (to release ATP, or energy), (2) re-esterification to form
triglyceride, which can then be exported into the blood as very low density lipoproteins, or (3) stored in lipid droplets, resulting in liver steatosis and
ultimately NASH. Adiponectin, a hormone derived from adipose tissue, appears to have a pivotal role in improving fatty acid oxidation and decreasing
fatty acid synthesis, components of lipid handling.
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An increase in cholesterol accumulation in the liver can also contribute to NASH, though its role is not as clearly defined as in the case of
triglycerides. The dysregulation of the cholesterol pathway can result in an increase in the cholesterol levels in the liver. The increased cholesterol can
accumulate in the liver cell membranes and activate Kupffer cells (activated stellate macrophages), thereby triggering inflammatory pathways and resulting
in the progression of NASH.
Increased Insulin Resistance
Insulin resistance, which typically develops in obese individuals, is considered to be a fundamental underlying mechanism in the majority of
NASH patients. Fatty acids are primarily delivered to the liver from blood following lipolysis of triglycerides in adipose tissue, a process that is regulated
by the actions of insulin on adipocytes. Insulin resistance in adipose tissue manifests as dysregulated lipolysis resulting in excessive delivery of FFA to the
liver. The liver tries to cope with the large influx of FFA; however, the build-up of metabolic intermediates interferes with signaling, resulting in hepatic
insulin resistance and the inability of the liver to process this excess FFA influx. The state of hepatic insulin resistance further exacerbates the problem by
triggering DNL and the build-up of excess fat in the liver.
Injury to Hepatocytes
When the disposal of fatty acids through beta-oxidation or the formation of triglycerides is chronically overwhelmed, fatty acids can form lipotoxic
species that lead to stress on the endoplasmic reticulum, oxidative stress and inflammation, all of which are pivotal processes in the development of NASH.
Liver inflammation may be an important link between the initial metabolic stress and subsequent hepatocyte death and stimulation of fibrogenesis in
NASH by promotion of the expression of pro-inflammatory cytokines and of apoptosis (cell death). These processes are core to the steatohepatitis that
gives NASH its name. For example, hepatocyte apoptosis results in the ballooning of cells, a classic pathological feature of NASH. While hepatocytes are
the primary and major target of toxic lipids, other cells such as Kupffer cells and hepatic stellate cells are also affected by lipotoxicity and contribute to the
development of NASH pathology.
Additional factors, including dysregulation of cytokines and adipokines, energy depletion, anti-oxidant deficiencies, products of the gut
microbiome and iron load may modulate hepatocyte vulnerability to the development of lipotoxic stress, injury and inflammation.
Development and Progression of Liver Fibrosis in Response to Hepatocyte Injury
Signaling from stressed or injured hepatocytes and Kupffer cells leads to activation of quiescent hepatic stellate cells. Upon activation, hepatic
stellate cells release collagen and other factors. When the production of collagen and matrix proteins is faster than their degradation, accumulation of these
proteins in the extracellular matrix can lead to progressive fibrosis. As the lipotoxicity and inflammation continue to damage the liver, the hepatic stellate
cells continue to be activated resulting in greater collagen deposition that ultimately leads to fibrosis and cirrhosis.
Co-morbidities Associated with NASH
Patients with NASH frequently have other significant co-morbidities—hypertriglyceridemia, obesity, hyperlipidemia/dyslipidemia, hyperglycemia
(including Type 2 diabetes) and systemic hypertension, a constellation of which is commonly referred to as metabolic syndrome—which also increase the
risk of developing cardiovascular disease. Figure 2 below shows certain co-morbidities associated with NASH.
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Figure 2: NASH Co-morbidities
Selected Co-morbidities
Prevalence in NASH Population
Hypertriglyceridemia
Obesity
Hyperlipidemia / Dyslipidemia
Metabolic syndrome
Type 2 diabetes
83%
82%
72%
71%
44%
In addition, NASH was found to independently increase the risk of non-liver-related adverse outcomes, including cardiovascular risk and
malignancy. Multiple epidemiological studies have linked NASH to increased cardiovascular morbidity, concluding that the majority of deaths among
NASH patients are attributable to cardiovascular disease (cardiovascular death is four times higher than death related to liver disease).
In considering therapeutic options to treat NASH, we believe it is important to address the underlying metabolic co-morbidities in addition to the
liver pathology.
Diagnosis
Most people with NASH are asymptomatic and their disease is often discovered incidentally following a liver imaging procedure, such as an
ultrasound, prescribed for other reasons or as part of an investigation for elevated liver enzymes. Once suspected clinically, a liver biopsy is required to
definitively diagnose NASH, which necessitates the joint presence of steatosis, ballooning and lobular inflammation. Once pathologically confirmed, the
severity of NAFLD and NASH is determined using the histologically validated NAS, which grades disease activity on a scale of 0 to 8. The NAS is the
sum of the individual scores for steatosis (0 to 3), lobular inflammation (0 to 3), and hepatocellular ballooning (0 to 2) but does not include a score for
fibrosis. Fibrosis staging (F0-F4) relies on the Kleiner classification (F0 = no fibrosis; F1 = perisinusoidal or periportal fibrosis (not both); F2 = both
perisinusoidal and periportal fibrosis; F3 = bridging fibrosis; F4 = cirrhosis).
Histological diagnosis remains the gold standard for assessment of NASH and fibrosis. However, given that liver biopsy is associated with risks of
pain, bleeding and other morbidity, as well as significant cost, the procedure is not practical for general patient screening. Several non-invasive tools such
as clinical risk scores and imaging techniques are increasingly used to assess NASH patients. Clinical risk scores such as the NAFLD fibrosis score,
Fibrosis-4 index, the Enhanced Liver Fibrosis score and vibration-controlled transient elastography (“VCTE”), have been validated and are increasingly
used. These tools have an excellent negative predictive value and an acceptable positive predictive value for detection of advanced (≥ F3) fibrosis and are
increasingly used in clinical settings. Additionally, evidence is emerging that shows a correlation between reduction in steatosis as measured by MRI-PDFF
and improvement in histological changes in the liver. Extensive efforts are also under way to develop non-invasive means to identify patients with NAS ≥ 4
or fibrosis ≥ F2 patients without a need for a liver biopsy. In draft guidance, the FDA encouraged sponsors to identify biochemical or noninvasive imaging
biomarkers that, once characterized and agreed by the FDA, could replace liver biopsies for patient selection and efficacy assessment in clinical trials.
We expect that the validation and subsequent adoption of these new tools will result in an increase in the diagnosis and treatment rates for NASH in
the future.
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FGF21 Overview
Fibroblast growth factors (“FGFs”), including FGF21 and FGF19, are a large family of cell-signaling proteins involved in the regulation of many
processes within the body. FGF21 is an endogenous metabolic hormone that regulates energy homeostasis, glucose-lipid-protein metabolism and insulin
sensitivity, and modulates the pathways that mitigate against intracellular stress. FGF21 is secreted primarily by the liver but is also secreted by the white
adipose tissue (“WAT”), skeletal muscle and the pancreas. FGF21 exerts its biological benefits through the activation of three fibroblast growth factor
receptors (“FGFRs”), FGFR1c, FGFR2c and FGFR3c, and requires co-activation of the transmembrane protein cofactor beta Klotho (“ß-Klotho”). FGF21
is not believed to activate FGFR4, which has been associated with adverse effects. FGF21 can act directly or indirectly on target organs by mediating
downstream regulators, such as adiponectin, and upstream regulators that induce FGF21, such as nutritional stress or transcription factors.
Biological Effects of FGF21:
Reducing Liver Steatosis by Improving Lipid Handling and Insulin Sensitivity
FGF21 has been clinically shown to reduce liver steatosis. FGF21 reduces liver steatosis by (1) increasing fatty acid oxidation in the liver, (2)
reducing the deposition of free fatty acids from peripheral tissue to the liver and (3) reducing DNL in the liver. FGF21 exerts its systemic effects by
reducing the serum levels of lipids (e.g., triglycerides, LDL cholesterol) and increasing insulin sensitivity. Increasing insulin sensitivity reduces lipolysis
and can also reduce serum levels of lipids. In particular, FGF21 has been demonstrated to reduce liver fat in patients with NASH in multiple clinical trials.
Improving Liver Inflammation and Fibrosis
FGF21 is also believed to reduce liver fibrosis, the pathological change mostly clearly linked to liver-related morbidity in NASH patients via two
potential pathways. One pathway is through the metabolic benefits of FGF21 described above. Long-term improvements in metabolic regulation reduce the
ongoing liver injury that drives fibrosis and thus allows the liver time to heal. The other pathway is a direct anti-fibrotic effect mediated via adiponectin, an
adipokine that is upregulated by FGF21. Increased adiponectin downregulates the hepatic stellate cells that are activated upon hepatic injury and
responsible for collagen deposition and subsequent fibrosis. FGF21 demonstrated an improvement in liver fibrosis in patients in NASH in a clinical trial.
FGF21 Signaling
As noted above, FGF21 exerts its biological benefits through the co-activation of FGFRs and ß-Klotho. FGFRs are expressed widely throughout
the body whereas ß-Klotho is primarily expressed in metabolic tissues such as adipose tissue, liver, and pancreas, thereby providing organ specificity to
FGF21.The binding of FGF21 is a two-step process. The C-terminus of FGF21 initially binds to ß-Klotho enabling the N-terminus to form an expanded
complex with one of the FGFRs. Once the co-receptor complex has formed with ß-Klotho and one of the FGFRs, a series of intracellular signaling
cascades is initiated. These signaling cascades enable FGF21 to exert its biological functions.
FGF21 activates three specific FGFRs (FGFR1c, FGFR2c and FGFR3c), which based on nonclinical studies and clinical trials, appear to be
responsible for mediating the desired therapeutic actions of FGF21 in NASH. FGF21 is not believed to activate FGFR4. Activation of FGFR4 results in an
increase in LDL cholesterol and has been implicated in the etiology or progression of HCC.
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BIO89-100
Overview
We are developing BIO89-100, a specifically engineered glycoPEGylated analog of FGF21, for the treatment of NASH and SHTG. BIO89-100 has
been specifically engineered to retain the activity of native FGF21 while extending its half-life. Specifically, it has been engineered to: (1) protect against
proteolysis and reduce renal clearance, (2) have an extended half-life, (3) minimize susceptibility to aggregate in solution and (4) optimize its potency,
enabling the potential use of lower dosage/doses. Additionally, we believe that BIO89-100 may enhance binding affinity for ß-Klotho, by altering the
conformation of the C-terminus which could have a positive impact on efficacy.
Primary Structure and Protein Engineering of BIO89-100
BIO89-100 has been optimally constructed with two mutations via substitutions with natural amino acids at site-specific positions (173 and 176)
toward the C-terminus end of the hormone. The mutations were incorporated into the FGF21 sequence after existing proline to create a consensus sequence
for glycosylation. Subsequently, the glycosyl linker and a single 20 kDa glycoPEG moiety were enzymatically introduced at the O-linked glycosylation
consensus site (position 173) via the proprietary glycoPEGylation technology. Our glycoPEG moiety is an activated form of the PEG molecule with the use
of Sialic Acid, CMP-SA-PEG. The proximity of the mutations ensures consistent and efficient attachment of the glycoPEG moiety.
BIO89-100 has two modified natural amino acid residues:
•
•
S173T: Serine modified to Threonine at position 173; and
R176A: Arginine modified to Alanine at position 176.
In addition, a Methionine residue was introduced at the N-terminus which acts as the translation initiation signal. Figure 3 below shows the
structure of BIO89-100.
Figure 3: Structure of BIO89-100
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The increase in the size of the molecule from 19.4 kDa to 40 kDa together with the site-specific mutations adjacent to the primary cleavage site of
FGF21 (by the FAP enzyme between positions 171 and 172 on the native amino acid chain, which would be represented by positions 172 and 173 in our
molecule starting with Methionine in position 1) are designed to prolong the half-life of the molecule. Additionally, we believe that the use of
glycoPEGylation technology produces a comparatively stronger and more flexible structure, which aids in the development of a stable formulation.
PEGylation technology has been used successfully in many pharmaceutical products including products that have been marketed for more than 10 years.
BIO89-100 uses a proprietary glycoPEGylation technology that has been previously validated by a third party, as this technology is incorporated in
another pharmaceutical product (Lonquex® by Teva) that has received regulatory approval and is currently commercialized in the European Union.
The Development and Selection of BIO89-100
The discovery program that led to the selection of BIO89-100 was directed towards achieving an optimal pharmacokinetic (“PK”) and efficacy
profile. It has been shown that the in vivo half-life of FGF21 can be extended by covalently linking a single glycoPEG moiety to the molecule. We
performed extensive screening of FGF21 analogs with mutations at different positions including close to the N-terminus, as well as different
glycoPEGylations to select an optimized molecule based on its potency, PK and in-vivo efficacy.
Stage I—Optimizing Selection of Mutation Sites—In Vitro Potency Testing
Mutations were inserted at different sites for both non-PEGylated FGF21 analogs and corresponding glycoPEGylated analogs and screened in a
cell-based potency assay to select analogs that did not lose potency relative to the native hormone. Amongst the multiple glycoPEGylated analogs tested,
only mutations at sites towards either N-terminus or C-terminus showed potency comparable to that of native FGF21 hormone and were selected for further
development.
Stage II—Optimizing for glycoPEG (20 kDa vs 30 kDa)—In Vitro Potency Testing
Analogs selected in Stage I were prepared with either a 20 kDa or a 30 kDa glycoPEG moiety and tested for potency in mouse adipocytes (3T3-L1)
and human embryonic kidney (HEK-293) cell lines. Minimal differences in potencies were observed between the 20 kDa and 30 kDa glycoPEGylated
analogs. However, only the glycoPEGylated analogs that had mutations and a glycoPEG attachment at the C-terminus, as distinct from those with
mutations at the N-terminus, maintained their potency in both mouse and human cell lines. These analogs were selected for future development.
Stage III—Optimizing for PK Properties and Efficacy—In Vivo Testing
Selected analogs from Stage II with either a 20 kDa or a 30 kDa glycoPEG moiety, were chosen for in vivo testing in a diabetic mouse model. In
addition to PK, changes from baseline in glucose, triglycerides and insulin were measured. The data showed that the circulating half-life of the
glycoPEGylated analogs for both glycoPEG sizes was extended (range 15 to 30 hours) as compared to native FGF21 (2 hours). As expected, all analogs
were observed to cause a reduction in blood glucose levels. However, the 20 kDa glycoPEGylated analogs were observed to outperform the 30 kDa analogs
by improving triglycerides at lower doses and across broader dose ranges. BIO89-100 resulted in the greatest reduction of insulin and was selected as the
candidate for clinical development.
In summary, the mutations made to the native FGF21 molecule and the addition of the 20 kDA glycoPEG moiety via the use of the
glycoPEGylation technology were observed to significantly improve the PK properties of the molecule while retaining the therapeutic benefits. We believe
that BIO89-100 is a well-balanced molecule with a unique profile, which has the potential to have therapeutic benefits in NASH and cardio-metabolic
diseases. Figure 4 below sets forth what we believe are the key features and potential benefits of BIO89-100:
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Figure 4: Summary of BIO89-100 Attributes and Benefits
Features
Use of PEG (via
glycoPEGylation)
▪ Increases protein size and hydrodynamic volume that reduces
▪ Prolongs half-life
Description
Potential Benefit
renal filtration
▪ Prevents degradation by endocytosis and proteolytic enzymes
▪ Protects antigenic sites present on the protein surface (i.e. antigenic
epitopes)
▪ Reduces immunogenicity
▪ Steric repulsion between the PEGylated surfaces increases water
▪ Results in more stable formulation
solubility and reduces aggregates
Site-Specific Mutations
▪ Mutation at position 173 is immediately adjacent to the primary
▪ Prolongs half-life
GlycoPEGylation
Technology
cleavage (FAP enzyme) site of FGF21
▪ Allows site specific linkage (glycoPEG moiety to position 173)
▪ Proximity of the glycoPEG moiety to the
C-terminus induces conformational changes to the molecule
▪ Retains potency against receptor to
improve efficacy
▪ Provides a strong and flexible glycosyl bond that helps the glycoPEG
▪ Further enhances half-life
moiety remain intact, further reducing degradation
Therapeutic Potential of BIO89-100 Supported by Preclinical Animal Models of NASH, Diabetes and Obesity
BIO89-100 was evaluated in multiple distinct animal models of NASH, diabetes and obesity, including non-human primate studies. In each of
these studies, consistent and significant beneficial effects were observed across a range of endpoints, specifically, robust improvements in lipid handling,
glycemic control and insulin resistance as well as significant improvements in hepatic steatosis, injury and fibrosis. We believe these results demonstrate
the potential of BIO89-100 to simultaneously address the multiple drivers of NASH pathogenesis. The histological endpoints, NAS and fibrosis score,
mirror the endpoints we expect to assess in our clinical development. In addition, treatment with BIO89-100 in animal models was observed to result in
consistent reductions in body weight.
BIO89-100 has been evaluated in three animal models of direct relevance to NASH. These included: (1) Stelic Animal Model (“STAM”), (2) Diet-
induced NASH (“DIN”) model and (3) spontaneous diabetic obese cynomolgus monkey model. Additional studies done in diabetes mouse model and diet
induced obesity mouse model showed benefits in key markers of relevance in NASH.
A wide range of doses were tested in these studies as well as weekly and once every two-week dosing regimen was tested in a cynomolgus monkey
study. The key outcomes of these studies are summarized in Figure 5 below.
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Figure 5: Summary of NASH Pharmacology Studies
Preclinical pharmacology study with
BIO89-100
Improved
Insulin
Sensitivity
Improved
Triglycerides and
Cholesterol
Reduced
Hepatocyte
Injury
Reduced Liver Steatosis,
Inflammation &
Fibrosis
Body
Weight
Reduction
DIN mouse model I (10 weeks)
DIN mouse model II (19 weeks)
Diabetic obese cynomolgus monkey study 1 (8
weeks; weekly dosing)
Diabetic obese cynomolgus monkey study 2 (4
weeks; QW or Q2W dosing)
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
Not evaluated
Not evaluated
✓
✓
✓
✓
Legend:
✓
*
Statistically significant benefit observed.
Improvement observed, but did not achieve statistical significance.
BIO89-100 Clinical Development in NASH
Phase 1a Clinical Trial of Single Dose of BIO89-100 in Healthy Volunteers
We conducted a Phase 1a clinical trial to evaluate the safety, tolerability and PK of BIO89-100 in 58 healthy volunteers. In this randomized,
double-blind, placebo-controlled, Phase 1a, first-in-human, SAD clinical trial the PK profile of BIO89-100 was generally dose-proportional or slightly
more than dose-proportional with a half-life of approximately 55 to 100 hours. The observed median time of maximum serum concentration ranged from
36 to 60 hours. At single doses of 9.1 mg and higher, significant improvements were observed in key lipid parameters measured at Day 8 and Day 15 after
dosing on Day 1. The mean changes versus baseline include significant reductions in triglycerides (up to 51%) and LDL-C (up to 37%) and increase in
HDL-C (up to 36%) despite the baseline values being in the normal range. BIO89-100 demonstrated rapid (starting from Day 2), sustained and durable
improvements on lipid parameters for two weeks or more after single dose administration. The effect on lipid parameters was generally dose-dependent.
BIO89-100 was well tolerated across the dose range and there were no deaths, serious adverse events or discontinuations due to adverse events. The most
commonly observed treatment-related adverse events, occurring in at least two subjects in the pooled BIO89-100 group, were injection site reactions and
headache, all of which were reported as mild. No clinically meaningful trends were observed in gastrointestinal events, laboratories or vital signs including
blood pressure or heart rate changes.
Phase 1b/2a Proof of Concept Clinical Trial in NASH Patients
In September 2020, we presented positive topline results from our Phase 1b/2a trial in NASH patients which has informed the advancement of our
clinical strategy in NASH. We plan to initiate a Phase 2b trial in NASH patients in the first half of 2021.The 13-week phase 1b/2a multicenter, randomized,
double-blind, placebo-controlled, multiple ascending dose-ranging trial enrolled a total of 81 patients to receive weekly (3mg/9mg/18mg/27mg) or every
two-week (18mg/36mg) dosing of BIO89-100 or placebo for up to 12 weeks. Key endpoints assessed were safety, tolerability, and PK of BIO89-100 as
well as change in liver fat measured by MRI-PDFF and other metabolic markers. The trial design is shown in Figure 6 below.
15
Figure 6: Phase 1b/2a Trial Design
As shown in Figure 7 below, all dose groups demonstrated significant reductions in liver fat at week 13, with relative reductions up to 60% versus
baseline and up to 70% versus placebo, as measured by MRI-PDFF. 43% of the patients at the highest dose achieved normal liver fat content of < 5%. A
significant proportion of patients responded to therapy with up to 88% and 71% of patients achieving a ³30% or a ³50% reduction in liver fat versus
baseline, respectively.
Figure 7: Relative Reduction in Liver Fat vs. Placebo at Week 13
16
As shown in Figure 8 below, treatment with BIO89-100 also resulted in significant improvements in liver transaminases, with up to a 44%
reduction in ALT and a 35 U/L decrease in ALT in patients with elevated baseline levels. Treatment with BIO89-100 resulted in significant reductions in
triglycerides (up to 28%; p <0.05), non-HDL (up to 16%; p<0.01) and LDL-C (up to 16%; p<0.05). Triglycerides were reduced to a greater extent in
patients with elevated triglycerides at baseline (TG ≥200 mg/dL), and 53% of the BIO89-100 patients in this group normalized triglyceride levels versus
0% in the placebo group. BIO89-100 also demonstrated significant increases in the insulin-sensitizing hormone adiponectin (up to 61%; p<0.001).
Improvements were also noted across the spectrum of metabolic marker data vs. placebo for the 27mg QW dose group including HOMA-IR, glucose,
HbA1c, weight (p<0.05) and adiponectin (p<0.001).
Figure 8: Clinically Meaningful ALT Reduction; Greater Reduction in Patients with High ALT
Baseline characteristics were similar across the sub-populations of biopsy-confirmed NASH and PNASH patients enrolled in the trial and results
were also consistent across the two sub-groups. Specifically, the reductions in liver fat, percentage of responders on MRI-PDFF, and BIO89-100’s effect on
reducing ALT and triglycerides were also similar across these sub-populations.
As shown in Figures 9 and 10 below, BIO89-100 was well-tolerated across all doses with no deaths or serious adverse events related to treatment
and a low incidence of treatment-related adverse events (“TRAEs”) that occurred in ≥ 10% of patients. The only treatment-related adverse event that
occurred in ≥10% of all BIO89-100-treated subjects was mild, increased appetite (15.9%) consistent with other investigational FGF21 analogs. Low
frequency of gastrointestinal (“GI”) related adverse events was observed with a profile for BIO89-100 that was similar to placebo. Low rates of diarrhea
(9.5% vs. 11.1% for placebo) and nausea (4.8% vs. 11.1% for placebo) and importantly, no vomiting were reported in BIO89-100 treated patients. No
adverse effects on heart rate or blood pressure were observed.
17
Figure 9: Safety Overview
Figure 10: Treatment-Related Emergent AEs in ≥ 10% of Pooled BIO89-100 Group
Paired-biopsy, Open-label Histology Cohort
In December 2020, we initiated a paired-biopsy, open-label cohort as part of the Phase 1b/2a trial assessing histology endpoints, with data
anticipated by the end of 2021. This cohort is expected to enroll approximately 20 patients with biopsy-confirmed NASH who will be treated for 20 weeks
with 27 mg of BIO89-100 once weekly. The cohort will build on the recent data from 89bio’s Phase 1b/2a trial and will provide an early opportunity to
demonstrate BIO89-100’s benefits on histology endpoints.
BIO89-100 Clinical Development in SHTG
BIO89-100 has demonstrated significant reduction in triglyceride levels across all our preclinical and clinical studies. In diabetic obese cynomolgus
monkeys with elevated triglyceride levels, BIO89-100 showed significant effects on triglycerides with a maximal reduction of 78% and 76% at doses of 1
mg/kg. In monkeys treated with baseline levels of triglycerides greater than 500mg/dL (n=4), the three monkeys treated with BIO89-100 1 mg/kg weekly
had triglyceride reductions >90% at study end. In our Phase 1a clinical study, in patients with baseline triglyceride values in the normal range (mean
baseline 94 mg/dL), BIO89-100 demonstrated reductions of triglycerides from baseline up to 51% at Day 8 after a single dose in healthy volunteers. In our
Phase 1b/2a trial, treatment with BIO89-100 resulted in significant reductions in triglycerides (up to 28%; p <0.05). Triglycerides were reduced to a greater
extent in patients with elevated triglycerides at baseline (TG ³200 mg/mL), and 53% of the BIO89-100 patients in this group normalized triglyceride levels
versus 0% in the placebo group. While currently approved SHTG therapies decrease triglyceride levels, they generally do not have broader metabolic
benefits.
We initiated our Phase 2 trial (ENTRIGUE) in SHTG patients in the third quarter of 2020 and expect to enroll approximately 90 patients who could
be on stable background medications. In this Phase 2 multi-center, randomized, double-blind, placebo-controlled study designed to evaluate safety, efficacy
and tolerability, patients will receive BIO89-100 administered weekly (9 mg, 18 mg or 27 mg) or every two weeks (36 mg) or placebo. The primary
endpoint is the reduction in fasting triglycerides from baseline. Key secondary endpoints include other lipids and metabolic markers and change in liver fat
measured by MRI-PDFF. Topline data from ENTRIGUE are expected in the second half of 2021. We have expanded ENTRIGUE with an additional cohort
of patients on fibrates to assess the benefit of 27 mg weekly BIO89-100 when added to background fibrates. In this cohort, a total of 36 patients will be
randomized to either BIO89-100 or placebo. The primary endpoint and key secondary endpoint are the same as in ENTRIGUE. We also expect to initiate
registrational trials in SHTG in 2022, pending positive data from ENTRIGUE.
18
There is regulatory precedence for the approval of therapies for the treatment of SHTG in the United States based on the reduction in triglycerides
from baseline as the primary endpoint for full approval. The FDA surrogate endpoint table for drug approval lists a reduction in triglycerides from baseline
as the endpoint for full approval of a therapy in SHTG. A clinical outcome study was not required for certain third-party approvals in SHTG or as a post-
marketing commitment. The SHTG Phase 3 trial for some of these products consisted of a single study of a 12-week duration with 75 to 100 patients per
treatment group. Based on the regulatory path followed by other companies that have successfully developed SHTG therapies, we believe that a
combination of smaller clinical trials and shorter development timelines could mean that SHTG potentially represents a quicker path to market for BIO89-
100.
Agreements with Teva
Agreements Relating to FGF21 Program
In April 2018, we entered into an Asset Transfer and License Agreement (the “FGF21 Agreement”) with Teva Pharmaceutical Industries Ltd
(“Teva”), under which we acquired certain patents, intellectual property and other assets relating to Teva’s glycoPEGylated FGF21 program. Under this
agreement, Teva also granted a perpetual, non-exclusive (but exclusive as to BIO89-100), non-transferable, worldwide license to patents and know-how
related to glycoPEGylation technology for use in the research, development, manufacture and commercialization of the compound BIO89-100 and products
containing BIO89-100. In addition, we entered into a Sublicense Agreement with ratiopharm (the “ratiopharm Sublicense”), under which we were granted
a perpetual, exclusive, worldwide sublicense to patents and know-how related to glycoPEGylation technology used in the development, manufacture and
commercialization of BIO89-100 and products containing BIO89-100.
Under the FGF21 Agreement, we are obligated to use commercially reasonable efforts to develop and commercialize BIO89-100 in each of the
United States and five major European countries. We have the right to sublicense all rights licensed to us by Teva under the FGF21 Agreement.
Pursuant to the FGF21 Agreement and the FASN Agreement (as defined and described below), we paid Teva a nonrefundable upfront payment of
$6.0 million. In addition, under the FGF21 Agreement, we are required to make certain payments to Teva totaling $2.5 million for the achievement of
certain clinical development milestones, and additional payments totaling up to $65.0 million upon achievement of certain commercial milestones. We are
also obligated to pay Teva tiered royalties at percentages in the low-to-mid single-digits on worldwide net sales of products containing BIO89-100. Our
royalty obligations will terminate, on a product-by-product and country-by-country basis, at the later of: (1) the date of expiration of the last to expire valid
claim in the assigned patents that covers BIO89-100 in such country, (2) the expiration of data or regulatory exclusivity for BIO89-100 in such country and
(3) 10 years from the first commercial sale of BIO89-100 in such country. We are not required to make any payments to ratiopharm pursuant to the
ratiopharm Sublicense.
The term of the FGF21 Agreement will continue, on a product-by-product and country-by-country basis, until the royalty term with respect to
BIO89-100 in such country expires. The ratiopharm Sublicense will continue until terminated in accordance with its terms. We may terminate the FGF21
Agreement and the ratiopharm Sublicense for any reason. Either party may terminate the FGF21 Agreement for cause for the other party’s uncured material
breach. ratiopharm may terminate the ratiopharm Sublicense for certain material breaches by us. Either party may terminate the FGF21 Agreement or the
ratiopharm Sublicense in the event of bankruptcy of the other party. Teva may terminate the FGF21 Agreement if we challenge the validity of any patent
licensed to us under the FGF21 Agreement. Termination of the FGF21 Agreement or the ratiopharm Sublicense will impact our rights under the intellectual
property licensed to us by Teva and ratiopharm, respectively, but will not affect our rights under the assets assigned to us.
In April 2018, we also entered into a Reagent Supply and Technology Transfer Agreement, under which Teva will supply us with certain reagents
required for the glycoPEGylation process that are necessary for our development and commercialization of BIO89-100, and transfer to us certain know-
how required for the production of such reagents. The term of this agreement was recently extended by mutual agreement until December 31, 2022.
19
FASN Agreements
In April 2018, we entered into an Asset Transfer and License Agreement with Teva under which we acquired from Teva patents, intellectual
property and other assets relating to Teva’s development program of small molecule inhibitors of FASN (the “FASN Agreement”). Under the FASN
Agreement we are obligated to use commercially reasonable efforts to develop and commercialize FASN in the United States and five major European
countries. We have the right to sublicense all rights licensed to us by Teva under the FASN Agreement.
Pursuant to the FASN Agreement and the FGF21 Agreement (as described above), we paid Teva a nonrefundable upfront payment of $6.0 million.
In addition, under the FASN Agreement, we are required to make certain payments to Teva totaling $2.5 million for the achievement of certain clinical
development milestones, and additional payments totaling up to $65.0 million upon achievement of certain commercial milestones. We are also obligated
to pay Teva tiered royalties at percentages in the low-to-mid single-digits on worldwide net sales of products arising from the FASN program. Our royalty
obligations will terminate, on a product-by-product and country-by-country basis, at the later of: (1) the date of expiration of the last to expire valid claim
in the assigned patents that covers FASN in such country, (2) the expiration of data or regulatory exclusivity for such product arising from the FASN
program in such country and (3) 10 years from the first commercial sale of a product arising from the FASN program in such country.
The term of the FASN Agreement will continue, on a product-by-product and country-by-country basis, until the royalty term with respect to the
product arising from the FASN program in such country expires. We may terminate the FASN Agreement for any reason. Either party may terminate the
agreement for cause for the other party’s uncured material breach, or in the event of bankruptcy of the other party.
Government Regulation and Product Approval
The FDA and other regulatory authorities at federal, state and local levels, as well as in foreign countries, extensively regulate, among other things,
the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record
keeping, approval, advertising, promotion, marketing, post-approval monitoring and post-approval reporting of biologics, such as those we are developing.
We, along with third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing
regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates.
The process required by the FDA before biologic product candidates may be marketed in the United States is expensive and time-consuming.
Generally, this process involves completing pre-clinical laboratory studies before the FDA will allow human clinical trials to commence. We are then
required to complete human clinical trials to demonstrate that a product candidate is safe and effective. Following the completion of these clinical trials, we
are required to prepare and submit a biologics license (“BLA”) application, which presents the FDA with detailed clinical and safety data, as well as
manufacturing data. As part of the review of a BLA, the FDA may inspect manufacturing facilities to assure that the facilities, methods and controls are
adequate to preserve the biological product’s continued safety, purity and potency, and may also inspect selected clinical investigation sites to assess
compliance with current Good Clinical Practices (“cGCP”). This process takes many years from inception through filing of a BLA application and the
likelihood of success is highly uncertain.
Preclinical and Clinical Development
Prior to beginning the first clinical trial with a product candidate, we must submit an investigational new drug (“IND”) application to the FDA. An
IND is a request for authorization from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is
the general investigational plan and the protocol(s) for clinical studies. Submission of an IND may or may not result in FDA authorization to begin a
clinical trial.
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Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in
accordance with cGCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study.
Furthermore, an independent review board (“IRB”) for each site proposing to conduct the clinical trial must review and approve the plan for any clinical
trial and its informed consent form before the clinical trial begins at that site, and must monitor the study until completed. Regulatory authorities, the IRB
or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health
risk or that the trial is unlikely to meet its stated objectives.
For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap.
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Phase 1—The investigational product is initially introduced into healthy human subjects or patients with the target disease or condition.
These studies are designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the investigational product in
humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness.
Phase 2—The investigational product is administered to a limited patient population with a specified disease or condition to evaluate the
preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2
clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.
Phase 3—The investigational product is administered to an expanded patient population to further evaluate dosage, to provide statistically
significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites.
These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for
product approval.
Concurrent with clinical trials, companies must finalize a process for manufacturing the product in commercial quantities in accordance with
current good manufacturing practices (“cGMP”) requirements. The manufacturing process must be capable of consistently producing quality batches of the
product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product, or for biologics,
the safety, purity and potency.
BLA Submission and Review
Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product
development, nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or more
indications. The submission of a BLA requires payment of a substantial application user fee to FDA, unless a waiver or exemption applies.
Once a BLA has been submitted, the FDA’s goal is to review standard applications within ten months after it accepts the application for filing, or, if
the application qualifies for priority review, six months after the FDA accepts the application for filing. In both standard and priority reviews, the review
process is may be extended by FDA requests for additional information or clarification. The FDA reviews a BLA to determine, among other things,
whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed, or held meets standards designed to assure the
product’s continued safety, purity and potency. The FDA may convene an advisory committee to provide clinical insight on application review questions.
Before approving a BLA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an
application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure
consistent production of the product within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more
clinical sites to assure compliance with cGCP. If the FDA determines that the application, manufacturing process or manufacturing facilities are not
acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any
requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
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After the FDA evaluates a BLA and conducts necessary inspections, the FDA may either issue an approval letter or a Complete Response letter. An
approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A Complete Response letter
will describe deficiencies that the FDA has identified in the BLA. The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not
satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.
If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated
uses for which such product may be marketed. For example, the FDA may approve the BLA with a Risk Evaluation and Mitigation Strategy (“REMS”) to
ensure the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a product and
to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication
plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may
condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the
FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product
reaches the marketplace. The FDA may require, or companies may voluntarily pursue, one or more Phase 4 post-market studies and surveillance to further
assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of
these post-marketing studies.
Expedited Programs for Serious Conditions
The FDA maintains several programs intended to facilitate and expedite development and review of new drugs and biologics to address unmet
medical needs in the treatment of serious or life-threatening diseases or conditions. These programs include Fast Track designation, Breakthrough Therapy
designation, Priority Review and Accelerated Approval. These programs can significantly reduce the time it takes for the FDA to review a BLA, but they
do not guarantee that a product will receive FDA approval. Even if a product qualifies initially, the FDA may later decide that the product no longer meets
the conditions for qualification or decide that the time period for FDA review will not be shortened.
Post-Approval Requirements
Any products manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including,
among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and
advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims,
are subject to prior FDA review and approval. Biologic manufacturers and their subcontractors are required to register their establishments with the FDA
and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP. Changes
to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being
implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements upon companies
and third-party manufacturers. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to
maintain compliance with cGMP and other aspects of regulatory compliance.
The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the
product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or
frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new
safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other
restrictions under a REMS program, among other potential consequences.
The FDA closely regulates the marketing, labeling, advertising and promotion of biologics. A company can make only those claims relating to
safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other
agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in,
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among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties.
Biosimilars and Reference Product Exclusivity
The Patient Protection and Affordable Care Act, as amended (collectively, the “Affordable Care Act”) includes a provision called the Biologics
Price Competition and Innovation Act of 2009 (“BPCIA”), which created an abbreviated approval pathway for biological products that are biosimilar to or
interchangeable with an FDA-approved reference biological product.
Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of
safety, purity and potency, can be shown through analytical studies, animal studies, and a clinical study or studies.
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 that applicant’s own preclinical data and data from adequate and
well-controlled clinical trials to demonstrate the safety, purity and potency of its product. At this juncture, it is unclear whether products deemed
“interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.
The BPCIA is complex and continues to be interpreted and implemented by the FDA. In addition, recent government proposals have sought to
reduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have
also been the subject of recent litigation. As a result, the ultimate impact, implementation, and impact of the BPCIA is subject to significant uncertainty.
Other U.S. Healthcare Laws and Compliance Requirements
Pharmaceutical companies are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the
states and foreign jurisdictions in which they conduct their business. Such laws include, without limitation: the federal Anti-Kickback Statute (“AKS”), the
federal False Claims Act, HIPAA and similar foreign, federal and state fraud, abuse and transparency laws.
The federal AKS prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting or receiving any
remuneration, to induce or in return for either the referral of an individual, or the purchase or recommendation of an item or service for which payment may
be made under any federal healthcare program. The term remuneration has been interpreted broadly to include anything of value. The AKS has been
interpreted to apply to arrangements between pharmaceutical manufacturers on one hand, and prescribers and purchasers on the other. Our practices may
not in all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor. Failure to meet all of the requirements of a
particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the AKS. Instead, the legality of the
arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances. A person or entity does not need
to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
The federal false claims laws, including the False Claims Act (“FCA”), which imposes significant penalties and can be enforced by private citizens
through civil qui tam actions, and civil monetary penalty laws prohibit any person or entity from, among other things, knowingly presenting, or causing to
be presented, a false or fraudulent claim for payment of federal government funds, including federal healthcare programs, such as Medicare and Medicaid.
Pharmaceutical and other healthcare companies have been prosecuted under these laws for engaging in a variety of different types of conduct that caused
the submission of false claims to federal healthcare programs. Under the AKS, for example, a claim resulting from a violation of the AKS is deemed to be a
false or fraudulent
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claim for purposes of the FCA. The FCA imposes mandatory treble damages and per-violation civil penalties up to approximately $23,000.
HIPAA created additional federal criminal statutes that prohibit, among other things, executing a scheme to defraud any healthcare benefit
program, including private third-party payors, and making false statements relating to healthcare matters. A person or entity does not need to have actual
knowledge of the healthcare fraud statute implemented under HIPAA or specific intent to violate the statute in order to have committed a violation.
Also, many states have similar, and typically more prohibitive, fraud and abuse statutes or regulations that apply to items and services reimbursed
under Medicaid and other state programs, or, in several states, apply regardless of the payor.
The U.S. federal Physician Payments Sunshine Act requires certain manufacturers of drugs and biologics covered by Medicare, Medicaid or the
Children’s Health Insurance Program, with specific exceptions, to annually report to CMS information related to payments or other transfers of value made
to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Beginning in
2022, such reporting obligations will be expanded to include payments and other transfers of value provided in 2021 to certain other healthcare
professionals.
Ensuring business arrangements with third parties comply with applicable healthcare laws and regulations is a difficult and costly endeavor. If our
operations are found to be in violation of any of the federal and state healthcare laws described above or any other current or future governmental
regulations that apply to us, we may be subject to significant penalties, including without limitation, civil, criminal and/or administrative penalties,
damages, fines, disgorgement, imprisonment, exclusion from participation in government programs, such as Medicare and Medicaid, injunctions, private
“qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to allow us to enter into government contracts,
contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, additional reporting obligations and oversight if we
become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or
restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
Data Privacy and Security
Numerous state, federal and foreign laws, govern the collection, dissemination, use, access to, confidentiality and security of personal information,
including health-related information. In the United States, numerous federal and state laws and regulations, including state data breach notification laws,
state health information privacy laws, and federal and state consumer protection laws and regulations, govern the collection, use, disclosure, and protection
of health-related and other personal information could apply to our operations or the operations of our partners. Entities that are found to be in violation of
HIPAA or other laws may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight
obligations. Further, entities that knowingly obtain, use, or disclose certain individually identifiable health information in an improper fashion may be
subject to criminal penalties.
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Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we may obtain regulatory approval.
In the United States and in foreign markets, sales of any products for which we receive regulatory approval for commercial sale will depend, in part, on the
extent to which third-party payors provide coverage and establish adequate reimbursement levels for such products. In the United States, third-party payors
include federal and state healthcare programs, private managed care providers, private health insurers and other organizations. Adequate coverage and
reimbursement from governmental healthcare programs, such as Medicare and Medicaid in the United States, and commercial payors are critical to new
product acceptance.
Decisions regarding whether to cover any of our product candidates, if approved, the extent of coverage and amount of reimbursement to be
provided are made on a plan-by-plan basis. Further, no uniform policy for coverage and reimbursement exists in the United States, and coverage and
reimbursement can differ significantly from payor to payor. Third-party payors often rely upon Medicare coverage policy and payment limitations in
setting their own reimbursement rates, but also have their own methods and approval process apart from Medicare determinations. As a result, the coverage
determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product
candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first
instance.
For products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult
because of the higher prices often associated with such drugs. Additionally, separate reimbursement for the product itself or the treatment or procedure in
which the product is used may not be available, which may impact physician utilization. In addition, companion diagnostic tests require coverage and
reimbursement separate and apart from the coverage and reimbursement for their companion pharmaceutical or biological products. Similar challenges to
obtaining coverage and reimbursement, applicable to pharmaceutical or biological products, will apply to companion diagnostics.
In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost-containment programs, including
price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Third-party payors are increasingly
challenging the prices charged for medical products and services, examining the medical necessity and reviewing the cost effectiveness of pharmaceutical
or biological products, medical devices and medical services, in addition to questioning safety and efficacy. Adoption of price controls and cost-
containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit sales of any
product that receives approval. Decreases in third-party reimbursement for any product or a decision by a third-party not to cover a product could reduce
physician usage and patient demand for the product.
Healthcare Reform
In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed
changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities,
and affect the ability to profitably sell product candidates for which marketing approval is obtained. Among policy makers and payors in the United States
and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving
quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly
affected by major legislative initiatives.
For example, the Affordable Care Act has substantially changed healthcare financing and delivery by both governmental and private insurers. The
Affordable Care Act and its implementing regulations, among other things, revised the methodology for calculating rebates for covered outpatient drugs
and certain biologics owed by manufacturers to the state and federal government under the Medicaid Drug Rebate Program, increased the minimum
Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate program to utilization of
prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded
prescription drugs, and expanded programs designed to test innovative payment models, service delivery models, or value-based arrangements, and fund
comparative effectiveness research.
There remain legal and political challenges to certain aspects of the Affordable Care Act. In December 2018, a United States District Court judge in
Texas ruled that the Affordable Care Act is unconstitutional in its entirety
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because the “individual mandate” was repealed by Congress in 2017. The decision has been appealed to the United States Supreme Court. A decision is
expected by spring 2021. It is unclear how such litigation and other efforts to repeal, replace or otherwise modify the Affordable Care Act will impact
reimbursement of pharmaceutical and biological products.
We anticipate that the Affordable Care Act, if substantially maintained in its current form, will continue to result in additional downward pressure
on coverage and the price that we receive for any approved product, and could seriously harm our business. Any reduction in reimbursement from
Medicare and 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 products. Such reforms
could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtain regulatory
approval and may affect our overall financial condition and ability to develop product candidates.
In addition, further legislation or regulation could be passed that could harm our business, financial condition and results of operations. Other
legislative changes have been proposed and adopted since the Affordable Care Act was enacted.
There has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically,
there have been several recent U.S. Congressional inquiries and proposed federal legislation designed to, among other things, bring more transparency to
drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform
government program reimbursement methodologies for drugs. In October 2020, the FDA issued guidance describing procedures for manufacturers to
facilitate the importation of FDA-approved biologics manufactured abroad and originally intended for sale in a foreign country into the United States.
Previously, the Trump administration released a “Blueprint,” or plan, to lower drug prices and reduce out of pocket costs of drugs that contained proposals
to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the
list price of their products, and reduce the out of pocket costs of drug products paid by consumers.
Although the Biden administration has stayed the effective dates of some last-minute drug price regulations issued by the Trump administration,
Congress and the Biden administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug
costs.
Additional Regulation
In addition to the foregoing, local, state and federal laws, including in the United States and Israel, regarding such matters as safe working
conditions, manufacturing practices, environmental protection, fire hazard control and hazardous substances, including the Occupational Safety and Health
Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern our use,
handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If our operations result
in contamination of the environment or expose individuals to hazardous or biohazardous substances, we could be liable for damages, environmental
remediation, and/or governmental fines. We believe that we are in material compliance with applicable environmental laws and occupational health and
safety laws that continued compliance therewith will not have a material adverse effect on our business. We cannot predict, however, how changes in these
laws may affect our future operations. We may incur significant costs to comply with such laws and regulations now or in the future.
Competition
The biopharmaceutical industry is intensely competitive and subject to rapid innovation and significant technological advancements. We believe
the key competitive factors that will affect the development and commercial success of BIO89-100 and any future product candidates are efficacy, safety
and tolerability profile, reliability, convenience of dosing, price, the level of generic competition and reimbursement. Our competitors include multinational
pharmaceutical companies, specialized biotechnology companies, universities and other research institutions. A number of biotechnology and
pharmaceutical companies are pursuing the development or
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marketing of pharmaceuticals that target the same diseases that we are targeting. Smaller or earlier-stage companies may also prove to be significant
competitors, particularly through collaborative arrangements with large, established companies. Given the high incidence of NASH, it is likely that the
number of companies seeking to develop products and therapies for the treatment of liver and cardio-metabolic diseases, such as NASH, will increase.
If BIO89-100 is approved for the treatment of NASH, future competition could also arise from products currently in development, including: GS-
0976, an ACC inhibitor, and GS-9674, an FXR agonist, from Gilead Sciences, Inc.; PF-05221304, an ACC inhibitor, and PF-06835919, a KHK inhibitor,
from Pfizer Inc.; Ocaliva, an FXR agonist from Intercept Pharmaceuticals, Inc.; Resmetirom, a beta-thyroid hormone receptor agonist from Madrigal
Pharmaceuticals, Inc.; VK2809, a beta-thyroid hormone receptor agonist from Viking Therapeutics, Inc.; Aldafermin, an FGF19 analog from NGM
Biopharmaceuticals, Inc.; MK-3655, an FGFR1c/KLB agonist antibody from Merck & Co., Inc.; Pegbelfermin, a PEGylated FGF21 analog from Bristol-
Myers Squibb Company; Efruxifermin, a FGF21 fusion protein from Akero Therapeutics, Inc.; Elobixibat, an IBAT-inhibitor from Albireo Pharma, Inc.; a
Galectin-3 inhibitor from Galectin Therapeutics Inc.; a synthetic conjugate of cholic acid and arachidic acid from Galmed Pharmaceuticals Ltd.;
MET409/MET642, FXR agonists from Metacrine, Inc, Novartis AG and Terns Pharmaceuticals; Semaglutide, a GLP-1 receptor agonist from Novo
Nordisk A/S; ALT-801, a dual GLP-1/glucagon agonist from Altimmune; Tirzepatide, a dual GIP/GLP-1 receptor agonist from Eli Lilly and Company; and
Lanifibranor, a PPAR alpha/delta/gamma agonist from Iventiva;
If BIO89-100 is approved for the treatment of SHTG, we would face competition from currently approved and marketed products, including
statins, fibrates, Vascepa, and Lovaza, as well as generic products. Further competition could arise from products currently in development, including:
AKCEA-APOCIII-LRx, an ApoC III inhibitor from Ionis; Vupanorsen/AKCEA-ANGPTL3, an anti-ANGPTL3 from Pfizer; Evinacumab, an Anti-
ANGPTL3 from Regeneron Pharmaceuticals, Inc.; Pemafibrate, a PPAR alpha agonist from Kowa Research Institute, Inc.; and ARO-APOC3, an ApoC III
inhibitor and ARO-ANG3, an anti-ANGPTL3 from Arrowhead Pharmaceuticals, Inc.
Many of our competitors have substantially greater financial, technical, human and other resources than we do and may be better equipped to
develop, manufacture and market technologically superior products. In addition, many of these competitors have significantly longer operating histories
and greater experience than we have in undertaking nonclinical studies and human clinical trials of new pharmaceutical products and in obtaining
regulatory approvals of human therapeutic products. Many of our competitors have established distribution channels for the commercialization of their
products, whereas we have no such channel or capabilities. In addition, many competitors have greater name recognition and more extensive collaborative
relationships. As a result, our competitors may obtain regulatory approval of their products more rapidly than we do or may obtain patent protection or
other intellectual property rights that limit our ability to develop or commercialize our product candidate or any future product candidates. Our competitors
may also develop and succeed in obtaining approval for drugs that are more effective, more convenient, more widely used and less costly or have a better
safety profile than our products and these competitors may also be more successful than we are in manufacturing and marketing their products. If we are
unable to compete effectively against these companies, then we may not be able to commercialize our product candidate or any future product candidates or
achieve a competitive position in the market. This would adversely affect our ability to generate revenue. Our competitors also compete with us in
recruiting and retaining qualified scientific, management and commercial personnel, establishing clinical trial sites and enrolling patients for clinical trials,
as well as in acquiring technologies complementary to, or necessary for, our programs.
Manufacturing and Supply
We do not own or operate manufacturing facilities for the production of BIO89-100, nor do we have plans to develop our own manufacturing
operations in the foreseeable future. We currently rely, and expect to continue to rely, on third parties for the manufacturing of our product candidates for
preclinical and clinical testing, as well as for commercial manufacturing if BIO89-100 or any future product candidate receives marketing approval.
BIO89-100 drug substance is manufactured by fermentation of a recombinant strain of the bacterium E. coli. Product accumulates as insoluble
particles (inclusion bodies) within the cells and is recovered by cell disruption, followed by solubilization of the inclusion bodies, protein refolding and
purification with two chromatographic separation columns. Purified material is glycoPEGylated in a 2-step enzymatic reaction where a 20kDa linear
glycoPEG moiety is attached to the protein through GalNAc and Sialic Acid linkers.
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GlycoPEGylated protein is purified with two chromatographic columns to yield product with target quality attributes. Purified glycoPEGylated
protein is concentrated and then formulated to a target concentration with formulation buffer as drug product.
Northway Biotechpharma (“BTPH”) is our sole source supplier for BIO89-100. Any reduction or halt in supply of drug product from BTPH could
limit our ability to develop BIO89-100 until a replacement contract manufacturer is found and qualified. We currently have material available to support
our ongoing clinical trials for the treatment of NASH and SHTG.
We are working with BTPH on process optimization to support large-scale production for future trials and commercialization. In parallel, we have
entered into a contract with a formulation development company to explore the potential for a new refrigerated liquid formulation and/or a freeze-dried, or
lyophilized product.
BTPH Agreement
In May 2018, we entered into a master services agreement with BTPH, under which BTPH agreed to provide us certain services, including
development, manufacturing, and storing of BIO89-100, under statements of work for such services to be agreed by the parties from time to time. The
master services agreement will continue for the duration of time that BTPH is providing services to us, unless earlier terminated by either party upon its
terms. We may terminate the agreement at any time after a specified notice period and subject to the payment of certain agreed upon fees where such
termination results in cancellation of manufacturing scheduled within a certain period. In addition, either party may terminate the agreement for cause for
the other party’s uncured material breach, in the event of bankruptcy of the other party, in the event of the commission of fraud by the other party or in the
event of a force majeure.
Sales and Marketing
We currently have no marketing, sales or distribution capabilities. In order to commercialize any products that are approved for commercial sale,
we must either develop a sales and marketing infrastructure or collaborate with third parties that have sales and marketing experience.
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We may elect to establish our own sales force to market and sell a product for which we obtain regulatory approval if we expect that the geographic
market for a product we develop on our own is limited or that the prescriptions for the product will be written principally by a relatively small number of
physicians. If we decide to market and sell any products ourselves, we do not expect to establish direct sales capability until shortly before the products are
approved for commercial sale.
We plan to seek third-party support from established pharmaceutical and biotechnology companies for those products that would benefit from the
promotional support of a large sales and marketing force. In these cases, we might seek to promote our products in collaboration with marketing partners or
rely on relationships with one or more companies with large established sales forces and distribution systems.
Intellectual Property
Our success depends in part upon our ability to protect our core technology and intellectual property. To protect our intellectual property rights, we
rely on patents, trademarks, copyrights and trade secret laws, confidentiality procedures, and employee disclosure and invention assignment agreements.
Our intellectual property is critical to our business and we strive to protect it through a variety of approaches, including by obtaining and maintaining patent
protection in the United States and internationally for our product candidates, novel biological discoveries, new targets and applications, and other
inventions that are important to our business. For our product candidates, we generally intend to pursue patent protection covering compositions of matter,
methods of making and methods of use. As we continue the development of our product candidates, we plan to identify additional means of obtaining
patent protection that would potentially enhance commercial success, including pursuit of claims directed to new therapeutic indications.
FGF21 Patents
Our FGF21 patent portfolio includes four families:
The first family is entitled “Remodeling and GlycoPEGylation of Fibroblast Growth Factor (FGF)”. This patent family provides granted patent
protection in 39 countries around the globe, including the United States (U.S. Patent Number 9,200,049, expiry date: June 25, 2028; and U.S. Patent No.
10,874,714, expiry date: October 10, 2028), Canada, Europe (broadly), and Japan (latter three expire October 31, 2025) for FGF21 conjugates comprising a
variety of modifying groups that can be attached at several different amino acid positions. GlycoPEGylated FGF21 is specifically claimed. The granted
claims broadly protect our lead drug candidate BIO89-100 and pharmaceutical compositions thereof, as well as methods for making and using BIO89-100
to treat FGF21 deficiency in a patient in need thereof. One U.S. application is pending in this family.
The second family is entitled “Mutant FGF-21 Peptide Conjugate and Uses Thereof” and is specifically directed to BIO89-100. The PCT
Application for this family was filed on September 4, 2018 (PCT/IB2018/00112). A U.S. Prioritized Examination Continuation Patent Application
(Application Serial No. 16/225,640) was filed on December 19, 2018 as a continuation of PCT/IB2018/0112 and from which U.S. Patent Number
10,407,479 was issued on September 10, 2019. The term of the U.S. Patent Number 10,407,479 is September 4, 2038. The issued claims are directed to
BIO89-100 and a defined genus specifically encompassing BIO89-100 and compositions thereof (including site-specific mutations at positions 173 and
176), as well as methods for making and using BIO89-100 for a variety of therapeutic indications. Such indications include methods for treating NASH or
metabolic syndrome. Subjects where there is a need to reduce blood glucose or to reduce HbA1C include those afflicted with diabetes Type 2, NASH and
metabolic syndrome. The claims encompass different therapeutic regimens for administering BIO89-100 (e.g., once a week or once every two weeks),
which regimens are based on BIO89-100’s surprisingly long half-life in vivo. One U.S. application is pending in this family. National phase entry of this
PCT Application has been initiated in Australia (granted), Korea (allowed), Europe, China, Hong Kong, Japan (allowed), Canada and Israel to pursue
global protection of specific mutant FGF21 peptide conjugates, and particularly BIO89-100, in these jurisdictions. Australian patent No. 2018322943 was
granted on September 17, 2020 (expiry date: September 4, 2038).
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The third family is entitled “Methods Of Treatment Using Mutant FGF-21 Peptide Conjugates”. A U.S. patent application was filed on May 28,
2020 (US Serial Number 16/885,353). This patent application is not published.
The fourth family is entitled “Methods for promoting weight loss”. A PCT application was filed January 29, 2021 (PCT/IB2021/000044) with
claims directed towards method to reduce total body weight, body fat content and/or BMI. National phase entry of this application is due by July 31, 2022.
We will continue to file patent applications to cover various formulations of FGF21. We have filed a provisional application on March 11, 2021 on
stable liquid formulation of FGF21.
FASN Patents
Our FASN patent portfolio currently consists of three patent families, including patents and/or patent applications in the United States, the
European Patent Convention, Canada, Mexico, Israel, China and Japan.
The first patent family, directed to TEV-48317, which we acquired from Teva under the FASN Agreement, and other 1,4-substituted piperidine-
based FASN inhibitors, is currently protected by three granted U.S. patents that cover these compounds, pharmaceutical compositions comprising these
compounds, and/or methods of treating FASN-mediated disorders using these compounds. The non-extended term for these patents would expire on June
17, 2036. A pending U.S. application has also been filed. The first patent family also includes two foreign patents and four patent applications. The second
patent family is directed to other 1,4-substituted piperidine-based FASN inhibitors, pharmaceutical compositions, and methods of treating FASN-mediated
disorders. The second patent family includes one granted U.S. patent, three foreign patents, and two foreign patent applications. The third patent family is
directed to spiropiperidine FASN inhibitors, pharmaceutical compositions containing these compounds, and methods of treating FASN-mediated disorders
using these compounds. The third patent family includes one U.S. patent application and five foreign patent applications.
Employees
As of December 31, 2020, we had 26 full-time employees and 27 total employees. 19 employees are engaged in research and development
activities. None of our employees are represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our
employees to be good.
Corporate Information
We were incorporated in January 2018 in Israel under the name 89Bio Ltd. 89bio, Inc., the registrant whose name appears on the cover page of this
Annual Report on Form 10-K, was incorporated in June 2019 for the purpose of an internal reorganization transaction. In September 2019, all of the equity
holders of 89Bio Ltd. exchanged 100% of the equity of 89Bio Ltd. for 100% of the equity of 89bio, Inc. Following this exchange, 89Bio Ltd. became a
wholly owned subsidiary of 89bio, Inc.
Our principal executive offices are located at 142 Sansome Street, San Francisco, California 94104 and our telephone number is (415) 500-4614.
Our website is www.89bio.com. Information contained on or accessible through our website is not a part of this Annual Report on Form 10-K, and the
inclusion of our website address in this Annual Report on Form 10-K is an inactive textual reference only.
We file electronically with the SEC our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). We make available on our website at www.89bio.com, under “Investors,” free of charge, copies of these reports as soon as reasonably practicable
after filing or furnishing these reports with the SEC.
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Implications of Being an Emerging Growth Company and a Smaller Reporting Company
We are an emerging growth company (“emerging growth company”), as defined in Section 2(a) of the Securities Act of 1933, as amended (the
“Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may take advantage of certain exemptions
from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including relief from the
auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, less extensive disclosure obligations regarding executive
compensation in our registration statements, periodic reports and proxy statements, exemptions from the requirements to hold a nonbinding advisory vote
on executive compensation, and exemptions from stockholder approval of any golden parachute payments not previously approved. We may also elect to
take advantage of other reduced reporting requirements in future filings. As a result, our stockholders may not have access to certain information that they
may deem important and the information that we provide to our stockholders may be different than, and not comparable to, information presented by other
public reporting companies. We could remain an emerging growth company until the earlier of (1) the last day of the year following the fifth anniversary of
the completion of our initial public offering (“IPO”), (2) the last day of the year in which we have total annual gross revenue of at least $1.07 billion, (3)
the last day of the year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the
market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year or (4)
the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
In addition, the JOBS Act also provides that an emerging growth company may take advantage of the extended transition period provided in the
Securities Act for complying with new or revised accounting standards. An emerging growth company may therefore delay the adoption of certain
accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption and, as a
result, will not be subject to the same implementation timing for new or revised accounting standards as are required of other public companies that are not
emerging growth companies, which may make comparison of our consolidated financial information to those of other public companies more difficult.
We are also a smaller reporting company (“smaller reporting company”), as defined in the Exchange Act. We may continue to be a smaller
reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to
smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) our voting and non-voting common stock held
by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than $100.0
million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million
measured on the last business day of our second fiscal quarter.
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Item 1A. Risk Factors.
An investment in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below
before deciding whether to make an investment decision with respect to shares of our common stock. You should also refer to the other
information contained in this Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and our audited consolidated financial statements and related notes. Our business, financial condition, results of operations and
prospects could be materially and adversely affected by any of these risks or uncertainties. In any such case, the trading price of our common stock could
decline, and you could lose all or part of your investment. We caution you that the risks, uncertainties and other factors referred to below and elsewhere in
this Annual Report on Form 10-K may not contain all of the risks, uncertainties and other factors that may affect our future results and operations.
Moreover, new risks will emerge from time to time. It is not possible for us to predict all risks.
Risk Factor Summary
Investing in our common stock involves significant risks. You should carefully consider the risks described below before making a decision to
invest in our common stock. If we are unable to successfully address these risks and challenges, our business, financial condition, results of operations, or
prospects could be materially adversely affected. In such case, the trading price of our common stock would likely decline, and you may lose all or part of
your investment. Below is a summary of some of the risks we face.
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We are a clinical-stage biopharmaceutical company with a limited operating history and no products approved for commercial sale. We have incurred
net losses since our inception, we expect to incur significant and increasing operating losses and we may never be profitable. Our stock is a highly
speculative investment.
The ongoing COVID-19 pandemic has resulted and may in the future result in significant disruptions to our clinical trials or other business
operations, which could have a material adverse effect on our business.
Our business depends on the success of BIO89-100, our only product candidate under clinical development, which has not completed a pivotal trial.
If we are unable to obtain regulatory approval for and successfully commercialize BIO89-100 or other future product candidates, or we experience
significant delays in doing so, our business will be materially harmed.
Clinical drug development involves a lengthy and expensive process with uncertain timelines and uncertain outcomes, and the results of prior
preclinical or clinical trials are not necessarily predictive of our future results.
If we experience delays in clinical testing, our commercial prospects will be adversely affected, our costs may increase and our business may be
harmed.
If we encounter difficulties in enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely
affected.
BIO89-100 and any future product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory
approval or limit the commercial profile of an approved label.
We are developing BIO89-100 for the treatment of NASH, an indication for which there are no approved products. This makes it difficult to predict
the timing and costs of the clinical development of BIO89-100 for the treatment of NASH.
Lack of efficacy, adverse events or undesirable side effects may emerge in clinical trials conducted by third parties developing FGF product
candidates, which could adversely affect our stock price, our ability to attract additional capital and our development program.
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.
We have relied on, and expect to continue to rely on, third-party manufacturers to produce BIO89-100 or any future product candidates. Any failure
by a third-party manufacturer to produce acceptable product candidates for us pursuant to our specifications and regulatory standards may delay or
impair our ability to initiate or complete our clinical trials, obtain and maintain regulatory approvals or commercialize approved products.
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The manufacture of biologic products is complex and we are subject to many manufacturing risks, any of which could substantially increase our costs
and limit supply of our products.
We will require substantial additional capital to finance our operations, which may not be available to us on acceptable terms, or at all. As a result, we
may not complete the development and commercialization of BIO89-100 or develop new product candidates.
We face substantial competition, which may result in others discovering, developing or commercializing competing products before or more
successfully than us.
Unstable market and economic conditions may have serious adverse consequences on our business and financial condition.
Our Loan and Security Agreement with Silicon Valley Bank contains certain covenants that could adversely affect our operations and, if an event of
default were to occur, we could be forced to repay any outstanding indebtedness sooner than planned and possibly at a time when we do not have
sufficient capital to meet this obligation.
BIO89-100 has not received regulatory approval. If we are unable to obtain regulatory approvals to market BIO89-100 or any future product
candidates, our business will be adversely affected.
Our success depends upon our ability to obtain and maintain intellectual property protection for our products and technologies.
We rely on a license from Teva and a sublicense from ratiopharm to patents and know-how related to glycoPEGylation technology that are used in
the development, manufacture and commercialization of BIO89-100. Any termination or loss of significant rights, including the right to
glycoPEGylation technology, or breach, under these agreements or any future license agreement related to our product candidates, would materially
and adversely affect our ability to continue the development and commercialization of the related product candidates.
Risks Related to Our Business and Industry
We are a clinical-stage biopharmaceutical company with a limited operating history and no products approved for commercial sale. We have incurred
net losses since our inception, we expect to incur significant and increasing operating losses and we may never be profitable. Our stock is a highly
speculative investment.
We are a clinical-stage biopharmaceutical company with a limited operating history that may make it difficult to evaluate the success of our
business to date and to assess our future viability. We commenced operations in 2018, and to date, our operations have been focused on organizing and
staffing our company, raising capital, acquiring our initial product candidate, BIO89-100 and licensing certain related technology, conducting research and
development activities, including preclinical studies and clinical trials, and providing general and administrative support for these operations. Investment in
biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any
potential product candidate will fail to demonstrate adequate effect and/or an acceptable safety profile, gain regulatory approval and become commercially
viable. We have no products approved for commercial sale, we have not generated any revenue from product sales to date and we continue to incur
significant research and development and other expenses related to our ongoing operations. We have limited experience as a company conducting clinical
trials and no experience as a company commercializing any products.
BIO89-100 is in development and, to date, we have not generated any revenue from the licensing or commercialization of BIO89-100. We will not
be able to generate product revenue unless and until BIO89-100 or any future product candidate, alone or with future partners, successfully completes
clinical trials, receives regulatory approval and is successfully commercialized. As BIO89-100 is in development, we do not expect to receive revenue from
it for a number of years, if ever. Although we may seek to obtain revenue from collaboration or licensing agreements with third parties, we currently have
no such agreements that could provide us with material, ongoing future revenue and we may never enter into any such agreements.
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We are not profitable and have incurred net losses since our inception. Consequently, predictions about our future success or viability may not be as
accurate as they would be if we had a longer operating history or a history of successfully developing and commercializing pharmaceutical products. We
have spent, and expect to continue to spend, significant resources to fund research and development of, and seek regulatory approvals for, BIO89-100 and
any future product candidates. We expect to incur substantial and increasing operating losses over the next several years as our research, development
clinical trial and manufacturing activities increase. In addition, because of the numerous risks and uncertainties associated with pharmaceutical product
development, including that our product candidates may not advance through development or achieve the endpoints of applicable clinical trials, we are
unable to predict the timing or amount of increased expenses, or if or when we will achieve or maintain profitability. The size of our future net losses will
depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. The net losses we incur may fluctuate significantly from
quarter-to-quarter such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. Even if we
eventually generate product revenue, we may never be profitable and, if we do achieve profitability, we may not be able to sustain or increase profitability
on a quarterly or annual basis.
The ongoing COVID-19 pandemic has resulted and may in the future result in significant disruptions to our clinical trials or other business operations,
which could have a material adverse effect on our business.
Our business and its operations, including but not limited to our research and development activities, could be adversely affected by health
epidemics in regions where we have business operations, and such health epidemics could cause significant disruption in the operations of third parties
upon whom we rely. In response to public health directives and orders related to COVID-19 and based on guidance from public health officials, we have
implemented and continue to implement work-from-home policies for our employees on an office-by-office basis. The effects of executive and similar
government orders, shelter-in-place orders and our work-from-home policies may negatively impact our growth, including our ability to recruit and
onboard new employees, and productivity, disrupt our business and delay our preclinical and clinical programs and timelines, the magnitude of which will
depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These and
similar, and perhaps more severe, disruptions in our operations could negatively impact our business, operating results and financial condition.
Our clinical trials have been and may continue to be affected by the COVID-19 pandemic. For example, while we initiated the Phase 2 trial
(ENTRIGUE) of BIO89-100 for the treatment of SHTG and a paired-biopsy histology cohort as part of the Phase 1b/2a trial of BIO89-100 in NASH in
2020, our successful completion of these trials will depend on the external environment with respect to COVID-19 remaining conducive to executing the
trial safely and effectively. Similarly, while we expect to initiate a Phase 2b trial of BIO89-100 in NASH patients in the first half of 2021, we may be
delayed in the initiation of such trial due to COVID-19 or the related government restrictions.
In addition, quarantines, shelter-in-place, executive and similar government orders, or the perception that such orders, shutdowns or other
restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases, have impacted and may continue to impact
personnel at third-party manufacturing facilities in the United States, Europe and other countries, or the availability or cost of materials we use or require to
conduct our business, including product development, which would disrupt our supply chain. Furthermore, some of our manufacturers and suppliers are in
Europe and may be impacted by port closures and other restrictions resulting from the COVID-19 pandemic, which may disrupt our supply chain or limit
our ability to obtain sufficient materials for our drug products. In particular, BTPH, our sole source supplier for BIO89-100, has missed certain project
deadlines for our manufacturing scale-up due to quarantine orders and has forecasted other delays due to COVID-19-related impacts on their suppliers;
however, we do not expect delays to the overall timeline for the delivery of clinical supplies.
If COVID-19 continues to spread in the United States and elsewhere, we may experience additional disruptions that could severely impact our
business, preclinical studies and clinical trials, including: delays in receiving authorization 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; changes in
local regulations as part of a response to the COVID-19 pandemic which may require us to change the ways in which our clinical trials are conducted and
result in unexpected costs, or
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discontinuing our clinical trials altogether; a 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; interruption of key clinical trial activities, such as clinical
trial site monitoring and data entry and verification, due to limitations on travel imposed or recommended by federal or state governments, employers and
others, or interruption of clinical trial subject visits and study procedures, the occurrence of which could affect the completeness and integrity of clinical
trial data and, as a result, determine the outcomes of the trial; the risk that participants enrolled in our clinical trials will acquire 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; the risk that
participants enrolled in our clinical trials will not be able to travel to our clinical trial sites as a result of quarantines or other restrictions resulting from
COVID-19 or comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services; interruptions or delays in
preclinical studies due to restricted or limited operations at our research and development laboratory facilities; limitations in employee resources that would
otherwise be focused on the conduct of our clinical trials; the refusal of the FDA to accept data from clinical trials in affected geographies; and interruption
or delays to our clinical activities.
The COVID-19 pandemic continues to evolve rapidly. The ultimate impact of the COVID-19 pandemic or a similar public health emergency is
highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, healthcare
systems, or the global economy as a whole. However, any one or a combination of these events could have an adverse effect on the operation of and results
from our clinical trials and on our other business operations, including preventing or delaying approval for BIO89-100.
Our business depends on the success of BIO89-100, our only product candidate under clinical development, which has not completed a pivotal trial. If
we are unable to obtain regulatory approval for and successfully commercialize BIO89-100 or other future product candidates, or we experience
significant delays in doing so, our business will be materially harmed.
To date, the primary focus of our product development has been BIO89-100 for the treatment of patients with NASH. Currently, BIO89-100 is our
only product candidate under clinical development. This may make an investment in our company riskier than similar companies that have multiple
product candidates in active development and that therefore may be able to better sustain a failure of a lead candidate. Successful continued development
and ultimate regulatory approval of BIO89-100 for the treatment of NASH or other indications, including SHTG, is critical to the future success of our
business. We have invested, and will continue to invest, a significant portion of our time and financial resources in the clinical development of BIO89-100.
If we cannot successfully develop, obtain regulatory approval for and commercialize BIO89-100, we may not be able to continue our operations. The
future regulatory and commercial success of BIO89-100 is subject to a number of risks, including that if approved for NASH or SHTG, BIO89-100 will
likely compete with products that may reach approval for the treatment of NASH prior to BIO89-100, products that are currently approved for the treatment
of SHTG and the off-label use of currently marketed products for NASH and SHTG.
Clinical drug development involves a lengthy and expensive process with uncertain timelines and uncertain outcomes, and the results of prior
preclinical or clinical trials are not necessarily predictive of our future results.
BIO89-100 and any future product candidates will be subject to rigorous and extensive clinical trials and extensive regulatory approval processes
implemented by the FDA and comparable foreign regulatory authorities before obtaining marketing approval from these regulatory authorities. The drug
development and approval process is lengthy and expensive, and approval is never certain. Investigational new drugs, such as BIO89-100, may not prove to
be safe and effective in clinical trials. We have no direct experience as a company in conducting later stage clinical trials required to obtain regulatory
approval. We may be unable to conduct clinical trials at preferred sites, enlist clinical investigators, enroll sufficient numbers of participants or begin or
successfully complete clinical trials in a timely fashion, if at all. In addition, the design of a clinical trial can determine whether its results will support
approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. We may be unable to
design and execute a clinical trial to support regulatory approval. Even if a current clinical trial is successful, it may be insufficient to demonstrate that
BIO89-100 is safe or effective for registration purposes.
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There is a high failure rate for drugs and biologic products proceeding through clinical trials. Failure can occur at any time during the clinical trial
process. The results of preclinical studies and early clinical trials of BIO89-100 or any future product candidate may not be predictive of the results of
later-stage clinical studies or trials and the results of studies or trials in one set of patients or line of treatment may not be predictive of those obtained in
another. In fact, many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late stage clinical trials even
after achieving promising results in preclinical studies and earlier stage clinical trials. In addition, data obtained from preclinical and clinical activities is
subject to varying interpretations, which may delay, limit or prevent regulatory approval. It is impossible to predict when or if BIO89-100 or any future
product candidate will prove effective or safe in humans or will receive regulatory approval. Owing in part to the complexity of biological pathways,
BIO89-100 or any future product candidate may not demonstrate in patients the biochemical and pharmacological properties we anticipate based on
laboratory studies or earlier stage clinical trials, and they may interact with human biological systems or other drugs in unforeseen, ineffective or harmful
ways. The number of patients exposed to product candidates and the average exposure time in the clinical development programs may be inadequate to
detect rare adverse events or findings that may only be detected once a product candidate is administered to more patients and for greater periods of time.
To date, our Phase 1a and Phase 1b/2a clinical trials have involved small patient populations and, because of the small sample size in such trials, the results
of these clinical trials may be subject to substantial variability and may not be indicative of either future interim results or final results in future trials of
patients with liver or cardio-metabolic diseases. If we are unable to successfully demonstrate the safety and efficacy of BIO89-100 or other future product
candidates and receive the necessary regulatory approvals, our business will be materially harmed.
If we experience delays in clinical testing, our commercial prospects will be adversely affected, our costs may increase and our business may be
harmed.
We cannot guarantee that we will be able to initiate and complete clinical trials and successfully accomplish all required regulatory activities or
other activities necessary to gain approval and commercialize BIO89-100 or any future product candidates. We currently have two active investigational
new drug (“IND”) applications with the FDA in the United States for BIO89-100. In the future, we may file an additional IND with another division for
any future indications or future product candidates. If any such future IND is not approved by the FDA, our clinical development timeline may be
negatively impacted and any future clinical programs may be delayed or terminated. As a result, we may be unable to obtain regulatory approvals or
successfully commercialize our products. We do not know whether any other clinical trials will begin as planned, will need to be restructured or will be
completed on schedule, or at all. Our product development costs will increase if we experience delays in clinical testing. Significant clinical trial delays
also could shorten any periods during which we may have the exclusive right to commercialize BIO89-100 and any future product candidates or allow our
competitors to bring products to market before we do, which would impair our ability to successfully commercialize BIO89-100 or any future product
candidates and may harm our business, results of operations and prospects. Our or our future collaborators’ inability to timely complete clinical
development could result in additional costs to us as well as impair our ability to generate product revenue, continue development, commercialize BIO89-
100 and any future product candidates, reach sales milestone payments and receive royalties on product sales. In addition, if we make changes to a product
candidate including, for example, a new formulation, we may need to conduct additional nonclinical studies or clinical trials to bridge or demonstrate the
comparability of our modified product candidate to earlier versions, which could delay our clinical development plan or marketing approval for our current
product candidate and any future product candidates.
If we encounter difficulties in enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely
affected.
The timely completion of clinical trials largely depends on patient enrollment. We may encounter delays in enrolling, or be unable to enroll, a
sufficient number of patients to complete any of our future clinical trials, and even once enrolled, we may be unable to retain a sufficient number of
patients to complete any of our trials. Furthermore, as a result of the inherent difficulties in diagnosing NASH, which can currently only be definitively
diagnosed through a liver biopsy, and identifying SHTG patients, and the significant competition for recruiting NASH and SHTG patients in clinical trials,
we or our future collaborators may be unable to enroll the patients we need to complete clinical trials on a timely basis, or at all. In addition, our
competitors, some of whom have significantly greater resources than we do, are conducting clinical trials for the same indications and seek to enroll
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patients in their studies that may otherwise be eligible for our clinical studies or trials. Since the number of qualified clinical investigators is limited, we
expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which could further reduce the number of
patients who are available for our clinical trials in these sites. Our inability to enroll a sufficient number of patients for our clinical trials would result in
significant delays or may require us to abandon one or more clinical trials altogether. Even if we are able to enroll a sufficient number of patients in our
clinical studies or trials, delays in patient enrollment may result in increased costs or may affect the timing or outcome of our clinical trials, which could
prevent completion of these trials and adversely affect our ability to advance the development of BIO89-100 and any future product candidates.
BIO89-100 and any future product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory
approval or limit the commercial profile of an approved label.
Undesirable side effects caused by BIO89-100 or any future 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 other comparable foreign regulatory
authorities. Additional clinical studies may be required to evaluate the safety profile of BIO89-100 or any future product candidates. As with other drugs,
we have seen evidence of adverse effects in animal and human studies and it is possible that other adverse effects will become apparent in ongoing or
future animal or human safety studies. It may be difficult to discern whether certain events or symptoms observed during our clinical trials or by patients
using our approved products are related to BIO89-100 or any future product candidates or approved products or some other factor. As a result, we and our
development programs may be negatively affected even if such events or symptoms are ultimately determined to be unlikely related to BIO89-100 or any
future product candidates or approved products. Further, we expect that BIO89-100 will require multiple administrations via subcutaneous injection in the
course of a clinical trial. This chronic administration increases the risk that rare adverse events or chance findings are discovered in the commercial
setting, where BIO89-100 would be administered to more patients or for greater periods of time, that were not uncovered by our clinical drug development
programs.
We are developing BIO89-100 for the treatment of NASH, an indication for which there are no approved products. This makes it difficult to predict the
timing and costs of the clinical development of BIO89-100 for the treatment of NASH.
We are developing BIO89-100 for the treatment of NASH, an indication for which there are no approved products. Because there is no established
regulatory approval process for NASH, the development of a novel product candidates such as BIO89-100 may be more expensive and take longer than for
other, better known or extensively studied product candidates. As other companies are in later stages of clinical trials for their potential NASH therapies,
we expect that the path for regulatory approval for NASH therapies may continue to evolve in the near term as these other companies refine their
regulatory approval strategies and interact with regulatory authorities. Such evolution may impact our future clinical trial designs, including trial size and
endpoints, in ways that we cannot predict today. Certain of our competitors have recently experienced regulatory setbacks for NASH therapies following
communications from the FDA. We currently do not know the impact, if any, that these setbacks could have on the path for regulatory approval for NASH
therapies generally or for BIO89-100. Our anticipated development costs would likely increase if development of BIO89-100 or any future product
candidate is delayed because we are required by the FDA to perform studies or trials in addition to, or different from, those that we currently anticipate.
We are also developing BIO89-100 for the treatment of SHTG. Clinical trials for the treatment of SHTG may be relatively costly and time
consuming. The requirements for approval by the FDA and comparable foreign regulatory authorities may change over time and this may require
changes to ongoing or future clinical trial designs that could impact timelines and cost.
Lack of efficacy, adverse events or undesirable side effects may emerge in clinical trials conducted by third parties developing FGF product candidates,
which could adversely affect our stock price, our ability to attract additional capital and our development program.
Lack of efficacy, adverse events or undesirable side effects may emerge in clinical trials conducted by third parties developing FGF product
candidates like ours. For example, Bristol-Myers Squibb Company and Akero
37
Therapeutics, Inc. are also developing FGF21 product candidates for the treatment of NASH. We have no control over their clinical trials or development
program, and lack of efficacy, adverse events or undesirable side effects experienced by subjects in their clinical trials could adversely affect our stock
price, our ability to attract additional capital and our clinical development plans for BIO89-100 or even the viability of BIO89-100 as a product candidate,
including by creating a negative perception of FGF therapeutics by healthcare providers or patients.
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 clinical trials, which are 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 results that we report may differ from future results of the
same studies, 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. As a result, topline data should be viewed with caution until the final data are available. From time to time, we may also disclose interim data
from our clinical trials. In addition, we may report interim analyses of only certain endpoints rather than all endpoints. 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.
We have relied on, and expect to continue to rely on, third-party manufacturers to produce BIO89-100 or any future product candidates. Any failure by
a third-party manufacturer to produce acceptable product candidates for us pursuant to our specifications and regulatory standards may delay or
impair our ability to initiate or complete our clinical trials, obtain and maintain regulatory approvals or commercialize approved products.
We do not own or operate manufacturing facilities for the production of clinical or commercial quantities of our product candidates, and we lack
the resources and the capabilities to do so. As a result, we currently rely, and expect to rely for the foreseeable future, on third-party manufacturers to
supply us with BIO89-100 and any future product candidates. We currently have a sole source relationship with BTPH pursuant to which they supply us
with BIO89-100. If there should be any disruption in our supply arrangement with BTPH, including any adverse events affecting BTPH, it could have a
negative effect on the clinical development of BIO89-100 and other operations while we work to identify and qualify an alternate supply source. In
addition, we will require large quantities of BIO89-100 for large clinical trials and to commercialize BIO89-100. Our current manufacturer may not be
able to scale production to the larger quantities and we may not be able to find another manufacturer who has the capacity to manufacture a commercial-
scale quantity of BIO89-100.
We do not have a long-term supply agreement with any third-party manufacturer. Reliance on third-party manufacturers entails risks to which we
would not be subject if we manufacture product candidates or products ourselves. For example, if we do not maintain our key manufacturing relationships,
we may fail to find replacement manufacturers or develop our own manufacturing capabilities in a timely manner or at all, which could delay or impair our
ability to obtain regulatory approval for our products and substantially increase our costs or deplete profit margins, if any. If we do find replacement
manufacturers, we may not be able to enter into agreements with them on terms and conditions favorable to us, and there could be a substantial delay
before new facilities could be qualified and registered with the FDA and other comparable foreign regulatory authorities.
We have begun producing certain of the reagents required for the glycoPEGylation at BTPH using the know-how transferred to us from Teva
Pharmaceutical Industries Ltd (“Teva”) under our Reagent Supply and Technology Transfer Agreement. We have not completed the manufacturing process
for these reagents and cannot guarantee that we will be able to produce them successfully, or scale up our production for the quantities needed
commercialization.
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Teva continues to supply us with certain reagents and will continue to do so until December 31, 2022. We expect the manufacturing of such
reagents will be transferred to a new supplier prior to the end of 2022. Any complications arising under our agreement with Teva or any difficulties
securing a new supplier could considerably delay the manufacture of BIO89-100. Any significant delay in the acquisition or decrease in the availability
of these raw materials from Teva or any new supplier could considerably delay the manufacture of BIO89-100, which could adversely impact the timing
of any planned trials or the regulatory approvals of BIO89-100.
The FDA and other comparable foreign regulatory authorities require manufacturers to register manufacturing facilities. The FDA and other
comparable foreign regulatory authorities also inspect these facilities to confirm compliance with cGMP. We have little to no control regarding the
occurrence of third-party manufacturer incidents. Any failure to comply with cGMP requirements or other FDA or comparable foreign regulatory
requirements could adversely affect our clinical research activities and our ability to develop BIO89-100 or any future product candidates and market our
products following approval. Our sole source supplier, BTPH, has not yet manufactured a commercial product, and as a result, has not been subject to
inspection by the FDA and other comparable foreign regulatory authorities.
Our current and anticipated future dependence upon others for the manufacture of our product candidates may adversely affect our future profit
margins and our ability to develop our product candidates and commercialize any products that receive regulatory approval on a timely basis. If we are
required to change manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply
with quality standards and with all applicable regulations and guidelines. For example, in the event that we need to switch our third-party manufacturer of
BIO89-100 from BTPH, which is our sole manufacturing source for BIO89-100, we anticipate that the complexity of the glycoPEGylation manufacturing
process may materially impact the amount of time it may take to secure a replacement manufacturer. The delays associated with the verification of a new
manufacturer, if we are able to identify an alternative source, could negatively affect our ability to develop product candidates in a timely manner or within
budget.
The manufacture of biologic products is complex and we are subject to many manufacturing risks, any of which could substantially increase our costs
and limit supply of our products.
To date, BIO89-100 has been manufactured by a single third-party manufacturer, BTPH, solely for preclinical studies and clinical trials. The
process of manufacturing BIO89-100, and in particular, the glycoPEGylation process, is complex, highly regulated, subject to several risks and requires
significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of
biologic products often encounter difficulties in production, including difficulties with production costs and yields, quality control, including stability of
the product, quality assurance testing, operator error and shortages of qualified personnel, as well as compliance with strictly enforced federal, state and
foreign regulations. We cannot assure you that any stability or other issues relating to the manufacture of BIO89-100 will not occur in the future. We have
limited process development capabilities and have access only to external manufacturing capabilities. We do not have and we do not currently plan to
acquire or develop the facilities or capabilities to manufacture bulk drug substance or filled drug product for use in human clinical trials or
commercialization.
We will require substantial additional capital to finance our operations, which may not be available to us on acceptable terms, or at all. As a result, we
may not complete the development and commercialization of BIO89-100 or develop new product candidates.
As a clinical-stage biopharmaceutical company, our operations have consumed significant amounts of cash since our inception. We expect our
research and development expenses to increase substantially in connection with our ongoing activities, particularly as we conduct clinical trials of and seek
regulatory approvals for BIO89-100. We believe that our existing cash, cash equivalents and short-term investments, together with the proceeds available from
our line of credit pursuant to our Loan Agreement (as defined above), will fund our projected operating requirements into the second quarter of 2023.
We will require additional capital to discover, develop, obtain regulatory approval for and commercialize BIO89-100 and any future product
candidates. We do not have any committed external source of funds other than the unused portion of the line of credit available to us pursuant to the Loan
Agreement. We expect to finance future cash needs through public or private equity or debt offerings or product collaborations. Additional capital may not
be available in sufficient amounts or on reasonable terms, if at all. If we do not raise additional capital, we may not
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be able to expand our operations or otherwise capitalize on our business opportunities, our business and financial condition will be negatively impacted and
we may need to: significantly delay, scale back or discontinue research and discovery efforts and the development or commercialization of any product
candidates or cease operations altogether; seek strategic alliances for research and development programs when we otherwise would not, or at an earlier
stage than we would otherwise desire or on terms less favorable than might otherwise be available; or relinquish, or license on unfavorable terms, our rights
to technologies or any product candidates that we otherwise would seek to develop or commercialize ourselves.
In addition, if BIO89-100 receives approval and is commercialized, we will be required to make milestone and royalty payments to Teva, from
whom we acquired certain patents and intellectual property relating to BIO89-100, and from whom we licensed patents and know-how related to
glycoPEGylation technology that is used in the manufacture of BIO89-100. For additional information regarding this license agreement, please see Note 5
to of our accompanying audited consolidated financial statements.
We face substantial competition, which may result in others discovering, developing or commercializing competing products before or more
successfully than us.
The biopharmaceutical industry is intensely competitive and subject to rapid innovation and significant technological advancements. Our
competitors include multinational pharmaceutical companies, specialized biotechnology companies, universities and other research institutions. A number
of biotechnology and pharmaceutical companies are pursuing the development or marketing of pharmaceuticals that target the same diseases that we are
targeting. Certain of these companies have recently published positive data regarding their clinical trials, which may further increase the competition we
face. Smaller or earlier-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large,
established companies. Given the high incidence of NASH and SHTG, it is likely that the number of companies seeking to develop products and therapies
for the treatment of liver and cardio-metabolic diseases, such as NASH and SHTG, will increase.
There are numerous currently approved therapies for treating diseases other than NASH and some of these currently approved therapies may exert
effects that could be similar to BIO89-100 in NASH. Many of these approved drugs are well-established therapies or products and are widely accepted by
physicians, patients and third-party payors. Some of these drugs are branded and subject to patent protection, and others are available on a generic basis.
This may make it difficult for us to differentiate our products from currently approved therapies, which may adversely impact our business strategy. We
expect that if BIO89-100 or any future product candidates are approved, they will be priced at a significant premium over competitive generic products,
including branded generic products. Insurers and other third-party payors may also encourage the use of generic products or specific branded products prior
to utilization of BIO89-100. In addition, many companies are developing new therapeutics, and we cannot predict what the standard of care will be as
BIO89-100 or any future product candidates progress through clinical development. In addition, to the extent BIO89-100 or any future product candidates
are approved for liver or cardio-metabolic indications, such as SHTG, the commercial success of our products will also depend on our ability to
demonstrate benefits over the then-prevailing standard of care, including diet, exercise and lifestyle modifications.
Further, if BIO89-100 or any future product candidates are approved for the treatment of SHTG, we will compete with currently approved
therapies and therapies further along in development. Our competitors both in the United States and abroad include large, well-established pharmaceutical
and generic companies with significantly greater name recognition. Our competitors may be able to charge lower prices than we can, which may adversely
affect our market acceptance. Many of these competitors have greater resources than we do, including financial, product development, marketing,
personnel and other resources.
If our competitors market products that are more effective, safer or cheaper than our products or that reach the market sooner than our products, we
may not achieve commercial success. Many of our competitors have substantially greater financial, technical, human and other resources than we do and
may be better equipped to develop, manufacture and market technologically superior products. As a result, our competitors may obtain regulatory approval
of their products more rapidly than we do or may obtain patent protection or other intellectual property rights that limit our ability to develop or
commercialize our product candidate or any future product candidates. Our competitors may also develop and succeed in obtaining approval for drugs that
are more effective,
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more convenient, more widely used and less costly or have a better safety profile than our products and these competitors may also be more successful than
we are in manufacturing and marketing their products.
Unstable market and economic conditions may have serious adverse consequences on our business and financial condition.
Global credit and financial markets have experienced extreme disruptions at various points over the last few decades. If another such disruption in
credit and financial markets and deterioration of confidence in economic conditions occurs, it may make any necessary debt or equity financing more
difficult to complete, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a
material adverse effect on our growth strategy, financial performance and share price and could require us to delay or abandon development or
commercialization plans. In addition, there is a risk that one or more of our service providers, manufacturers or other partners would not survive or be able
to meet their commitments to us under such circumstances, which could directly affect our ability to attain our operating goals on schedule and on budget.
Our Loan and Security Agreement with Silicon Valley Bank (the “Loan Agreement”) contains certain covenants that could adversely affect our
operations and, if an event of default were to occur, we could be forced to repay any outstanding indebtedness sooner than planned and possibly at a
time when we do not have sufficient capital to meet this obligation.
Pursuant to the Loan Agreement, we have pledged substantially all of our assets, other than our intellectual property rights, and have agreed that we
may not sell or assign rights to our patents and other intellectual property without the prior consent of Silicon Valley Bank (“SVB”). Additionally, the Loan
Agreement contains certain affirmative and negative covenants that could prevent us from taking certain actions without the consent of our lenders. These
covenants may limit our flexibility in operating our business and our ability to take actions that might be advantageous to us and our stockholders. The
Loan Agreement also includes customary events of default, including, among other things, a change of control. Upon the occurrence and continuation of an
event of default, all amounts due under the Loan Agreement become (in the case of a bankruptcy event), or may become (in the case of all other events of
default and at the option of SVB), immediately due and payable. If an event of default under the Loan Agreement should occur, we could be required to
immediately repay any outstanding indebtedness. If we are unable to repay such debt, the lenders would be able to foreclose on the secured collateral,
including our cash accounts, and take other remedies permitted under the Loan Agreement. Even if we are able to repay any indebtedness on an event of
default, the repayment of these sums may significantly reduce our working capital and impair our ability to operate as planned.
We may encounter difficulties in managing our growth, which could adversely affect our operations.
We are in the early stages of building the full team that we anticipate we will need to complete the development BIO89-100 and other future
product candidates. As we advance our preclinical and clinical development programs for product candidates, seek regulatory approval in the United States
and elsewhere and increase the number of ongoing product development programs, we anticipate that we will need to increase our product development,
scientific and administrative headcount. We will also need to establish commercial capabilities in order to commercialize any product candidates that may
be approved. Such an evolution may impact our strategic focus and our deployment and allocation of resources. Our ability to manage our operations and
growth effectively depends upon the continual improvement of our procedures, reporting systems and operational, financial and management controls. We
may not be able to implement administrative and operational improvements in an efficient or timely manner and may discover deficiencies in existing
systems and controls. In addition, in order to continue to meet our obligations as a public company and to support our anticipated long-term growth, we
will need to increase our general and administrative capabilities. Our management, personnel and systems may experience difficulty in adjusting to our
growth and strategic focus.
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We must attract and retain highly skilled employees in order to succeed. If we are not able to retain our current senior management team and our
scientific advisors or continue to attract and retain qualified scientific, technical and business personnel, our business will suffer.
We may not be able to attract or retain qualified personnel and consultants due to the intense competition for such individuals in the biotechnology
and pharmaceutical industries. If we are not able to attract and retain necessary personnel and consultants to accomplish our business objectives, it may
significantly impede the achievement of our development and commercial objectives and our ability to implement our business strategy. In addition, we are
highly dependent on the development, regulatory, manufacturing, commercialization and financial expertise of the members of our executive team, as well
as other key employees and consultants. If we lose one or more of our executive officers or other key employees or consultants, our ability to implement
our business strategy successfully could be seriously harmed.
We are developing a new drug product formulation for BIO89-100 and we may be unsuccessful. Any changes in methods of product candidate
manufacturing or formulation may result in the need to perform new clinical trials or obtain new drug product, which would require additional costs
and cause delay.
We are developing a new drug product formulation of BIO89-100 for late stage clinical trials and commercialization. Our current drug product is
stored as a frozen liquid and is therefore not well-suited to larger clinical trials or commercialization. We have developed a new refrigerated liquid
formulation and have engaged a formulation development company to also explore a freeze-dried, or lyophilized, formulation. We have commenced
development of a pre-filled syringe for the new drug product formulation and we also plan to begin development of a pen-type autoinjector. There is no
assurance that we will be successful in developing a new drug product formulation, a pre-filled syringe or an autoinjector on a timely basis or at all, which
could impede our development and commercialization strategy for BIO89-100. The FDA or other comparable foreign regulatory authorities could require
nonclinical studies or clinical trials to support introduction of any new formulation, pre-filled syringe and autoinjector, which could delay completion of
clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical trials, increase our clinical trial costs, delay approval of
BIO89-100 and jeopardize our ability to commence product sales and generate revenue from BIO89-100, if approved.
We rely on third parties for certain aspects of our product candidate development process and we may not be able to obtain and maintain the third-party
relationships that are necessary to develop, commercialize and manufacture some or all of our product candidates.
We expect to depend on collaborators, partners, licensees, clinical investigators, CROs, manufacturers and other third parties to support our
discovery efforts, to formulate product candidates, to conduct clinical trials for some or all of our product candidates, to manufacture clinical and
commercial scale quantities of our drug substance and drug product and to market, sell and distribute any products we successfully develop. Any of these
third parties may terminate their engagements with us at any time. If we need to enter into alternative arrangements, it would delay our product
development activities and such alternative arrangements may not be available on terms acceptable to us. We also expect to rely on other third parties to
store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical development, marketing
approval and/or commercialization of BIO89-100 or any future product candidates, producing additional losses and depriving us of potential revenue.
If we fail to develop and commercialize additional product candidates, we may be unable to grow our business.
Although the development and commercialization of BIO89-100 is currently our primary focus, as part of our longer-term growth strategy, we plan
to evaluate the development and commercialization of other therapies related to NASH and other liver and cardio-metabolic diseases. The success of this
strategy depends primarily upon our ability to identify and validate new therapeutic candidates, and to identify, develop and commercialize new drugs and
biologics. Our research efforts may initially show promise in discovering potential new drugs and biologics, yet fail to yield product candidates for clinical
development for a number of reasons.
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We may use our limited financial and human resources to pursue a particular research program or product candidate that is ultimately unsuccessful or
less successful than other programs or product candidates that we may have forgone or delayed.
Because we have limited personnel and financial resources, we may forego or delay the development of certain programs or product candidates that
later prove to have greater commercial potential than the programs or product candidates that we do pursue. 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 development
programs for product candidates may not yield any commercially viable products. Similarly, our decisions to delay or terminate drug development programs
may also be incorrect and could cause us to miss valuable opportunities.
We may seek to establish commercial collaborations for our product candidates, and, if we are not able to establish them on commercially reasonable
terms, we may have to alter our development and commercialization plans.
Our drug development programs and the potential commercialization of our product candidates will require substantial additional cash to fund
expenses. We may decide to collaborate with other pharmaceutical and biotechnology companies for the development and potential commercialization of
our product candidates. Collaborations are complex and time-consuming to negotiate and document. 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 the product candidate for which we are
seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization
or reduce the scope of any sales or marketing activities or increase our expenditures and undertake development or commercialization activities at our own
expense.
We may not be successful in our efforts to identify, in-license or acquire, discover, develop or commercialize additional product candidates.
We may seek to identify, in-license or acquire, discover, develop and commercialize additional product candidates. We cannot assure you that our
effort to in-license or acquire additional product candidates will be successful. Even if we are successful in in-licensing or acquiring additional product
candidates, their requisite development activities may require substantial resources, and we cannot assure you that these development activities will result
in regulatory approvals.
Our international operations may expose us to business, regulatory, political, operational, financial, pricing and reimbursement risks associated with
doing business outside of the United States.
Our use of our international facilities subject us to U.S. and foreign governmental trade, import and export, and customs regulations and laws.
Compliance with these regulations and laws is costly and exposes us to penalties for non-compliance. Doing business internationally potentially involves a
number of risks, any of which could harm our ongoing international clinical operations and supply chain, as well as any future international expansion and
operations and, consequently, our business, financial condition, prospects and results of operations.
Product liability lawsuits against us could cause us to incur substantial liabilities and to 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 human clinical trials and will face an even
greater risk if we commercialize any resulting products. Product liability claims may be brought against us by subjects enrolled in our clinical trials,
patients, or others using our products. Our clinical trial liability insurance coverage may not adequately cover all liabilities that we may incur.
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Our employees, contractors, vendors, principal investigators, consultants and future partners may engage in misconduct or other improper activities,
including noncompliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of fraud or other misconduct by our employees, contractors, vendors, principal investigators, consultants or future
partners. Misconduct by these parties could include failures to comply with FDA regulations, to provide accurate information to the FDA, to comply with
federal and state healthcare fraud and abuse laws and regulations, to report financial information or data timely, completely or accurately, or to disclose
unauthorized activities to us. Most states also have statutes or regulations similar to these federal laws, which may apply to items such as pharmaceutical
products and services reimbursed by private insurers. We and/or our future partners may be subject to administrative, civil and criminal sanctions for
violations of any of these laws.
We depend on our information technology systems and those of our third-party collaborators, service providers, contractors or consultants. Our
internal computer systems, or those of our third-party collaborators, service providers, contractors or consultants, may fail or suffer security breaches,
disruptions, or incidents, which could result in a material disruption of our development programs or loss of data or compromise the privacy, security,
integrity or confidentiality of sensitive information related to our business and have a material adverse effect on our reputation, business, financial
condition or results of operations.
In the ordinary course of our business, we collect, store and transmit large amounts of confidential information, including intellectual property,
proprietary business information and personal information. Our internal technology systems and infrastructure, and those of our current or future third-
party collaborators, service providers, contractors and consultants are vulnerable to damage from computer viruses, unauthorized access or use resulting
from malware, natural disasters, terrorism, war and telecommunication and electrical failures, denial-of-service attacks, cyber-attacks or cyber-intrusions
over the Internet, hacking, phishing and other social engineering attacks, persons inside our organizations (including employees or contractors), loss or
theft, or persons with access to systems inside our organization. While to our knowledge we have not experienced any material system failure, accident or
security breach to date we have been subject to periodic phishing attempts. If a material system failure, accident or security breach were to occur and cause
interruptions in our operations or the operations of third-party collaborators, service providers, contractors and consultants, it could result in a material
disruption of our development programs and significant reputational, financial, legal, regulatory, business or operational harm.
To the extent that any real or perceived security breach affects our systems (or those of our third-party collaborators, service providers, contractors
or consultants), or results in the loss of or accidental, unlawful or unauthorized access to, use of, release of, or other processing of personally identifiable
information or damage to our data or applications or other data or applications relating to our technology or product candidates, or inappropriate disclosure
of confidential or proprietary information, we could incur liabilities and the further development of our product candidates could be delayed. Any failure or
perceived failure by us or any third-party collaborators, service providers, contractors or consultants to comply with our privacy, confidentiality, data
security or similar obligations, or any data security incidents or other security breaches that result in the accidental, unlawful or unauthorized access to, use
of, release of, processing of, or transfer of sensitive information, including personally identifiable information, may result in negative publicity, harm to our
reputation, governmental investigations, enforcement actions, regulatory fines, litigation or public statements against us, could cause third parties to lose
trust in us or could result in claims by third parties, including those that assert that we have breached our privacy, confidentiality, data security or similar
obligations, any of which could have a material adverse effect on our reputation, business, financial condition or results of operations.
Risks Related to Regulatory Approvals
BIO89-100 has not received regulatory approval. If we are unable to obtain regulatory approvals to market BIO89-100 or any future product
candidates, our business will be adversely affected.
We do not expect BIO89-100 or any future product candidate to be commercially available for several years, if at all. BIO89-100 is and any future
product candidate will be subject to strict regulation by regulatory authorities in the United States and in other countries. We cannot market any product
candidate until we have completed all necessary preclinical studies and clinical trials and have obtained the necessary regulatory approvals. We do not
know whether regulatory agencies will grant approval for BIO89-100 or any future product candidate. Even if we complete preclinical studies and clinical
trials successfully, we may not be able to obtain regulatory approvals or we may not receive approvals to make claims about our products that we believe to
be necessary to effectively market our products. Data obtained from preclinical studies and clinical trials is subject to varying interpretations that could
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delay, limit or prevent regulatory approval, and failure to comply with regulatory requirements or inadequate manufacturing processes are examples of
other problems that could prevent approval. The regulatory authorities in the United States and the EU have not approved any products for the treatment of
NASH, and while there are recent guidelines issued by the FDA for the development of drugs for the treatment of NASH and a FDA surrogate endpoint
table for drug approval that includes SHTG, it is unclear whether the requirements for approval will change in the future. Any such changes may require us
to conduct new trials that could delay our timeframe and increase the costs of our programs related to BIO89-100 or any future product candidate for the
treatment of NASH or SHTG. While the FDA has approved reduction in triglycerides levels as a surrogate endpoint for the full approval of drugs for the
treatment of SHTG, it is unclear whether this endpoint will apply to any product candidates that we develop. If such endpoint is not deemed to apply to our
product candidates, it would delay our development timeline and increase the costs of our programs for the treatment of SHTG. We have not had any
discussions with the FDA regarding a surrogate endpoint or accelerated approval regulations. However, we currently expect that our SHTG program would
be subject to smaller clinical trials and that we may expect a relatively quicker overall development timeline for this indication. These expectations are
based on a published FDA surrogate endpoint table for drug approval that includes SHTG, as well as the development path followed by other companies
that developed an SHTG therapy.
Even if we are able to obtain regulatory approvals for BIO89-100 or any future product candidate, if they exhibit harmful side effects after approval,
our regulatory approvals could be revoked or otherwise negatively impacted, and we could be subject to costly and damaging product liability claims.
Even if we receive regulatory approval for BIO89-100 or any future product candidates, we will have tested them in only a small number of patients
during our clinical trials. If our applications for marketing are approved and more patients begin to use our product, new risks and side effects associated with
our products may be discovered. As a result, regulatory authorities may revoke their approvals. We have not had any discussions with the FDA regarding a
surrogate endpoint or accelerated approval regulations. However, based on recent guidelines issued by the FDA for the development of drugs for the treatment
of NASH, if BIO89-100 is approved by the FDA based on a surrogate endpoint pursuant to section 506(c) of the Federal Food, Drug, and Cosmetic Act and
the accelerated approval regulations (21 C.F.R. part 314, subpart H; 21 C.F.R. part 601, subpart E), consistent with FDA guidance, we will be required to
conduct additional clinical trials establishing clinical benefit on the ultimate outcome of NASH. If BIO89-100 is approved by the FDA for the treatment of
SHTG based on an endpoint of the reduction of triglycerides, the FDA may still require a cardiovascular outcomes study as part of a post-marketing
authorization commitment. Such a study would be time consuming and costly and we cannot guarantee that we will see positive results, which could result in
the revocation of the approval. Additionally, we may be required to conduct additional clinical trials, make changes in labeling of our product, reformulate our
product or make changes and obtain new approvals for our and our suppliers’ manufacturing facilities for BIO89-100 and any future product candidates. We
might have to withdraw or recall our products from the marketplace. We may also experience a significant drop in the potential sales of our product if and
when regulatory approvals for such product are revoked. As a result, we may experience harm to our reputation in the marketplace or become subject to
lawsuits, including class actions. Any of these results could decrease or prevent any sales of our approved product or substantially increase the costs and
expenses of commercializing and marketing our product.
The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time-consuming and inherently
unpredictable. Our inability to obtain regulatory approval for BIO89-100 or any future product candidates would substantially harm our business.
Currently, we do not have any product candidates that have received regulatory approval. The time required to obtain approval from the FDA and
comparable foreign regulatory authorities is unpredictable but typically takes many years following the commencement of preclinical studies and clinical
trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations or the
type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s development and may vary among
jurisdictions. It is possible that none of BIO89-100 or any future product candidates will ever obtain regulatory approval. BIO89-100 or any future product
candidate could fail to receive regulatory approval from the FDA or comparable foreign regulatory authorities for many reasons, including those
referenced in Part I, Item 1. “Business—Government Regulation and Product Approval”. If we were to obtain approval, regulatory authorities may
approve any of our product candidates for fewer or more limited indications
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than we request, may grant approval contingent on the performance of costly post-marketing clinical trials or may approve a product candidate with a label
that does not include the labeling claims necessary or desirable for the successful commercialization of the product candidate.
Even if BIO89-100 or any future product candidate receives regulatory approval, it may still face future development and regulatory difficulties.
Even if we obtained regulatory approval for a product candidate, it would be subject to ongoing requirements by the FDA and comparable foreign
regulatory authorities governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, safety surveillance,
import, export, advertising, promotion, recordkeeping and reporting of safety and other post-market information. In addition, manufacturers of drug
products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with
cGMP, regulations and standards. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of
unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that
product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. If we,
our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, or undesirable
side effects caused by such products are identified, a regulatory agency may: issue safety alerts, Dear Healthcare Provider letters, press releases or other
communications containing warnings about such product; mandate modifications to promotional materials or require us to provide corrective information
to healthcare practitioners; require that we conduct post-marketing studies; require us to enter into a consent decree, which can include imposition of
various fines, reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance; seek an injunction or impose
civil or criminal penalties or monetary fines; suspend marketing of, withdraw regulatory approval of or recall such product; suspend any ongoing clinical
studies; refuse to approve pending applications or supplements to applications filed by us; suspend or impose restrictions on operations, including costly
new manufacturing requirements; or seize or detain products, refuse to permit the import or export of products or require us to initiate a product recall. The
occurrence of any event or penalty described above may inhibit our ability to commercialize our products and generate product revenue.
Risks Relating to Intellectual Property
Our success depends upon our ability to obtain and maintain intellectual property protection for our products and technologies.
Our success will depend in significant part on our current or future licensors’, licensees’ or collaborators’ ability to establish and maintain adequate
protection of our owned and licensed intellectual property covering the product candidates we plan to develop, and the ability to develop these product
candidates and commercialize the products resulting therefrom, without infringing the intellectual property rights of others. In addition to taking other steps
to protect our intellectual property, we hold issued patents, we have applied for patents, and we intend to continue to apply for, patents with claims covering
our technologies, processes and product candidates when and where we deem it appropriate to do so. We have filed numerous patent applications both in
the United States and in certain foreign jurisdictions to obtain patent rights to inventions we have discovered, with claims directed to compositions of
matter, methods of use and other technologies relating to our programs. There can be no assurance that any of these patent applications will issue as patents
or, for those applications that do mature into patents, that the claims of the patents will exclude others from making, using or selling our product candidates
or products that compete with or are similar to our product candidates. In countries where we have not sought and do not seek patent protection, third
parties may be able to manufacture and sell our product candidates without our permission, and we may not be able to stop them from doing so.
With respect to patent rights, we do not know whether any of the pending patent applications for any of our product candidates will result in the
issuance of patents that effectively protect our technologies, processes and product candidates, or if any of our issued patents or our current or future
licensors’, licensees’ or collaborators’ issued patents will effectively prevent others from commercializing competitive technologies, processes and
products. We cannot be certain that we or our current or future licensors, licensees or collaborators were the first to make the inventions claimed in our
owned or licensed patents or pending patent applications, or that we or our current or future licensors, licensees or collaborators were the first to file for
patent protection of such inventions.
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Any changes we make to our BIO89-100 or any future product candidates to cause them to have what we view as more advantageous properties
may not be covered by our existing patents and patent applications, and we may be required to file new applications and/or seek other forms of protection
for any such altered product candidates. The patent landscape surrounding the technology underlying our product candidates is crowded, and there can be
no assurance that we would be able to secure patent protection that would adequately cover an alternative to BIO89-100 or any future product candidates.
We and our current or future licensors, licensees or collaborators may not be able to prepare, file and prosecute all necessary or desirable patent
applications at a reasonable cost or in a timely manner. It is also possible that we or our current or future licensors, licensees or collaborators will fail to
identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection
for them. Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to
maintain or enforce the patents, covering technology that we license from or license to third parties and may be reliant on our current or future licensors,
licensees or collaborators to perform these activities, which means that these patent applications may not be prosecuted, and these patents enforced, in a
manner consistent with the best interests of our business. If our current or future licensors, licensees or collaborators fail to establish, maintain, protect or
enforce such patents and other intellectual property rights, such rights may be reduced or eliminated. If our current or future licensors, licensees or
collaborators are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could
be compromised.
Similar to the patent rights of other biotechnology companies, the scope, validity and enforceability of our owned and licensed patent rights
generally are highly uncertain and involve complex legal and factual questions. The issuance of a patent is not conclusive as to its inventorship, scope,
validity or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad. In recent years, these areas have
been the subject of much litigation in the industry. As a result, the issuance, scope, validity, enforceability and commercial value of our and our current or
future licensors’, licensees’ or collaborators’ patent rights are highly uncertain. Our and our current or future licensors’, licensees’ or collaborators’ pending
and future patent applications may not result in patents being issued that protect our technology or product candidates, or products resulting therefrom, in
whole or in part, or that effectively prevent others from commercializing competitive technologies and products. The patent examination process may require
us or our current or future licensors, licensees or collaborators to narrow the scope of the claims of pending and future patent applications, which would limit
the scope of patent protection that is obtained, if any. Our and our current or future licensors’, licensees’ or collaborators’ patent applications cannot be
enforced against third parties practicing the technology that is currently claimed in such applications unless and until a patent issues from such applications,
and then only to the extent the claims that issue are broad enough to cover the technology being practiced by those third parties.
Furthermore, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting
such candidates might expire before or shortly after the resulting products are commercialized. As a result, our owned and in-licensed patents may not
provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. We expect to seek extensions of patent terms
for our issued patents, where available. The applicable authorities, including the FDA in the United States, and any comparable foreign regulatory
authorities, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant
more limited extensions than we request. In addition, we may not be granted an extension because of, for example, failing to apply within applicable
deadlines, failing to apply prior to the expiration of relevant patents or otherwise failing to satisfy applicable requirements.
We may not be able to protect our intellectual property rights throughout the world.
The legal protection afforded to inventors and owners of intellectual property in countries outside of the United States may not be as protective or
effective as that in the United States and we may, therefore, be unable to acquire and enforce intellectual property rights outside the United States to the same
extent as in the United States. Whether filed in the United States or abroad, our patent applications may be challenged or may fail to result in issued patents.
Filing, prosecuting, enforcing and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our
intellectual property rights in some countries outside the United States are less extensive than those in the United States. In addition, the laws of some foreign
countries do not protect intellectual property rights to the same extent as federal and certain state laws in the United States.
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Consequently, 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 technologies in jurisdictions where
we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have
patent protection, but enforcement is not as strong as that in the United States. These products may compete with BIO89-100 or any future product
candidates and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
We rely on a license from Teva and a sublicense from ratiopharm to patents and know-how related to glycoPEGylation technology that are used in the
development, manufacture and commercialization of BIO89-100. Any termination or loss of significant rights, including the right to glycoPEGylation
technology, or breach, under these agreements or any future license agreement related to our product candidates, would materially and adversely affect
our ability to continue the development and commercialization of the related product candidates.
In April 2018, we entered into an Asset Transfer and License Agreement (the “FGF21 Agreement”) with Teva under which we acquired certain
patents, intellectual property and other assets relating to Teva’s glycoPEGylated FGF21 program, including BIO89-100. Under this agreement, we were
granted a perpetual, non-exclusive (but exclusive as to BIO89-100), non-transferable, worldwide license to patents and know-how related to
glycoPEGylation technology used in the development, manufacture and commercialization of BIO89-100 and products containing BIO89-100. The FGF21
Agreement also contains numerous covenants with which we must comply, including the utilization of commercially reasonable efforts to develop and
ultimately commercialize BIO89-100, as well as certain reporting covenants and the obligation to make royalty payments, if and when BIO89-100 is
approved for commercialization. Our failure to satisfy any of these covenants could result in the termination of the FGF21 Agreement. In addition, we
entered into a Sublicense Agreement with ratiopharm (the “ratiopharm Sublicense”), under which we were granted a perpetual, exclusive, worldwide
sublicense to patents and know-how related to glycoPEGylation technology used in the development, manufacture and commercialization of BIO89-100
and products containing BIO89-100. Termination of the FGF21 Agreement or the ratiopharm Sublicense will impact our rights under the intellectual
property licensed to us by Teva and ratiopharm, respectively, including our license to glycoPEGylation technology, but will not affect our rights under the
assets assigned to us.
Beyond this agreement, our commercial success will also depend upon our ability, and the ability of our licensors, to develop, manufacture, market
and sell our product candidates and use our proprietary technologies without infringing the proprietary rights of third parties. A third party may hold
intellectual property rights, including patent rights, that are important or necessary to the development of our product candidates. As a result, we may enter
into additional license agreements in the future. If we fail to comply with the obligations under these agreements, including payment and diligence
obligations, our licensors may have the right to terminate these agreements, in which event we may not be able to develop, manufacture, market or sell any
product that is covered by these agreements or to engage in any other activities necessary to our business that require the freedom to operate afforded by the
agreements, or we may face other penalties under the agreements.
We may be unable to obtain intellectual property rights or technology necessary to develop and commercialize BIO89-100 and any future product
candidates.
The patent landscape around our programs is complex, and we are aware of several third-party patents and patent applications containing subject
matter that might be relevant to BIO89-100. Depending on what claims ultimately issue from these patent applications, and how courts construe the issued
patent claims, as well as depending on the ultimate formulation and method of use of BIO89-100 or any future product candidates, we may need to obtain a
license to practice the technology claimed in such patents. There can be no assurance that such licenses will be available on commercially reasonable
terms, or at all.
We may become involved in lawsuits or other proceedings to protect or enforce our intellectual property, which could be expensive, time-consuming
and unsuccessful and have a material adverse effect on the success of our business.
Third parties may infringe our patents or misappropriate or otherwise violate our intellectual property rights. In the future, we may initiate legal
proceedings to enforce or defend our intellectual property rights, to protect our
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trade secrets or to determine the validity or scope of intellectual property rights we own or control. Also, third parties may initiate legal proceedings against
us to challenge the validity or scope of intellectual property rights we own, control or to which we have rights. An adverse result in any litigation
proceeding could put one or more of our patents at risk of being invalidated, narrowed, held unenforceable or interpreted in such a manner that would not
preclude third parties from entering the market with competing products.
Third-party pre-issuance submission of prior art to the USPTO, or opposition, derivation, revocation, reexamination, inter partes review or
interference proceedings, or other pre-issuance or post-grant proceedings or other patent office proceedings or litigation in the United States or other
jurisdictions provoked by third parties or brought by us, may be necessary to determine the inventorship, priority, patentability or validity of inventions
with respect to our patents or patent applications. An unfavorable outcome could leave our technology or product candidates without patent protection,
allow third parties to commercialize our technology or product candidates and compete directly with us, without payment to us, or could require us to
obtain license rights from the prevailing party in order to be able to manufacture or commercialize our product candidates without infringing third-party
patent rights. Our business could be harmed if the prevailing party in such a case does not offer us a license on commercially reasonable terms, or at all.
Even if we obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. 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. Even if we successfully defend such litigation or proceeding, we may incur
substantial costs and our defense may distract our management and other employees.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of
our confidential information could be compromised by disclosure during this type of litigation. In addition, many foreign jurisdictions have rules of
discovery that are different than those in the United States and that may make defending or enforcing our patents extremely difficult. There could also be
public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these
results to be negative, it could have a material adverse effect on the price of shares of our common stock.
Third parties may initiate legal proceedings against us alleging that we infringe their intellectual property rights or we may initiate legal proceedings
against third parties to challenge the validity or scope of intellectual property rights controlled by third parties.
Third parties may initiate legal proceedings against us alleging that we infringe their intellectual property rights or we may initiate legal
proceedings against third parties to challenge the validity or scope of intellectual property rights controlled by third parties, including in oppositions,
interferences, revocations, reexaminations, inter partes review or derivation proceedings before the USPTO or its counterparts in other jurisdictions. These
proceedings can be expensive and time-consuming and many of our adversaries in these proceedings may have the ability to dedicate substantially greater
resources to prosecuting these legal actions than we can. We could be found liable for monetary damages, including treble damages and attorneys’ fees, if
we are found to have willfully infringed a patent of a third party. A finding of infringement could prevent us from commercializing our BIO89-100 or any
future product candidates or force us to cease some of our business operations, which could materially harm our business.
Although we have reviewed certain third-party patents and patent filings that we believe may be relevant to our therapeutic candidates or products,
we have not conducted a freedom-to-operate search or analysis for any of our therapeutic candidates or products, and we may not be aware of patents or
pending or future patent applications that, if issued, would block us from commercializing our product candidates. Thus, we cannot guarantee that our
product candidates, or our commercialization thereof, do not and will not infringe any third party’s intellectual property.
Risks Related to Ownership of Our Common Stock
The price of our common stock may be volatile, and you may lose all or part of your investment.
The market price of our common stock could fluctuate significantly, and you may not be able to resell your shares at or above the price you paid
for your shares. Those fluctuations could be based on various factors in addition to those otherwise described in this prospectus, including those described
in these “Risk Factors.” Any of
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these factors may result in large and sudden changes in the volume and trading price of our common stock. In the past, following periods of volatility in the
market price of a company’s securities, stockholders have often instituted securities class action litigation against that company.
Sales of our common stock, or the perception that such sales may occur, could depress the price of our common stock.
Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, could depress the
market price of our common stock. Certain holders of shares of our common stock have rights, subject to certain 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. In addition, we
have filed a registration statement registering under the Securities Act the shares of our common stock reserved for issuance under our 2019 Equity
Incentive Plan, including shares issuable upon exercise of outstanding options. These shares can be freely sold in the public market upon issuance, subject
to volume limitations applicable to affiliates. Further, as opportunities present themselves, we may enter into financing or similar arrangements in the
future, including the issuance of debt or equity securities.
Raising additional capital may cause dilution to existing stockholders, restrict our operations or require us to relinquish rights to our technologies.
Existing stockholders could suffer dilution or be negatively affected by fixed payment obligations we may incur if we raise additional funds
through the issuance of additional equity securities or debt or the Loan Agreement. Furthermore, these securities may have rights senior to those of our
common stock and could contain covenants or protective rights that would restrict our operations and potentially impair our competitiveness, 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.
General Risk Factors
Our directors, executive officers and current holders of 5% or more of our capital stock have substantial control over our company, which could limit
your ability to influence the outcome of matters subject to stockholder approval, including a change of control.
As of December 31, 2020, our executive officers, directors and other holders of 5% or more of our common stock beneficially owned a majority
of our outstanding common stock. As a result, our executive officers, directors and other holders of 5% or more of our common stock, if they act, will be
able to influence or control matters requiring approval by our stockholders, including the election of directors and the approval of mergers, acquisitions
or other extraordinary transactions. In addition, our current directors, executive officers and other holders of 5% or more of our common stock, acting
together, would have the ability to control the management and affairs of our company. They may also have interests that differ from yours and may vote
in a way with which you disagree and that may be adverse to your interests. This concentration of ownership may have the effect of delaying, preventing
or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their shares of our common
stock as part of a sale of our company.
We previously identified material weaknesses in our internal control over financial reporting, which have been remediated. If we identify additional
material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to produce timely and
accurate financial statements, and we or our independent registered public accounting firm may conclude that our internal control over financial
reporting is not effective, which could adversely affect our investors’ confidence and our stock price.
As an emerging growth company under the JOBS Act, our management is required to report upon the effectiveness of our internal control over
financial reporting under Section 404 of the Sarbanes-Oxley Act. Our independent registered public accounting firm is not required to formally attest to the
effectiveness of our internal control over financial reporting until the date we are no longer an emerging growth company and reach accelerated filer status.
Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our
reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our independent registered
public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may
require prospective or retroactive changes to our consolidated financial statements or identify other areas for further attention or improvement. As
previously disclosed, in connection with our financial statement close process
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for 2018, we identified material weaknesses in the design and operating effectiveness of our internal control over financial reporting. While we have
remediated such material weaknesses, we cannot assure you that we have identified all material weaknesses or that there will not be additional material
weaknesses or deficiencies that we will identify in the future.
Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law could prevent a third party from acquiring us
(even if an acquisition would benefit our stockholders), may limit the ability of our stockholders to replace our management and limit the price that
investors might be willing to pay for shares of our common stock.
Our amended and restated certificate of incorporation and our amended and restated bylaws could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from attempting to acquire, control of us. These provisions could delay or prevent a change in control
of the company and could limit the price that investors might be willing to pay in the future for shares of our common stock. In addition, as a Delaware
corporation, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which prohibits a Delaware
corporation from engaging in a business combination specified in the statute with an interested stockholder (as defined in the statute) for a period of three
years after the date of the transaction in which the person first becomes an interested stockholder, unless the business combination is approved in advance
by a majority of the independent directors or by the holders of at least two-thirds of the outstanding disinterested shares. The application of Section 203 of
the Delaware General Corporation Law could also have the effect of delaying or preventing a change of control of us.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of
the United States will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability
to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for
certain actions or proceedings under Delaware statutory or common law. Our amended and restated certificate of incorporation provides further that the
federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities
Act. These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or
our directors, officers or other employees. If a court were to find the choice of forum provision contained in our amended and restated certificate of
incorporation to be inapplicable or unenforceable, we may incur additional costs associated with resolving such action in other jurisdictions.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We lease office space, which consists of approximately 1,600 square feet located at 6 Hamada Street, Herzliya, 4673340, Israel. This lease expires
on April 30, 2021. We also lease office space at 142 Sansome Street, San Francisco, California 94104, which consists of approximately 3,600 square feet.
This lease expires on January 14, 2022. We believe that our current spaces are adequate for our needs. We also believe we will be able to obtain additional
space, as needed, on commercially reasonable terms.
Item 3. Legal Proceedings.
We are currently not a party to any material legal proceedings. From time to time, we may become involved in legal proceedings arising in the
ordinary course of our business. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of
management resources, negative publicity, reputational harm and other factors, and there can be no assurances that favorable outcomes will be obtained.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is traded on The Nasdaq Global Market under the symbol “ETNB.”
As of March 1, 2021, there were approximately 12 stockholders of record of our common stock.
Dividend Policy
We have never declared or paid cash dividends on our capital stock and have no present intention to pay cash dividends on our common stock for
the foreseeable future. Any determination to pay dividends to holders of our common stock will be at the discretion of our board of directors and will
depend on many factors, including our financial condition, results of operations, liquidity, earnings, projected capital and other cash requirements, legal
requirements, restrictions in the agreements governing any indebtedness we may enter into, business prospects and other factors that our board of directors
deems relevant.
Use of Proceeds from our Initial Public Offering
On November 13, 2019, we completed our IPO, pursuant to which we issued and sold an aggregate of 6,100,390 shares of common stock
(inclusive of 795,703 shares pursuant to the underwriters’ option to purchase additional shares) at the IPO price of $16.00 per share. The aggregate gross
proceeds from our IPO were $97.6 million, and the net proceeds were $87.7 million after deducting underwriting discounts and commissions of $6.8
million and other offering expenses of $3.1 million. The offer and sale of the shares of common stock in the IPO were registered pursuant to registration
statements on Form S-1 (File Nos. 333-234174 and 333-234617), which the SEC declared effective on November 8, 2019. No offering expenses were paid
directly or indirectly to any of our directors or officers (or their associates) or persons owning 10% or more of any class of our equity securities or to any
other affiliates. The underwriters for our IPO were BofA Securities, Inc., SVB Leerink LLC, RBC Capital Markets, LLC, and Oppenheimer & Co. Inc.
There has been no material change in the intended use of proceeds from our IPO as described in our final prospectus filed with the SEC pursuant
to Rule 424(b)(4) on November 12, 2019.
Item 6. Selected Financial Data.
We are a smaller reporting company, as defined by Rule 12b-2 under the Securities and Exchange Act of 1934 and in Item 10(f)(1) of Regulation
S-K, and are not required to provide the information under this item.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial
statements and related notes and other financial information included elsewhere in this Annual Report on Form 10-K. Some of the information contained
in this discussion and analysis includes forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from
those described in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to,
those identified below and those discussed in the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K.
Overview
We are a clinical-stage biopharmaceutical company focused on the development and commercialization of innovative therapies for the treatment of
liver and cardio-metabolic diseases. Our lead product candidate, BIO89-100, a specifically engineered glycoPEGylated analog of FGF21, is currently being
developed for the treatment of NASH and for the treatment of SHTG. NASH is a severe form of NAFLD, characterized by inflammation and fibrosis in the
liver that can progress to cirrhosis, liver failure, HCC and death. There are currently no approved products for the treatment of NASH. In September 2020,
we announced positive topline data from the Phase 1b/2a trial of BIO89-100 in NASH. We plan to initiate a Phase 2b trial in NASH patients in the first half
of 2021. In December 2020, we initiated a paired-biopsy open-label cohort as part of the Phase 1b/2a trial in NASH patients assessing histology endpoints
with topline data anticipated by the end of 2021. SHTG is a condition identified by severely elevated levels of triglycerides (greater than or equal to 500
mg/dL), which is associated with an increased risk of NASH, cardiovascular events and acute pancreatitis. We initiated our Phase 2 trial (ENTRIGUE) in
SHTG patients in the third quarter of 2020 and expect to report topline data in the second half of 2021.
We commenced operations in 2018 and have devoted substantially all of our resources to raising capital, acquiring our initial product candidate,
identifying and developing BIO89-100, licensing certain related technology, conducting research and development activities (including preclinical studies
and clinical trials) and providing general and administrative support for these operations. Prior to our initial public offering (“IPO”), we had funded our
operations primarily from the issuance and sale of capital stock. In November 2019, we completed our IPO pursuant to which we issued 6,100,390 shares
of our common stock at a price of $16.00 per share. We received net proceeds of $87.7 million from the IPO.
In July 2020, we completed an underwritten public offering of 3,047,040 shares of our common stock, including 397,440 shares sold pursuant to
the underwriters’ exercise of their option to purchase additional shares, at a public offering price of $27.50 per share. We raised a total of $83.8 million in
gross proceeds from the offering, or approximately $78.2 million in net proceeds after deducting underwriters’ discounts and commissions of $5.0 million
and offering costs of approximately $0.6 million.
In September 2020, we completed an underwritten public offering of 3,025,000 shares of our common stock, at a public offering price of $28.00
per share. We raised a total of $84.7 million in gross proceeds from the offering, or approximately $79.5 million in net proceeds after deducting
underwriting discounts and commissions of $4.6 million and offering costs of approximately $0.6 million.
As of December 31, 2020, our cash, cash equivalents and short-term investments totaled $204.6 million. Based on our current operating plan, we
believe that our cash, cash equivalents and short-term investments together with the proceeds available under our term loan facility will be sufficient to
meet our anticipated cash requirements through the second quarter of 2023.
We have incurred net losses since our inception. Our net losses for the years ended December 31, 2020 and 2019 were $49.5 million and $57.4
million, respectively. As of December 31, 2020, we had an accumulated deficit of $123.1 million. We expect to continue to incur significant expenses and
increasing operating losses as we advance BIO89-100 and any future product candidates through clinical trials, seek regulatory approval for BIO89-100
and any future product candidates, expand our clinical, regulatory, quality, manufacturing and commercialization capabilities, protect our intellectual
property, prepare for and, if approved, proceed to commercialization of BIO89-100 and any future product candidates, expand our general and
administrative support functions, including hiring additional personnel, and incur additional costs associated with operating as a public
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company. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our
expenditures on other research and development activities.
Impact of COVID-19 Pandemic
The ongoing COVID-19 pandemic has disrupted and may continue to disrupt our business and delay our preclinical and clinical programs and
timelines. The extent to which the COVID-19 pandemic may impact our future operating results and financial condition is uncertain. We initiated our Phase
2 trial (ENTRIGUE) in SHTG patients in the third quarter of 2020 as well as a new paired-biopsy open-label histology cohort as part of the Phase 1b/2a
trial in the fourth quarter of 2020. The COVID-19 surge observed late in the fourth quarter of 2020 and the first quarter of 2021 has impacted enrollment in
these studies. We plan to initiate a Phase 2b trial in NASH patients in the first half of 2021. We do not yet know the full extent of potential delays, which
could prevent or delay us from obtaining approval for BIO89-100. For more information regarding risks related to the ongoing COVID-19 pandemic,
please see the risk factor entitled “The ongoing COVID-19 pandemic has resulted and may in the future result in significant disruptions to our clinical trials
or other business operations, which could have a material adverse effect on our business,” in Part I. Item 1A of this Annual Report on Form 10-K. To the
extent the ongoing COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other
risks set forth under “Risk Factors” in this Annual Report on Form 10-K.
Components of Results of Operations
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for the development of our lead product candidate, BIO89-100. Our
research and development expenses consist primarily of external costs related to preclinical and clinical development, including costs related to acquiring
patents and intellectual property, expenses incurred under license agreements and agreements with contract research organizations and consultants, costs
related to acquiring and manufacturing clinical trial materials, including under agreements with contract manufacturing organizations and other vendors,
costs related to the preparation of regulatory submissions and expenses related to laboratory supplies and services, as well as personnel costs. Personnel
costs consist of salaries, employee benefits and share-based compensation for individuals involved in research and development efforts.
We expense all research and development expenses in the periods in which they are incurred. We accrue for costs incurred as the services are being
provided by monitoring the status of specific activities and the invoices received from our external service providers. We adjust our accrued expenses as
actual costs become known.
Payments associated with licensing agreements to acquire licenses to develop, use, manufacture and commercialize products that have not reached
technological feasibility and do not have alternate commercial use are expensed as incurred. Where contingent milestone payments are due to third parties
under research and development arrangements or license agreements, the milestone payment obligations are expensed when the milestone results are
probable and estimable, which is generally upon achievement of milestones.
We expect our research and development expenses to increase substantially for the foreseeable future as we continue the development of BIO89-
100 and continue to invest in research and development activities. The process of conducting the necessary clinical research to obtain regulatory approval
is costly and time consuming, and the successful development of BIO89-100 and any future product candidates is highly uncertain. To the extent that
BIO89-100 continues to advance into larger and later stage clinical trials, our expenses will increase substantially and may become more variable. The
actual probability of success for BIO89-100 or any future product candidate may be affected by a variety of factors, including the safety and efficacy of our
product candidates, investment in our clinical programs, manufacturing capability and competition with other products. As a result, we are unable to
determine the timing of initiation, duration and completion costs of our research and development efforts or when and to what extent we will generate
revenue from the commercialization and sale of BIO89-100 or any future product candidate.
54
General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs, expenses for outside professional services, including legal, human
resource, audit and accounting services, consulting costs and allocated facilities costs. Personnel and related costs consist of salaries, benefits and share-
based compensation for personnel in executive, finance and other administrative functions. Facilities costs consist of rent and maintenance of facilities. We
expect our general and administrative expenses to increase for the foreseeable future as we increase the size of our administrative function to support the
growth of our business and support our continued research and development activities.
Other Expenses, Net
Other expenses, net primarily consists of the revaluation of our convertible preferred stock liability, prior to extinguishment upon our IPO.
Results of Operations
Years Ended December 31, 2020 and 2019
The following table summarizes our results of operations for the periods presented (in thousands):
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other expenses, net
Income tax benefit (expense)
Net loss
Year Ended December 31,
2019
2020
Change
$
$
36,199 $
13,156
49,355
(49,355)
(203)
59
(49,499) $
21,346 $
5,294
26,640
(26,640)
(30,562)
(218)
(57,420) $
14,853
7,862
22,715
(22,715)
30,359
277
7,921
Research and Development Expenses
The following table summarizes the period-over-period changes in research and development expenses for the periods indicated (in thousands):
Clinical development
Contract manufacturing
Preclinical costs
Personnel-related expenses
Other expenses
Total research and development expenses
Year Ended December 31,
2019
2020
Change
13,613 $
12,995
1,684
6,841
1,066
36,199 $
5,453 $
7,257
4,072
3,688
876
21,346 $
8,160
5,738
(2,388)
3,153
190
14,853
$
$
Research and development expenses increased by $14.9 million, or 70%, to $36.2 million in 2020 compared to $21.3 million in 2019. The change
was primarily due to an increase of $8.2 million in clinical development costs as a result of our ongoing Phase 1b/2a study in NASH and the initiation of
our Phase 2 trial (ENTRIGUE) in SHTG patients in the third quarter of 2020, as well as our new paired-biopsy histology cohort as part of the Phase 1b/2a
trial in the fourth quarter of 2020, an increase of $5.7 million in contract manufacturing costs as a result of the manufacture of additional supplies for our
ongoing clinical trials, including our clinical trials initiated in the second half of 2020 and an increase of $3.2 million in personnel-related costs, including
share-based compensation, due to higher headcount. The increases were partially offset by a decrease of $2.4 million in preclinical costs. The timing of
such preclinical costs is dependent upon the status and stage of our clinical trials.
55
General and Administrative Expenses
General and administrative expenses increased by $7.9 million, or 149%, to $13.2 million in 2020 compared to $5.3 million in 2019. The change
was primarily due to an increase of $4.2 million in personnel-related costs, including share-based compensation, driven by higher headcount, an increase of
$2.5 million in professional services including legal and accounting consulting service fees and an increase of $1.4 million in insurance related costs. The
increases were partially offset by a decrease of $0.3 million in travel related expenses.
Other Expenses, Net
Other expenses, net decreased by $30.4 million to $0.2 million in 2020 compared to $30.6 million in 2019. In 2019, other expenses, net consisted
primarily of the revaluation of our convertible preferred stock liability which was extinguished upon our IPO in November 2019.
Liquidity and Capital Resources
To date, we have incurred significant net losses and negative cash flows from operations. As of December 31, 2020, we had available cash, cash
equivalents and short-term investments of $204.6 million and an accumulated deficit of $123.1 million. Prior to our IPO, we funded our operations from
the issuance and sale of capital stock. In connection with our IPO, we issued and sold an aggregate of 6,100,390 shares of common stock at a price of
$16.00 per share. We received proceeds of $87.7 million, net of underwriting discounts and commissions and estimated offering costs.
In April 2020, we entered into a secured term loan facility with an aggregate committed principal amount of up to $15.0 million. As of December
31, 2020, we had not drawn any amount under the term loan facility.
In July 2020, we completed an underwritten public offering of 3,047,040 shares of our common stock, including 397,440 shares sold pursuant
to the underwriters’ exercise of their option to purchase additional shares, at a public offering price of $27.50 per share. Upon completion of the
offering, we received gross proceeds of $83.8 million, before deducting underwriting discounts and commissions and offering expenses.
In September 2020, we completed an underwritten public offering of 3,025,000 shares of our common stock, at a public offering price of $28.00
per share. Upon completion of the offering, we received gross proceeds of $84.7 million, before deducting underwriting discounts and commissions and
offering expenses.
Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures related to our lead
product candidate, BIO89-100. We plan to increase our research and development expenses substantially for the foreseeable future as we continue the
clinical development of our current and future product candidates. At this time, due to the inherently unpredictable nature of clinical development, we
cannot reasonably estimate the costs we will incur and the timelines that will be required to complete development, obtain marketing approval, and
commercialize our current product candidate or any future product candidates. For the same reasons, we are also unable to predict when, if ever, we will
generate revenue from product sales or our current or any future license agreements which we may enter into or whether, or when, if ever, we may achieve
profitability. Clinical and preclinical development timelines, the probability of success, and development costs can differ materially from expectations. In
addition, we cannot forecast the timing and amounts of milestone, royalty and other revenue from licensing activities, which future product candidates may
be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development
plans and capital requirements.
Based on our research and development plans, we expect that our existing cash, cash equivalents and short-term investments together with the
proceeds available under our term loan facility, will be sufficient to fund our operations through the second quarter of 2023. However, our operating plans
and other demands on our cash resources may change as a result of many factors, and we may seek additional funds sooner than planned. There can be no
assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable to us.
56
Our future funding requirements will depend on many factors, including the following:
•
•
•
•
•
•
•
•
•
the progress, timing, scope, results and costs of our clinical trials of BIO89-100 and preclinical studies or clinical trials of other potential
product candidates we may choose to pursue in the future, including the ability to enroll patients in a timely manner for our clinical trials;
the costs and timing of obtaining clinical and commercial supplies and validating the commercial manufacturing process for BIO89-100
and any other product candidates we may identify and develop;
the cost, timing and outcomes of regulatory approvals;
the timing and amount of any milestone, royalty or other payments we are required to make pursuant to current or any future collaboration
or license agreements;
costs of acquiring or in-licensing other product candidates and technologies;
the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;
the costs associated with attracting, hiring and retaining additional qualified personnel as our business grows;
our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced
internal controls over financial reporting; and
the cost of preparing, filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.
We expect to continue to generate substantial operating losses for the foreseeable future as we expand our research and development activities. We
will continue to fund our operations primarily through utilization of our current financial resources and through additional raises of capital to advance our
current product candidate through clinical development, to develop, acquire or in-license other potential product candidates and to fund operations for the
foreseeable future. However, there is no assurance that such funding will be available to us or that it will be obtained on terms favorable to us or will
provide us with sufficient funds to meet our objectives. Any failure to raise capital as and when needed could have a negative impact on our financial
condition and on our ability to pursue our business plans and strategies.
To the extent that we raise additional capital through partnerships or licensing arrangements with third parties, we may have to relinquish valuable
rights to our product candidates, future revenue streams or research programs or to grant licenses on terms that may not be favorable to us. If we raise
additional capital through public or private equity offerings, the ownership interest of our then-existing stockholders will be diluted, and the terms of these
securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing,
we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or
declaring dividends. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or suspend one or more of our
clinical trials or preclinical studies, research and development programs or commercialization efforts or grant rights to develop and market our product
candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
Cash Flows
The following table summarizes our cash flows for the periods presented (in thousands):
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Net increase in cash and cash equivalents, and
restricted cash
57
$
Year Ended December 31,
2019
2020
(46,244) $
(106,832)
157,924
(25,460)
(139)
107,702
$
4,848 $
82,103
Net Cash Used in Operating Activities
During the year ended December 31, 2020, net cash used in operating activities was $46.2 million, which consisted of a net loss of $49.5 million
and a net change of $1.0 million in our net operating assets and liabilities, partially offset by non-cash charges of $4.3 million. The change in our operating
assets and liabilities was primarily due to a $3.6 million increase in prepaid and other current assets due to the timing of payments as well as increased
scale of operations and the initiation of clinical trials in the second half of 2020, offset in part by a $2.6 million increase in accounts payable and accrued
expenses as we grew our operations. The non-cash charges are primarily comprised of $3.8 million in share-based compensation, $0.3 million in
amortization of premium on available-for-sale securities and $0.2 million in amortization of debt issuance costs.
During the year ended December 31, 2019, net cash used in operating activities was $25.5 million, which consisted of a net loss of $57.4 million,
partially offset by non-cash charges of $31.0 million and a net change of $0.9 million in our net operating assets and liabilities. The non-cash charges are
primarily comprised of the revaluation of our convertible preferred stock liability of $30.6 million and $0.4 million in share-based compensation. The
change in our operating assets and liabilities was primarily due to a $2.9 million increase in accounts payable and accrued expenses as we grew our
operations, offset in part by a $2.0 million increase in other current assets and other assets due to the timing of payments.
Net Cash Used in Investing Activities
During the year ended December 31, 2020, net cash used in investing activities was $106.8 million, which consisted of $118.9 million in
purchases of available-for-sale securities and $0.1 million in purchases of property and equipment, offset in part by $12.2 million in proceeds from
maturities of available-for-sale securities.
During the year ended December 31, 2019, net cash used in investing activities consisted of purchases of property and equipment.
Net Cash Provided by Financing Activities
During the year ended December 31, 2020 net cash provided by financing activities was $157.9 million, which consisted of $157.7 million in net
proceeds from the issuance of common stock from our public offerings and $0.4 million in proceeds from the issuance of common stock upon exercise of
stock options and employee share purchase plan (“ESPP”) purchases, offset in part by a $0.2 million payment of debt issuance costs.
During the year ended December 31, 2019 net cash provided by financing activities was $107.7 million, which consisted of $87.7 million in net
proceeds from our initial public offering and $20.0 million in net proceeds from the issuance and sale of our convertible preferred stock.
Contractual Obligations and Other Commitments
We are a smaller reporting company, as defined by Rule 12b-2 under the Securities and Exchange Act of 1934 and in Item 10(f)(1) of Regulation
S-K, and are not required to provide the information under this item.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements, as defined in the rules and regulations of the SEC, and do not have any holdings in
variable interest entities.
Critical Accounting Polices and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements,
which have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). The preparation of these consolidated
financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
58
assets and liabilities as of the date of the consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our
estimates are based on our historical experience 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. Actual results may
differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding
our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
While our significant accounting policies are described in the notes to our consolidated financial statements included elsewhere in this Annual
Report on Form 10-K, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial
results.
Accrued Research and Development Expenses
We record accrued expenses for estimated preclinical and clinical trial and research expenses related to the services performed but not yet invoiced
pursuant to contracts with research institutions, contract research organizations and clinical manufacturing organizations that conduct and manage
preclinical studies, and clinical trials, and research services on our behalf. Payments for these services are based on the terms of individual agreements and
payment timing may differ significantly from the period in which the services were performed. Our estimates are based on factors such as the work
completed, including the level of patient enrollment. We monitor patient enrollment levels and related activity to the extent reasonably possible and make
judgments and estimates in determining the accrued balance in each reporting period. Our estimates of accrued expenses are based on the facts and
circumstances known at the time. If we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses
could differ from our estimates. As actual costs become known, we adjust our accrued expenses. To date, we have not experienced significant changes in
our estimates of preclinical studies and clinical trial accruals.
Share-Based Compensation
We measure compensation expense related to share-based awards granted to employees, directors, and non-employee service providers, including
stock options, based on the estimated fair value. We estimate the fair value of the awards on the date of grant, and the resulting share-based compensation,
using the Black-Scholes option-pricing model. The grant date fair value of the share-based awards, which have graded vesting, is recognized as an expense
using the straight-line method over the requisite service period of each award, which is generally the vesting period of the respective awards. We recognize
forfeitures as they occur.
We use the Black-Scholes option-pricing model to estimate the fair value of stock option awards that requires the use of subjective assumptions to
determine the fair value of share-based awards. These assumptions include:
•
•
•
•
Expected volatility—Since we have limited trading history for our common stock due to our short trading history, the expected volatility is
estimated based on the volatility of comparable publicly traded biotechnology companies during the equivalent period of the calculated
expected term of the options granted. The comparable companies were chosen based on their similar size, stage in the life cycle or area of
specialty.
Expected term—The expected term of options granted to employees and directors is determined using the “simplified” method. Under this
approach, the expected term is presumed to be the midpoint between the weighted-average vesting term and the contractual term of the
option. The simplified method makes the assumption that the employee will exercise share options evenly over the period when the share
options are vested and ending on the date when the share options would expire. The expected option term for options granted to non-
employees is estimated on a grant-by-grant basis.
Risk-free interest rate—The risk-free interest rate is based on the U.S. Treasury zero coupon bonds in effect on the grant date for periods
with an equivalent expected term as the option.
Expected dividend—We have never paid dividends and have no foreseeable plans to pay dividends on our shares of common stock.
Therefore, we use an expected dividend of zero.
59
We will continue to use judgment in evaluating the expected volatility and expected term utilized for our share-based compensation calculations on
a prospective basis.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements appearing under Part II Item 8 for more information about recent accounting pronouncements,
the timing of their adoption, and our assessment, to the extent we have made one yet, of their potential impact on our financial condition of results of
operations.
JOBS Act Accounting Election
We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or
revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.
We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective
dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably
opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements and our interim consolidated financial
statements may not be comparable to companies that comply with new or revised accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company, as defined by Rule 12b-2 under the Securities and Exchange Act of 1934 and in Item 10(f)(1) of Regulation
S-K, and are not required to provide the information under this item.
60
Item 8. Financial Statements and Supplementary Data.
89BIO, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firms
Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
61
Page
62
64
65
66
67
68
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors
89bio, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of 89bio, Inc. and subsidiaries (the Company) as of December 31, 2020, the related
consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the year ended December 31, 2020, and the related
notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in
conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an
understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis
for our opinion.
We have served as the Company’s auditor since 2020.
San Francisco, California
March 24, 2021
/s/ KPMG LLP
62
Report of Independent Registered Public Accounting Firm
To the stockholders and the Board of Directors of 89bio, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of 89bio, Inc. and subsidiaries (the “Company”) as of December 31, 2019, the related
consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flow, for the year ended December 31, 2019, and the related
notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year ended December 31, 2019, in conformity
with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
March 18, 2020
We began serving as the Company’s auditor in 2019. In 2020, we became the predecessor auditor.
63
89bio, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents
Restricted cash
Short-term investments
Prepaid and other current assets
Total current assets
Property and equipment, net
Other assets
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
Accrued expenses
Total current liabilities
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000,000 shares
authorized as of December 31, 2020 and 2019, respectively, no shares
issued and outstanding as of December 31, 2020 and 2019, respectively
Common stock, $0.001 par value, 100,000,000 shares
authorized as of December 31, 2020 and 2019, respectively; 19,931,660
and 13,788,982 shares issued and outstanding as of December 31, 2020
and 2019, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
As of December 31,
2020
2019
98,183 $
25
106,446
5,548
210,202
166
706
211,074 $
2,065 $
6,048
8,113
93,335
25
—
1,966
95,326
155
72
95,553
989
4,620
5,609
—
—
20
326,046
(10)
(123,095)
202,961
211,074 $
14
163,526
—
(73,596)
89,944
95,553
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
64
89bio, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other expenses, net
Net loss before income tax
Income tax benefit (expense)
Net loss
Other comprehensive income (loss):
Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Total other comprehensive loss
Comprehensive loss
Net loss per share, basic and diluted
Weighted-average shares used to compute net loss per share,
basic and diluted
Year Ended December 31,
2020
2019
$
$
$
$
$
36,199 $
13,156
49,355
(49,355)
(203)
(49,558)
59
(49,499) $
8
(18)
(10) $
(49,509) $
(3.08) $
21,346
5,294
26,640
(26,640)
(30,562)
(57,202)
(218)
(57,420)
—
—
—
(57,420)
(24.49)
16,087,785
2,344,191
The accompanying notes are an integral part of these consolidated financial statements.
65
89bio, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands, except share amounts)
Common Stock
Shares
Amounts
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Equity
$
23,073
611,226
$
1
$
118
$
—
$
(16,176 ) $
(16,057 )
Convertible Preferred Stock
Amounts
Shares
24,000,000
20,000,000
26,673
—
(44,000,000 )
(49,746 )
7,077,366
—
—
—
—
—
—
—
—
—
—
—
—
—
$
—
—
—
—
—
—
—
—
—
—
—
—
—
6,100,390
—
—
—
13,788,982
6,072,040
63,366
7,272
—
—
—
—
19,931,660
$
—
7
6
—
—
—
14
6
—
—
—
—
—
—
20
$
—
49,739
87,685
25,595
389
—
163,526
157,674
271
134
634
3,807
—
—
326,046
—
—
—
—
—
—
—
—
—
—
—
—
—
(10 )
(10 ) $
$
—
—
—
—
—
(57,420 )
(73,596 )
—
—
—
—
—
(49,499 )
—
(123,095 ) $
—
49,746
87,691
25,595
389
(57,420 )
89,944
157,680
271
134
634
3,807
(49,499 )
(10 )
202,961
Balance as of December 31, 2018
Issuance of convertible preferred stock, net of
issuance costs of $0 and settlement of
the convertible preferred stock liability of $6,673
Conversion of convertible preferred stock into
common stock upon completion of initial public
offering
Issuance of common stock in connection with
initial public offering, net of issuance costs
of $3,083
Capital contribution related to extinguishment of convertible
preferred stock liability
Share-based compensation
Net loss
Balance as of December 31, 2019
Issuance of common stock upon public offerings,
net of issuance costs of $1,208
Issuance of common stock upon exercise of stock options
Issuance of common stock upon ESPP purchase
Issuance of common stock warrant in connection with debt
financing
Share-based compensation
Net loss
Other comprehensive loss
Balance as of December 31, 2020
The accompanying notes are an integral part of these consolidated financial statements.
66
89bio, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation
Share-based compensation
Deferred tax assets
Revaluation of convertible preferred stock liability
Amortization of premium on available-for-sale securities
Amortization of debt issuance costs
Changes in operating assets and liabilities:
Prepaids and other current assets
Other assets
Accounts payable
Accrued expenses
Net cash used in operating activities
Cash flows from investing activities:
Purchases of available-for-sale securities
Proceeds from maturities of available-for-sale securities
Purchases of property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of common stock upon public offerings,
net of issuance costs
Proceeds from issuance of common stock upon initial public offering,
net of issuance costs
Proceeds from issuance of convertible preferred stock and convertible preferred
stock liability, net of issuance costs
Proceeds from issuance of common stock upon stock option exercises
Proceeds from issuance of common stock upon ESPP purchases
Proceeds from issuance of common stock
Payment of debt issuance costs
Net cash provided by financing activities
Net increase in cash and cash equivalents, and restricted cash
Cash and cash equivalents, and restricted cash at beginning of period
Cash and cash equivalents, and restricted cash at end of period
Components of cash and cash equivalents, and restricted cash:
Cash and cash equivalents
Restricted cash
Total cash and cash equivalents, and restricted cash
Supplemental disclosures of noncash information:
Issuance of common stock warrant in connection with term loan facility
Property and equipment purchases included in accounts payable
Cash paid for taxes
Conversion of convertible preferred stock into common stock at close of initial
public offering
Capital contribution related to extinguishment of convertible preferred
stock liability
Year Ended December 31,
2020
2019
$
(49,499) $
(57,420)
60
3,807
(69)
—
268
230
(3,600)
—
1,131
1,428
(46,244)
(118,895)
12,189
(126)
(106,832)
157,680
17
389
20
30,597
—
—
(1,918)
(72)
(520)
3,447
(25,460)
—
—
(139)
(139)
—
—
87,691
—
271
134
—
(161)
157,924
4,848
93,360
98,208 $
98,183 $
25
98,208 $
634 $
— $
142 $
20,000
—
—
11
—
107,702
82,103
11,257
93,360
93,335
25
93,360
—
55
106
— $
49,746
— $
25,595
$
$
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
67
89bio, Inc.
Notes to Consolidated Financial Statements
1. Organization and Basis of Presentation
Description of Business
89bio, Inc. (“89bio” or the “Company”) is a clinical-stage biopharmaceutical company focused on the development and commercialization of
innovative therapies for the treatment of liver and cardio-metabolic diseases. The Company’s lead product candidate, BIO89-100, a specifically engineered
glycoPEGylated analog of fibroblast growth factor 21, is currently being developed for the treatment of nonalcoholic steatohepatitis and for the treatment
of severe hypertriglyceridemia.
89bio, Inc. was formed as a Delaware corporation in June 2019, for the purpose of completing an initial public offering (“IPO”) and related
transactions in order to carry on the business of 89Bio Ltd., which was incorporated in Israel in January 2018.
The Company completed an internal reorganization transaction in September 2019, pursuant to which 89Bio Ltd. became a wholly owned
subsidiary of 89bio, Inc. (the “Reorganization”). As part of the Reorganization, all of the equity holders of 89Bio Ltd. exchanged 100% of the equity of
89Bio Ltd. for 100% of the equity of 89bio, Inc. The Reorganization was considered a transaction between entities under common control.
Public Offerings
In November 2019, 89bio, Inc. completed its IPO, pursuant to which it issued and sold an aggregate of 6,100,390 shares of common stock
(inclusive of 795,703 shares pursuant to the underwriters’ option to purchase additional shares), at the IPO price of $16.00 per share, resulting in net
proceeds of $87.7 million after deducting underwriting discounts and commissions of $6.8 million and other offering expenses of $3.1 million. Upon the
closing of the IPO, the Company’s outstanding convertible preferred stock automatically converted into 7,077,366 shares of common stock of 89bio, Inc.
based on a proportional adjustment to the conversion ratio of the convertible preferred stock on a 1-for-6.217 basis.
In July 2020, the Company completed an underwritten public offering of 3,047,040 shares of its common stock (inclusive of 397,440 shares
pursuant to the underwriters’ option to purchase additional shares), at the public offering price of $27.50 per share. The Company raised a total of $83.8
million in gross proceeds from the offering, or approximately $78.2 million in net proceeds after deducting underwriting discounts and commissions of
$5.0 million and offering costs of approximately $0.6 million.
In September 2020, the Company completed an underwritten public offering of 3,025,000 shares of its common stock, at a public offering price of
$28.00 per share. The Company raised a total of $84.7 million in gross proceeds from the offering, or approximately $79.5 million in net proceeds after
deducting underwriting discounts and commissions of $4.6 million and offering costs of approximately $0.6 million.
Liquidity
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which
contemplates the realization of assets and liquidation of liabilities in the normal course of business. To date, the Company has not generated revenues from
its activities and has incurred substantial operating losses. Management expects the Company to continue to generate substantial operating losses for the
foreseeable future until it completes development of its products and seeks regulatory approvals to market such products. The Company had cash, cash
equivalents and short-term investments of $204.6 million as of December 31, 2020.
The Company expects that its cash, cash equivalents and short-term investments as of December 31, 2020, together with proceeds available from
the Company’s term loan (see Note 6), will be sufficient to fund operating expenses and capital expenditure requirements for a period of at least one year
from the date these audited consolidated financial statements are filed with the Securities and Exchange Commission (“SEC”).
68
89bio, Inc.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S.
GAAP”).
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany
balances and transactions have been eliminated in consolidation.
Reclassification
Certain prior year footnote amounts have been updated for consistency with the current year presentation. Such reclassification has no effect on the
consolidated financial statements.
Foreign Currencies
Certain transactions during the years ended December 31, 2020 and 2019 were denominated in currencies other than the U.S. dollar. Gains and
losses from foreign currency transactions were not material for all periods presented and are reflected in the consolidated statements of operations and
comprehensive loss as a component of other expenses, net. The Company’s subsidiary in Lithuania uses the Euro as its functional currency for financial
reporting. The re-measurement from Euros to U.S. dollars results in translation gain and loss adjustments, which are reflected as a component of
comprehensive loss as foreign currency translation adjustments.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements
and the reported amounts of expenses during the reporting period. Significant estimates and assumptions made in the accompanying consolidated financial
statements include but are not limited to the fair value of stock options and certain accrued expenses. The Company evaluates its estimates and assumptions
on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual
results could differ from those estimates.
Fair Value Measurements
Financial assets and liabilities are recorded at fair value on a recurring basis in the balance sheets. The carrying values of Company’s financial
assets and liabilities, including cash and cash equivalents, restricted cash, prepaid and other current assets, accounts payable, and accrued expenses
approximate to their fair value due to the short-term maturity of these instruments. Fair value is defined as the price that would be received to sell an asset
or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. Assets and liabilities recorded at fair
value are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels are directly related to
the amount of subjectivity with the inputs to the valuation of these assets or liabilities as follows:
Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable inputs for similar assets or liabilities.
These include quoted prices for identical or similar assets or liabilities in active markets and quoted prices for identical or similar assets or
liabilities in markets that are not active;
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
69
89bio, Inc.
Notes to Consolidated Financial Statements
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents. Bank
deposits are held by accredited financial institutions and these deposits may at times be in excess of insured limits. The Company limits its credit risk
associated with cash and cash equivalents by placing them with financial institutions that it believes are of high quality. The Company has not experienced
any losses on its deposits of cash or cash equivalents.
Other Risks and Uncertainties
The Company’s future results of operations involve a number of other risks and uncertainties. Factors that could affect the Company’s future
operating results and cause actual results to vary materially from expectations include, but are not limited to, the Company’s early stages of clinical drug
development; the Company’s ability to advance product candidates into, and successfully complete, clinical trials on the timelines it projects; the
Company’s ability to adequately demonstrate sufficient safety and efficacy of its product candidates; the Company’s ability to enroll patients in its ongoing
and future clinical trials; the Company’s ability to successfully manufacture and supply its product candidates for clinical trials; the Company’s ability to
obtain additional capital to finance its operations; uncertainties related to the projections of the size of patient populations suffering from the diseases the
Company is targeting; the Company’s ability to obtain, maintain, and protect its intellectual property rights; developments relating to the Company’s
competitors and its industry, including competing product candidates and therapies; general economic and market conditions; and other risks and
uncertainties.
The Company’s product candidates will require approvals from the U.S. Food and Drug Administration and comparable foreign regulatory
agencies prior to commercial sales in their respective jurisdictions. There can be no assurance that any product candidates will receive the necessary
approvals. If the Company was denied approval, approval was delayed or the Company was unable to maintain approval for any product candidate, it could
have a materially adverse impact on the Company.
The ongoing COVID-19 pandemic has disrupted and may continue to disrupt the Company’s business and delay its preclinical and clinical
programs and timelines. The Company does not yet know the full extent of potential delays to clinical trials, which could prevent or delay the Company
from obtaining approval for BIO89-100. The extent to which the COVID-19 pandemic may impact the Company’s future operating results and financial
condition is uncertain.
Segment Reporting
The Company has one operating segment. The Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s
operations on a consolidated basis for the purposes of allocating resources and evaluating financial performance.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash
equivalents. Cash equivalents consist primarily of amounts invested in money market funds and commercial paper that are stated at fair value.
Restricted Cash
Restricted cash consists of a money market account that serves as collateral for the Company’s operating lease agreement for its facility in Israel.
Investments
Investments have been classified as available-for-sale and are carried at estimated fair value as determined based upon quoted market prices or
pricing models for similar securities. Management determines the appropriate classification of its investments in debt securities at the time of purchase.
Generally, investments with original maturities beyond three months at the date of purchase are classified as short-term because it is management’s intent to
use the investments to fund current operations or to make them available for current operations.
70
89bio, Inc.
Notes to Consolidated Financial Statements
Unrealized gains and losses are excluded from earnings and are reported as a component of comprehensive loss. The Company periodically
evaluates whether declines in fair values of its available-for-sale securities below their book value are other-than-temporary. This evaluation consists of
several qualitative and quantitative factors regarding the severity and duration of the unrealized loss as well as the Company’s ability and intent to hold the
available-for-sale security until a forecasted recovery occurs. Additionally, the Company assesses whether it has plans to sell the security or it is more likely
than not it will be required to sell any available-for-sale securities before recovery of its amortized cost basis. Realized gains and losses and declines in fair
value judged to be other than temporary, if any, on available-for-sale securities are included in other expenses, net. The cost of investments sold is based on
the specific-identification method. There are no material realized gains or losses on investments for the periods presented. Interest on available-for-sale
securities is included in other expenses, net and is not material for all periods presented.
Property and Equipment, Net
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated
useful lives of the related assets, generally ranging from three to seven years. Leasehold improvements are amortized on a straight-line basis over the
shorter of the assets’ estimated useful life or the remaining term of the lease. Upon retirement or sale of the assets, the cost and related accumulated
depreciation and amortization are removed from the consolidated balance sheets and the resulting gains or losses are recorded in the consolidated
statements of operations and comprehensive loss. Maintenance and repair costs are expensed as incurred.
Impairment of Long-Lived Assets
The Company periodically evaluates its long-lived assets, including property and equipment, for impairment whenever events or changes in
business circumstances indicate that the carrying amount of the assets or group of assets may not be fully recoverable. If indicators of impairment exist and
the undiscounted future cash flows that the assets are expected to generate are less than the carrying value of the assets, the Company reduces the carrying
amount of the assets through an impairment charge, to their estimated fair values based on a discounted cash flow approach or, when available and
appropriate, to comparable market values. There were no such indicators for the periods presented.
Accrued Research and Development Expenses
The Company estimates preclinical and clinical study and research expenses based on the services performed, pursuant to contracts with research
institutions that conduct and manage preclinical and clinical studies and research services on its behalf. The Company records the costs of research and
development activities based upon the estimated amount of services provided but not yet invoiced and includes these costs in accrued expenses in the
consolidated balance sheets. These costs are a component of the Company’s research and development expenses.
The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreements established with
its third-party service providers under the service agreements. The Company makes judgments and estimates in determining the accrued expenses balance.
As actual costs become known, the Company adjusts its accrued expenses. The Company has not experienced any material differences between accrued
costs and actual costs incurred. However, the status and timing of actual services performed may vary from the Company’s estimates, resulting in
adjustments to expense in future periods. Changes in these estimates that result in material changes to the Company’s accrued expenses could materially
affect the Company’s results of operations. Contingent milestone payments, if any, are expensed when the milestone results are probable and estimable,
which is generally upon achievement of the milestone.
Leases
The Company leases its office facilities under non-cancelable operating lease agreements and recognizes related rent expense on a straight-line
basis over the term of the lease.
71
89bio, Inc.
Notes to Consolidated Financial Statements
Convertible Preferred Stock Liability
The freestanding instruments related to the commitment by the Series A convertible preferred stockholders to purchase and by the Company to sell
its Series A convertible preferred stock in subsequent closings, contingent upon the achievement of certain developmental milestones and approval by the
board of directors, at a fixed price per stock, were considered a liability (or an asset), measured at fair value as the shares underlying the rights contained
liquidation preferences upon certain “deemed liquidation events” that were not solely within the Company’s control and which were considered in-
substance contingent redemption features. The instruments were subject to revaluation at each balance sheet date until settlement or extinguishment, with
revaluations recognized as either a component of other expenses, net in the consolidated statements of operations and comprehensive loss, or additional
paid-in capital in the consolidated balance sheets. Upon the completion of the Company’s IPO, the remaining shares of convertible preferred stock that
were previously issuable under subsequent closings were no longer issuable. Accordingly, the preferred stock liability was extinguished and because the
transaction occurred between related parties, the resulting $25.6 million was accounted for as a capital contribution by the preferred stockholders.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for the development of the Company’s lead product candidate, BIO89-100.
Research and development expenses consist primarily of external costs related to acquiring and licensing patents and intellectual properties, preclinical and
clinical development and related supplies, and personnel costs. Personnel costs consist of salaries, employee benefits and share-based compensation for
individuals involved in research and development efforts. Payments associated with licensing agreements to acquire licenses to develop, use, manufacture
and commercialize products that have not reached technological feasibility and do not have alternate commercial use are expensed as incurred.
Share-Based Compensation
The Company measures its share-based payment awards made to employees, directors, and non-employee service providers based on estimated
fair values and recognizes compensation over the requisite service period.
The Company estimates the fair value of share-based payment awards on the date of grant using a Black-Scholes option pricing model. The
Company recognizes compensation for the value of share-based payment awards, which have graded vesting, using the straight-line method over the
requisite service period of each award. The Company accounts for forfeitures as they occur.
The Black-Scholes option pricing model requires a number of assumptions, of which the most significant are expected volatility, expected option
term (the time from the grant date until the options are exercised or expire), risk-free rate, and expected divided rate. These assumptions include:
•
•
•
•
Expected volatility—Since the Company has limited trading history for its common stock due to its short trading history, the expected
volatility is estimated based on the volatility of comparable publicly traded biotechnology companies during the equivalent period of the
calculated expected term of the options granted. The comparable companies were chosen based on their similar size, stage in the life cycle
or area of specialty.
Expected term—The expected term of options granted to employees and directors is determined using the “simplified” method. Under this
approach, the expected term is presumed to be the midpoint between the weighted-average vesting term and the contractual term of the
option. The simplified method makes the assumption that the employee will exercise share options evenly over the period when the share
options are vested and ending on the date when the share options would expire. The expected option term for options granted to non-
employees is estimated on a grant-by-grant basis.
Risk-free interest rate—The risk-free interest rate is based on the U.S. Treasury zero coupon bonds in effect on the grant date for periods
with an equivalent expected term as the option.
Expected dividend—The Company has never paid dividends and has no foreseeable plans to pay dividends on its shares of common stock.
Therefore, an expected dividend of zero is used.
72
89bio, Inc.
Notes to Consolidated Financial Statements
Income Taxes
Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the consolidated financial statements carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates applied to
taxable income in the years in which those temporary differences are expected to be realized. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized as income or loss in the period that includes the enactment date. A valuation allowance is established when necessary to reduce
deferred tax assets to the amount expected to be realized. Interest and penalties related to unrecognized tax benefits are included within the provision of
income tax.
Basic and Diluted Net Loss per Share
Basic loss per share is computed by dividing the net loss by the weighted average number of common stock outstanding during the period. Diluted
loss per share is computed by dividing the net loss by the weighted average number of common stock outstanding together with the number of additional
common stock that would have been outstanding if all potentially dilutive common stock had been issued. Since the Company is in a loss position for the
periods presented, basic net loss per share is the same as diluted net loss per share since the effects of potentially dilutive securities are antidilutive.
Comprehensive Loss
The Company’s comprehensive loss is comprised of changes in unrealized gains or losses on available-for-sale securities and foreign currency
translation adjustments.
Recently Adopted Accounting Standards
In August 2018, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, Disclosure
Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which amends ASC 820, Fair Value Measurement. This ASU modifies
the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The Company adopted this standard
effective from January 1, 2020, with the removed and modified disclosures adopted on a retrospective basis and the new disclosures adopted on a
prospective basis. The standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02—Leases (“ASU 2016-02”), requiring the recognition of lease assets and liabilities on the balance
sheet. The standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and (c)
causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than
twelve months. The standard is effective for public entities for fiscal years beginning after December 15, 2018 and for nonpublic entities for fiscal years
beginning after December 15, 2021. As an emerging growth company, ASU 2016-02 is effective for the Company for the year ending December 31, 2022
and interim periods within the year ending December 31, 2023. The Company is currently evaluating the impact of this standard on its consolidated
financial statements and related disclosures.
73
89bio, Inc.
Notes to Consolidated Financial Statements
3. Fair Value Measurements
The following table presents the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy as
of December 31, 2020 (in thousands):
As of December 31, 2020
Money market funds
Commercial paper
Agency bonds
Corporate debt securities
U.S. government bonds
Municipal bonds
U.S. treasury bills
Agency discount securities
Valuation
Hierarchy
Level 1
Level 2
Level 2
Level 2
Level 2
Level 2
Level 2
Level 2
Total cash equivalents and available-for-sale securities
$
Classified as:
Cash equivalents
Short-term investments
Total cash equivalents and available-for-sale securities
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
$
$
46,134
76,605
29,654
11,890
7,093
5,592
4,680
200
181,848 $
$
—
—
15
—
—
2
—
—
17 $
Fair Value
—
$
(2)
—
(6)
—
(1)
—
—
(9) $
46,134
76,603
29,669
11,884
7,093
5,593
4,680
200
181,856
$
$
75,410
106,446
181,856
The following table summarizes the Company’s cash equivalents and available-for-sale securities by contractual maturity as of December 31, 2020 (in
thousands):
Within one year
After one year through two years
Total cash equivalents and available-for-sale securities
The Company did not hold any financial assets as of December 31, 2019.
As of December 31, 2020
160,304
21,552
181,856
$
$
The Company’s convertible preferred stock liability represented a Level 3 financial liability measured at fair value on a recurring basis prior to its
extinguishment in the fourth quarter of 2019. Accordingly, there was no Level 3 financial liability outstanding during the year ended and as of December
31, 2020.
For the year ended December 31, 2019, changes in the fair value of the Company’s Level 3 financial liability measured on a recurring basis were as
follows (in thousands):
Beginning balance
Revaluation of convertible preferred stock liability
recorded in other expenses (income), net
Partial settlement of convertible preferred stock
liability upon third closing
Capital contribution related to extinguishment of
preferred stock liability
Ending balance
74
Year Ended December
31,
2019
$
$
1,671
30,597
(6,673)
(25,595)
—
89bio, Inc.
Notes to Consolidated Financial Statements
The Company’s convertible preferred stock liability resulted from the initial sale of Series A convertible preferred stock where the investors’
committed to purchase additional shares of Series A convertible preferred stock in subsequent closings, contingent upon the achievement by the Company
of certain development milestones and approval by the board of directors. The investors’ commitment to purchase and the Company’s commitment to sell
shares of Series A convertible preferred stock represented a freestanding instrument accounted for at fair value and re-measured at each reporting date. The
Company estimated the fair value of this commitment using the Black Scholes option pricing model using the following assumptions:
Stock price
Exercise price
Expected term (years)
Expected volatility
Risk-free interest rate
4. Consolidated Balance Sheet Components
Property and Equipment, Net
Property and equipment, net consists of the following (in thousands):
Year Ended
December 31,
2019
$0.99-$2.57
$1.00
0.00-2.25
72.0%
0.0-2.4%
Computer equipment
Furniture and office equipment
Total property and equipment
Less: accumulated depreciation
Total property and equipment, net
As of December 31,
2020
2019
$
$
105 $
144
249
(83)
166 $
67
111
178
(23)
155
Depreciation expense for property and equipment was $60,000 and $17,000 for the years ended December 31, 2020 and 2019, respectively.
Accrued Expenses
Accrued expenses consist of the following (in thousands):
Accrued research and development expenses
Accrued employee and related expenses
Accrued professional and legal fees
Accrued other
Total accrued expenses
As of December 31,
2020
2019
$
$
2,884 $
2,552
453
159
6,048 $
2,326
1,396
573
325
4,620
5. Commitments and Contingencies
Leases
In May 2018, the Company entered into an operating lease agreement for its facility in Israel. The lease term expires in April 2021 and the
Company has an option to renew for an additional 12 months. Under the lease agreement, monthly lease payments are approximately $4,000.
75
89bio, Inc.
Notes to Consolidated Financial Statements
In December 2019, the Company entered into an operating lease for its headquarters in San Francisco. The lease term is for 24 months, expiring in
January 2022, and monthly lease payments during 2020 were approximately $17,500.
Future minimum lease payments under the Company’s non-cancellable operating lease obligations as of December 31, 2020, are as follows (in
thousands):
2021
2022
Total future minimum annual payments
As of December 31,
2020
$
$
232
8
240
Rent expense was $273,000 and $159,000 for years ended December 31, 2020 and 2019, respectively. The Company has security deposit balances
of $95,000, which are included in restricted cash and other assets in the consolidated balance sheets as of December 31, 2020 and 2019.
Asset Transfer and License Agreement with Teva Pharmaceutical Industries Ltd
In April 2018, the Company concurrently entered into two Asset Transfer and License Agreements (the “Teva Agreements”) with Teva
Pharmaceutical Industries Ltd (“Teva”) under which it acquired certain patents and intellectual property relating to two programs: (1) Teva’s
glycoPEGylated FGF21 program, including the compound TEV-47948 (BIO89-100), a glycoPEGylated long-acting FGF21 and (2) Teva’s development
program of small molecule inhibitors of Fatty Acid Synthase. Pursuant to the Teva Agreements, the Company paid Teva an initial nonrefundable upfront
payment of $6.0 million and the Company could be obligated to pay Teva up to $67.5 million under each program, for a total of $135.0 million, upon the
achievement of certain clinical development and commercial milestones. In addition, the Company is obligated to pay Teva tiered royalties at percentages
in the low-to-mid single-digits on worldwide net sales on all products containing the Teva compounds.
The Teva Agreements can be terminated (i) by the Company without cause, after the first anniversary of the effective date, upon 120 days’ written
notice to Teva, (ii) by either party, if the other party materially breaches any of its obligations under the Agreements and fails to cure such breach within 60
days after receiving notice thereof, or (iii) by either party, if a bankruptcy petition is filed against the other party and is not dismissed within 60 days. In
addition, Teva can also terminate the agreement related to the Company’s glycoPEGylated FGF21 program in the event the Company, or any of its affiliates
or sublicensees, challenges any of the Teva patents licensed to the Company, and the challenge is not withdrawn within 30 days of written notice from
Teva.
During the years ended December 31, 2020 and 2019, there were no license payment expenses related to the Teva Agreements.
6. Term Loan
Loan and Security Agreement
In April 2020, the Company and certain of its subsidiaries entered into a Loan and Security Agreement (the “Loan Agreement”) with the lenders
referred to therein (the “Lenders”), and Silicon Valley Bank, as collateral agent. The Loan Agreement provides for (i) a secured term A loan facility (the
“Term A Loan Facility”) of up to $10.0 million and (ii) a secured term B loan facility (the “Term B Loan Facility”) of up to $5.0 million that is available
upon the Company satisfying certain milestones. The Term A Loan Facility matures on November 1, 2022, provided, that if the Term B Loan Facility is
funded, the facilities instead mature on September 1, 2023. The loans will bear interest at the greater of (i) 4.50% and (ii) the sum of (a) the Prime Rate as
reported in The Wall Street Journal plus (b) 1.25%. As of December 31, 2020, the Company had not drawn any amount under the Loan Agreement.
In connection with the execution of the Loan Agreement, the Company agreed to issue the Lenders warrants to purchase shares of the Company’s
common stock. In April 2020, the Company issued Silicon Valley Bank a
76
89bio, Inc.
Notes to Consolidated Financial Statements
warrant to purchase 25,000 shares of the Company’s common stock with a warrant exercise price of $22.06 per share that is immediately exercisable. The
initial expiration date of April 7, 2030 was changed to June 30, 2025 in connection with the July 2020 offering. The Company determined the fair value of
the warrant at the issuance date by using the Black-Scholes option-pricing model with the following assumptions: risk-free interest rate of 0.75%, no
dividends, expected volatility of 92.3% and expected term of 10.0 years. Upon issuance, the fair value allocated to the warrant of $0.6 million was recorded
as a debt issuance cost and classified within other assets and met the requirements for equity classification within additional paid-in capital on the
consolidated balance sheets. An additional warrant to purchase 8,333 shares of the Company’s common stock will be issued in connection with the Term B
Loan Facility, if funded, with the exercise price determined on the Company’s stock price at the time of issuance.
Additionally, the Company incurred $0.2 million in closing costs that were recorded as debt issuance costs and classified within other assets on the
consolidated balance sheets.
The deferred assets related to the debt issuance cost and warrant are recognized as interest expense over the duration of the Loan Agreement and
are recorded within other expenses, net on the consolidated statements of operations and comprehensive loss. As of December 31, 2020, the remaining
unamortized debt issuance costs classified within other assets on the consolidated balance sheet is $0.6 million.
7. Convertible Preferred Stock
In April 2018, the Company entered into the Series A Share Purchase Agreement (the “Series A SPA”), pursuant to which the investors committed
to invest an aggregate amount of up to $60.0 million for the issuance of shares of Series A convertible preferred stock at a price of $1.00 per share in
subsequent closings. Upon the completion of the Company’s IPO on November 13, 2019, there were 16,000,000 remaining shares of convertible preferred
stock that were previously issuable that were no longer issuable. Accordingly, the preferred stock liability was extinguished and because the transaction
occurred between related parties, the resulting $25.6 million was accounted for as a capital contribution by the preferred stockholders during 2019.
Additionally, immediately prior to the completion of the Company’s IPO, all outstanding shares of convertible preferred stock automatically converted into
7,077,366 shares of common stock and the related carrying value was reclassified to common stock and additional paid-in capital.
8. Share-Based Compensation
Equity Incentive Plans
In 2018, the Company’s board of directors adopted the 89Bio Ltd. 2018 Equity Incentive Plan (the “2018 Plan”). In connection with the
Reorganization in September 2019, the Company’s board of directors approved the 2019 Equity Incentive Plan (the “2019 Plan”), which became effective
in September 2019. From and after the effective date of the 2019 Plan, the Company will no longer be making any future awards under the 2018 Plan.
The Company initially reserved 2,844,193 shares of common stock for issuance under the 2019 Plan. In addition, the number of shares of common
stock reserved for issuance under the 2019 Plan will automatically increase on the first day of January for a period of up to ten years, commencing on
January 1, 2020, in an amount equal to 4% of the total number of shares of the Company’s capital stock outstanding on the immediately preceding
December 31, or a lesser number of shares determined by the Company’s board of directors. As of December 31, 2020, there were 1,433,991 shares of
common stock available for issuance as future option grants under the 2019 Plan.
The Board determines the period over which options become exercisable and options generally vest over a four-year period, with 25% of options
vesting on the first anniversary of employment, and thereafter, the remaining options vesting quarterly, over the following 36-month period. The options
will expire within ten years from the date of grant. The exercise price of awards granted will not be less than the estimated fair value of the shares on the
date of grant.
77
89bio, Inc.
Notes to Consolidated Financial Statements
Employee Stock Purchase Plan
In October 2019, the Company adopted the 2019 Employee Stock Purchase Plan (“ESPP”), which became effective following the date of the IPO.
The Company initially reserved 225,188 shares of common stock for purchase under the ESPP. The number of shares of common stock reserved for
issuance under the ESPP will automatically increase on the first day of January for a period of up to ten years, in an amount equal to 1% of the total number
of shares of the Company’s common stock outstanding on the immediately preceding December 31, or a lesser number of shares determined by the
Company’s board of directors. Purchases will be accomplished through the participation of discrete offering periods and each offering is expected to be 6
months long. For each offering period, ESPP participants will purchase shares of common stock at a price per share equal to 85% of the lesser of the fair
market value of the Company’s common stock on (1) the first trading day of the applicable offering period or (2) the last trading day of the applicable
offering period.
The first six-month offering period under the ESPP commenced on January 1, 2020 and ended on June 30, 2020 and the second six-month offering
period commenced on July 1, 2020 and ended on December 31, 2020. A total of 7,272 shares of common stock were purchased pursuant to the ESPP for
the year ended December 31, 2020. As of December 31, 2020, there were 355,806 shares of common stock available for issuance under the ESPP.
The Company recorded share-based compensation for the periods indicated as follows (in thousands):
Research and development
General and administrative
Total share-based compensation
Year Ended December 31,
2019
2020
$
$
1,250 $
2,557
3,807 $
30
359
389
The fair value of option awards granted for the periods indicated was estimated at the date of grant using a Black-Scholes option-pricing model
with the following assumptions:
Expected term (years)
Contractual term (years)
Expected volatility
Risk-free interest rate
Expected dividend
Year Ended December 31,
2019
2020
4.0-6.1
10.0
86.4-97.6%
0.2-1.5%
—
5.9-6.1
10.0
61.8-87.6%
1.6-2.6%
—
The following table summarizes stock option activity for the year ended December 31, 2020:
Balance outstanding as of December 31, 2019
Granted
Exercised
Cancelled
Balance outstanding as of December 31, 2020
Exercisable as of December 31, 2020
Number of
Options
1,320,243 $
682,000
(63,366)
(40,482)
1,898,395
535,084 $
3.34
29.78
4.29
2.87
12.79
2.58
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
(In years)
Aggregate
Intrinsic
Value
(In thousands)
30,353
9.23 $
8.60 $
8.11 $
25,918
11,684
During the year ended December 31, 2020, the estimated total grant date fair value of options vested was $0.8 million. The weighted-average grant
date fair value of options granted for the years ended December 31, 2020 and 2019 was $21.88 and $2.90 per share, respectively. As of December 31, 2020,
there was $13.5 million of
78
89bio, Inc.
Notes to Consolidated Financial Statements
unrecognized share-based compensation cost related to stock options granted under the 2019 Plan, which is expected to be recognized over a weighted-
average period of 2.5 years.
9. Income Taxes
Tax Rates Applicable to the Income of the Company and its Subsidiaries
As a result of the Reorganization described in Note 1, the Company is taxed according to U.S. federal and state tax laws and Israeli tax laws. The
statutory tax rates applicable to the income of the Company and its subsidiaries are as follows:
89bio, Inc.
89Bio Ltd
89bio Management, Inc.
UAB 89bio Lithuania
The income tax benefit (expense) is comprised of (in thousands):
Current:
Federal
State
Foreign
Total
Deferred:
Federal
Total
Income tax benefit (expense)
Deferred Income Taxes
Year Ended December 31,
2020
2019
21%
23%
21%
15%
Year Ended December 31,
2020
2019
$
$
(11) $
1
—
(10)
69
69
59 $
21%
23%
21%
15%
(167)
(1)
(30)
(198)
(20)
(20)
(218)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows (in
thousands):
U.S. net operating loss carryforwards
Israel net operating loss carryforwards
Research and development expenses
Accrued expenses
Other
Total deferred tax assets
Less: valuation allowance
Net deferred tax assets
As of December 31,
2020
2019
$
$
11,342 $
3,978
5,392
635
658
22,005
(21,936)
69 $
1,916
4,328
3,419
349
10
10,022
(10,022)
—
U.S. research and development expenses and accrued expenses disclosed for the year ended December 31, 2019 were previously reported in the
2019 notes to the consolidated financial statements as a component of other. The reclassification had no impact on the consolidated financial statements for
the year ended December 31, 2019.
79
89bio, Inc.
Notes to Consolidated Financial Statements
As of December 31, 2020 and 2019, the Company recorded a valuation allowance of $21.9 million and $10.0 million, respectively, in respect of
deferred tax assets resulting from tax loss carryforwards and other temporary differences. Realization of deferred tax assets is dependent upon future
earnings, if any, the time and amount of which are uncertain. The Company regularly assesses the likelihood that its deferred tax assets will be recovered
from future taxable income and, to the extent it believes based upon the weight of available evidence that it is more likely than not that all or a portion of
deferred tax assets will not be realized, a valuation allowance is established through an adjustment to income tax expense. The valuation allowance
increased by $11.9 million in 2020, which primarily relates to significant taxable losses. The change in valuation allowance during 2020 also includes a
partial release of the valuation allowance against deferred tax assets in Israel due to achievement of recent profitability and the expectation of future
profitability in the jurisdiction, which decreased the valuation allowance by $69,000 in 2020. The valuation allowance increased by $6.5 million in 2019,
which primarily relates to significant taxable losses. It also includes a recapture of the valuation allowance against the Company’s deferred tax assets in the
United States due to the Reorganization that occurred in 2019, which increased the valuation allowance by $20,000.
Available Carryforward Tax Losses and Credits
As of December 31, 2020, the Company has an accumulated tax loss carryforward of approximately $54.1 million and $17.3 million for U.S. and
Israeli tax purposes, respectively. As of December 31, 2019, the Company has an accumulated tax loss carryforward of approximately $9.1 million and
$23.8 million for U.S. and Israeli tax purposes. Federal net operating losses generated after 2017 can be carried forward indefinitely but utilization will be
limited to 80% of taxable income in the period that net operating losses are being utilized. Carryforward tax losses in Israel have no expiration date.
As of December 31, 2020, the Company has federal research and development credit carryforwards of approximately $0.6 million, which
expire beginning in 2040. As of December 31, 2020 and 2019, the Company has state research and development credit carryforwards of approximately
$0.7 million and $0.2 million, respectively, which will carry forward indefinitely.
Loss from Continuing Operations, Before Income Tax
The Company recorded a loss from continuing operations, before income tax for the periods indicated as follows (in thousands):
United States
Lithuania
Israel
Net loss before income tax
Year Ended December 31,
2020
2019
$
$
(58,760) $
(73)
9,275
(49,558) $
(19,502)
200
(37,900)
(57,202)
80
89bio, Inc.
Notes to Consolidated Financial Statements
Reconciliation of Income Tax Benefit (Expense)
The reconciliation of income tax benefit (expense) based on the statutory tax rate to the effective tax rate is as follows (in thousands):
Income tax benefit computed at statutory rates
Research and development credits, net of
uncertain tax position
Change in valuation allowance
Change in Israel effective tax rate due to the 2019
reorganization
Foreign rate differential
Revaluation of convertible preferred stock liability
Other
Income tax benefit (expense)
Year Ended December 31,
2020
2019
$
8,285 $
13,095
815
(11,914)
647
1,671
—
555
59 $
93
(6,520)
(734)
—
(6,039)
(113)
(218)
$
Research and development credits, net of uncertain tax position disclosed for the year ended December 31, 2019 were previously reported in the
2019 notes to the consolidated financial statements as a component of other. The reclassification has no impact on the consolidated financial statements for
the year ended December 31, 2019.
Utilization of the U.S. federal and state net operating losses and credit carryforwards may be subject to an annual limitation provided for in Section
382 of the Internal Revenue Code and similar state codes. Any annual limitation could result in a deferral of the utilization of the net operating loss and
credit carryforwards.
Unrecognized Tax Benefits
During the years ended December 31, 2020 and 2019, the amount of gross unrecognized tax benefits increased by $0.3 million and $39,000,
respectively. If the total amount of unrecognized tax benefits was recognized, it would not have an impact to the effective tax rate as it would be offset by
the reversal of related deferred tax assets which are subject to a full valuation allowance.
The Company recognizes interest and penalties related to uncertain tax positions as part of the income tax provision. As of December 31, 2020 and
2019, such interest and penalties are not material.
The Company is subject to taxation in the United States, California, and several foreign jurisdictions. To date, the Company has not been subject to
any federal or state income tax audits. The Company is currently under examination by the Israeli taxing authorities for 2019 and 2018. As of December
31, 2020, all tax years remain open to examination.
In March 2020 and December 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and the
Consolidated Appropriation Act (“CAA”), respectively, as a result of the COVID-19 pandemic, which contain among other things, numerous income tax
provisions. Some of these tax provisions are expected to be effective retroactively for years ending before the date of enactment. The Company has
evaluated the current legislation and at this time, does not anticipate the CARES Act or the CAA to have a material impact on its consolidated financial
statements.
81
89bio, Inc.
Notes to Consolidated Financial Statements
10. Net Loss Per Share
The following outstanding potentially dilutive shares, including all outstanding stock options, have been excluded from the calculation of diluted
net loss per share for the periods presented due to their anti-dilutive effect:
Stock options to purchase common stock
Shares available for future option grants
Total
Year Ended December 31,
2019
2020
1,320,243
1,898,395
1,523,950
1,433,991
2,844,193
3,332,386
82
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of December 31, 2020, our management, with the participation and supervision of our principal executive officer and our principal financial
officer, evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). The term “disclosure
controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are
designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under
the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as
appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost
benefit relationship of possible controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer
concluded that our disclosure controls and procedures were effective as of December 31, 2020 to provide reasonable assurance that information we are
required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods
specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive
officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Remediation Efforts on Previously Reported Material Weaknesses
During the audit of our consolidated financial statements for the period from January 18, 2018 (inception) to December 31, 2018, material
weaknesses were identified in our internal control over financial reporting. 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 our annual or interim consolidated financial
statements will not be prevented or detected on a timely basis by the company’s internal controls. The material weaknesses that were identified related to
the following:
•
•
We did not have an internal finance department. Consequently, we lacked sufficient personnel with an appropriate level of knowledge and
requisite U.S. generally accepted accounting principles expertise to identify, evaluate and account for complex and non-routine transactions
and an adequate supervisory review structure that is needed to comply with financial reporting requirements.
We did not have an adequate assessment of risks that could significantly impact internal controls over financial reporting and did not
effectively design and monitor controls in response to the risks of material misstatement.
In 2019 and 2020, we implemented controls to remedy these material weaknesses. In 2019, we hired our Chief Financial Officer, principal
accounting officer and additional qualified accounting and finance personnel, formalized our hiring practices and engaged financial consultants to enable
the implementation of internal controls over financial reporting. In April 2020, we added a financial expert to the audit committee of the board of directors
and in June 2020, we appointed a new board member, who also serves as audit committee chair.
As a result of these remediation activities and based on testing of the new and modified controls for operating effectiveness, our management
concluded that we remediated the previously reported material weakness as of December 31, 2020.
83
Changes in Internal Control over Financial Reporting
Other than the changes in connection with the remediation of our previously disclosed material weaknesses, no change in our internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended December 31, 2020 that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f)
under the Exchange Act). Internal control over financial reporting is a process designed under the supervision and with the participation of our
management, including our principal executive officer and our principal financial officer, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the
United States.
As of December 31, 2020, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by
the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (“2013 Framework”). Based on this
assessment, our management concluded that our internal control over financial reporting was effective as of December 31, 2020.
Attestation Report of Registered Public Accounting Firm
As an emerging growth company, we are not required to provide and this Annual Report on Form 10-K does not include an attestation report on
our internal control over financial reporting issued by the Company’s independent registered public accounting firm. Our auditors will not be required to
formally opine on the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 until we
are no longer an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, and are no longer a non-accelerated filer.
Item 9B. Other Information.
None.
84
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
The information required by this Item 10 is incorporated herein by reference to information in our proxy statement for our 2021 Annual Meeting
of Stockholders (the “2021 Proxy Statement”), which we expect to be filed with the SEC within 120 days of the end of our fiscal year ended December 31,
2020, including under the heading “Directors, Executive Officers and Corporate Governance.”
We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal
executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the code is
available on our website located at www.89bio.com, under “Corporate Governance.” We intend to disclose on our website any amendments to, or waivers
from, the code of business conduct and ethics that are required to be disclosed pursuant to the disclosure requirements of Item 5.05 of Form 8-K within four
business days following the date of the amendment or waiver.
Item 11. Executive Compensation.
The information required by this Item 11 is incorporated herein by reference to information in our 2021 Proxy Statement, including under
headings “Executive Compensation” and “Directors, Executive Officers and Corporate Governance.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this Item 12 is incorporated herein by reference to information in our 2021 Proxy Statement, including under
headings “Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation-Securities Authorized for Issuance Under
Equity Compensation Plans.”
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item 13 is incorporated herein by reference to information in our 2021 Proxy Statement, including under
headings “Directors, Executive Officers and Corporate Governance” and “Certain Relationships and Related Party Transactions.”
Item 14. Principal Accounting Fees and Services.
The information required by this Item 14 is incorporated herein by reference to information in our 2021 Proxy Statement, including under
headings “Proposal 2: Ratification of Selection of Independent Registered Public Accounting Firm.”
85
Item 15. Exhibits, Financial Statement Schedules.
(a)
The following documents are filed as a part of this report:
(1)
Financial Statements
PART IV
See Index to Consolidated Financial Statements at Part II Item 8 “Financial Statements and Supplementary Data.”
(2)
Financial Statement Schedules
The financial statement schedules are omitted as they are either not applicable or the information required is presented in the
financial statements and notes thereto under Part II Item 8 “Financial Statements and Supplementary Data.”
(3)
Exhibits:
86
Exhibit
Number
Exhibit Index
Description
2.1
Contribution and Exchange Agreement, dated as of September 17, 2019, by and among 89Bio Ltd., the Company and its shareholders (filed
with the SEC as Exhibit 2.1 to the Company’s Form S-1 filed on October 11, 2019)
3.1
Second Amended and Restated Certificate of Incorporation of the Company (filed with the SEC as Exhibit 3.1 to the Company’s Form 8-K
filed on November 15, 2019)
3.2
Second Amended and Restated Bylaws of the Company (filed with the SEC as Exhibit 3.2 to the Company’s Form 8-K filed on November 15,
2019)
4.1
Specimen common stock certificate of the Company (filed with the SEC as Exhibit 4.1 to the Company’s Form S-1/A filed on October 28,
2019)
4.2
Investors’ Rights Agreement, dated as of September 17, 2019, by and among the Company and certain of its shareholders (filed with the SEC
as Exhibit 4.2 to the Company’s Form S-1 filed on October 11, 2019)
4.3*
Description of Securities
4.4
Form of Warrant to Purchase Common Stock for Silicon Valley Bank (filed with SEC as Exhibit 4.1 to the Company’s Current Report on
Form 8-K filed on April 13, 2020)
10.1+
Form of Indemnification Agreement for directors and executive officers (filed with the SEC as Exhibit 10.1 to the Company’s Form S-1 filed
on October 11, 2019)
10.2+
Amended and Restated 2019 Equity Incentive Plan and form of agreements thereunder (filed with the SEC as Exhibit 10.2 to the Company’s
Form S-1/A filed on October 28, 2019)
10.3+
2019 Employee Stock Purchase Plan (filed with the SEC as Exhibit 10.3 to the Company’s Form S-1/A filed on October 28, 2019)
10.4+
Executive Employment Offer Letter, dated April 15, 2020, by and between the Company and Rohan Palekar (filed with the SEC as Exhibit
10.1 to the Company’s Current Report on Form 8-K filed on May 4, 2020)
10.5+
Amended and Restated Executive Employment Agreement, dated July 28, 2020, by and between 89Bio Ltd. and Ram Waisbourd (filed with
the SEC as Exhibit 10.5 to the Company’s S-1 filed on September 14, 2020)
10.6+
Executive Employment Offer Letter, dated April 15, 2020, by and between the Company and Hank Mansbach (filed with the SEC as Exhibit
10.3 to the Company’s Current Report on Form 8-K filed on May 4, 2020)
10.7+
Executive Employment Offer Letter, dated April 15, 2020, by and between the Company and Quoc Le-Nguyen (filed with the SEC as Exhibit
10.4 to the Company’s Current Report on Form 8-K filed on May 4, 2020)
10.8+
Executive Employment Offer Letter, dated April 15, 2020, by and between the Company and Ryan Martins (filed with the SEC as Exhibit 10.2
to the Company’s Current Report on Form 8-K filed on May 4, 2020)
10.9+
Director Offer Letter, dated July 1, 2018, by and between 89Bio Ltd. and Michael Hayden (filed with the SEC as Exhibit 10.9 to the
Company’s Form S-1 filed on October 11, 2019)
10.10+ Non-Employee Director Compensation Policy (filed with the SEC as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on
November 13, 2020)
87
Exhibit
Number
10.11†
Asset Transfer and License Agreement—FGF21 by and among 89Bio Ltd., ratiopharm GmbH, Teva Branded Pharmaceutical Products R&D,
Inc. and Teva Pharmaceutical Industries Ltd, dated as of April 16, 2018 (filed with the SEC as Exhibit 10.11 to the Company’s Form S-1 filed
on October 11, 2019)
Description
10.12+ Reagent Supply and Technology Transfer Agreement by and between 89Bio Ltd. and Teva Biotech GmbH, dated as of April 16, 2018, as
amended (filed with the SEC as Exhibit 10.12 to the Company’s Form S-1 filed on October 11, 2019)
10.13+ Sublicense Agreement by and between 89Bio Ltd. and ratiopharm GmbH, dated as of April 16, 2018 (filed with the SEC as Exhibit 10.13 to
the Company’s Form S-1 filed on October 11, 2019)
10.14+ Master Services Agreement by and between 89Bio Ltd. and Biotechpharma UAB, dated as of May 7, 2018, as amended (filed with the SEC as
Exhibit 10.14 to the Company’s Form S-1 filed on October 11, 2019)
10.15
Office Lease by and between 89bio, Inc. and King Family Irrevocable Trust, dated as of December 5, 2019 (filed with the SEC as Exhibit
10.15 to the Company’s Annual Report on Form 10-K filed on March 18, 2020)
10.16
Loan and Security Agreement, dated as of April 7, 2020, among Silicon Valley Bank, the Lenders party thereto, 89bio, Inc., 89bio
Management, Inc. and 89Bio Ltd. (filed with the SEC as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 13, 2020)
16.1
Letter from Deloitte & Touche LLP, dated April 21, 2020 (filed with the SEC as Exhibit 16.1 to the Company’s Current Report on Form 8-K
filed on April 23, 2020)
21.1+
List of subsidiaries (filed with the SEC as Exhibit 21.1 to the Company’s Form S-1 filed on October 11, 2019)
23.1*
Consent of Independent Registered Public Accounting Firm
23.2*
Consent of Independent Registered Public Accounting Firm
31.1*
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934.
31.2*
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934.
32.1#
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
*
+
†
Filed herewith.
Indicates management contract or compensatory plan.
Portions of the exhibit have been omitted for confidentiality purposes.
88
#
Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.
Item 16. Form 10-K Summary.
None.
89
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report
to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 24, 2021
Date: March 24, 2021
89bio, Inc.
By:
By:
90
/s/ Rohan Palekar
Rohan Palekar
Chief Executive Officer and Director
(principal executive officer)
/s/ Ryan Martins
Ryan Martins
Chief Financial Officer
(principal financial and accounting officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Rohan Palekar,
Ram Waisbourd and Ryan Martins, and each of them, the true and lawful attorneys-in-fact and agents of the undersigned, with full power of substitution
and resubstitution, for and in the name, place and stead of the undersigned, to sign in any and all capacities (including, without limitation, the capacities
listed below), this Annual Report on Form 10-K, any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in
connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and anything necessary to be done to enable the registrant to comply with the provisions of the
Securities Exchange Act and all the requirements of the Securities and Exchange Commission, as fully to all intents and purposes as the undersigned might
or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitute, or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.
Name
/s/ Rohan Palekar
Rohan Palekar
/s/ Ryan Martins
Ryan Martins
/s/ Steven Altschuler
Steven Altschuler, M.D.
/s/ Derek DiRocco
Derek DiRocco, Ph.D.
/s/ Gregory Grunberg
Gregory Grunberg, M.D.
/s/ Michael Hayden
Michael Hayden, M.B., Ch.B., Ph.D.
/s/ Anat Naschitz
Anat Naschitz
/s/ Lota Zoth
Lota Zoth, C.P.A.
Title
Chief Executive Officer and Director
(principal executive officer)
Chief Financial Officer
(principal financial and accounting officer)
Director
Director
Director
Director
Director
Director
91
Date
March 24, 2021
March 24, 2021
March 24, 2021
March 24, 2021
March 24, 2021
March 24, 2021
March 24, 2021
March 24, 2021
Exhibit 4.3
DESCRIPTION OF REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT
OF 1934
The following description of our capital stock is intended as a summary only and therefore is not a complete description of our capital
stock. This description is based upon, and is qualified by reference to, our second amended and restated certificate of incorporation (the “Amended
Certificate”), our second amended and restated bylaws (the “Amended Bylaws”) and applicable provisions of Delaware corporate law. You should read our
Amended Certificate and Amended Bylaws, which are filed as exhibits to our Annual Report on Form 10-K, to which this exhibit is also appended.
Our authorized capital stock consists of 100,000,000 shares of common stock and 10,000,000 shares of preferred stock.
Common Stock
Our Amended Certificate authorizes the issuance of up to 100,000,000 shares of our common stock. All outstanding shares of our common
stock are validly issued, fully paid and nonassessable.
The holders of our common stock are entitled to one vote per share on all matters submitted to a vote of stockholders. A majority vote of
the shares present in person or represented by proxy and entitled to vote on the subject matter is required for the holders of our common stock to take action
on all matters (except for election of directors (as discussed below)), except as otherwise required by law, our Amended Certificate or our Amended
Bylaws. Our Amended Certificate does not provide for cumulative voting in the election of directors. The holders of our common stock will receive ratably
any dividends declared by our board of directors out of funds legally available therefor. In the event of our liquidation, dissolution or winding-up, the
holders of our common stock will be entitled to share ratably in all assets remaining after payment of or provision for any liabilities.
Preferred Stock
Under the terms of our Amended Certificate, our board of directors has the authority, without further action by our stockholders, to issue up
to 10,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix
the dividend, voting and other rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or
restrictions thereon, and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.
Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting
power or other rights of the holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in our control and may
adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock.
Registration Rights
Certain holders of shares of our common stock are entitled to rights with respect to the registration of these securities under the Securities
Act of 1933, as amended (the “Securities Act”). These rights are provided under the terms of our investors’ rights agreement, effective as of September 17,
2019 (the “IRA”). The IRA includes demand registration rights, short-form registration rights and piggyback registration rights. All fees, costs and
expenses of underwritten registrations under this agreement will be borne by us and all selling expenses, including underwriting discounts and selling
commissions, will be borne by the holders of the shares being registered.
Demand Registration Rights
Certain holders of shares of our common stock are entitled to demand registration rights. Under the terms of the IRA, we will be required,
upon the written request of at least 50% of the holders of the registrable securities, including either OrbiMed Israel Partners II, L.P. or OrbiMed Private
Investments VI, LP, provided that the anticipated aggregate offering price is at least $10 million, to file a registration statement on Form S-1 and use
commercially reasonable efforts to effect the registration of these shares for public resale. The right to have such shares registered on Form S-1 is further
subject to other specified conditions and limitations.
Piggyback Registration Rights
Pursuant to the IRA, if we register any of our common stock either for our own account or for the account of other security holders, the
holders of registrable shares party to the IRA are entitled to include their shares in the registration, subject to certain marketing and other limitations. We
may terminate or withdraw any registration initiated before the effective date of such registration in our sole discretion.
Form S-3 Registration Rights
Pursuant to the IRA, if we are eligible to file a registration statement on Form S-3, upon the written request of at least 10% of the holders
of registrable securities to sell registrable securities at an aggregate price of at least $5 million, we will be required to use commercially reasonable efforts
to effect a registration of such shares. The right to have such shares registered on Form S-3 is further subject to other specified conditions and limitations.
Anti-Takeover Effects of Our Amended Certificate, Amended Bylaws and Delaware Law
Our Amended Certificate and our Amended Bylaws include a number of provisions that may have the effect of delaying, deferring or
preventing another party from acquiring control of us and encouraging persons considering unsolicited tender offers or other unilateral takeover proposals
to negotiate with our board of directors rather than pursue non-negotiated takeover attempts.
•
•
•
Issuance of undesignated preferred stock: Under our Amended Certificate, our board of directors has the authority, without further
action by the stockholders, to issue up to 10,000,000 shares of undesignated preferred stock with rights and preferences, including voting
rights, designated from time to time by our board of directors. The existence of authorized but unissued shares of preferred stock enables
our board of directors to make it more difficult to attempt to obtain control of us by means of a merger, tender offer, proxy contest or
otherwise.
Classified board: Our Amended Certificate establishes a classified board of directors consisting of three classes of directors, with
staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes
continuing for the remainder of their respective three-year terms. This provision may have the effect of delaying a change in control of
our board of directors.
Election and removal of directors and board vacancies: Our Amended Bylaws provide that directors will be elected by a plurality vote.
Our Amended Certificate and Amended Bylaws also provide that our board of directors has the right to increase or decrease the size of
the board and to fill vacancies on the board. Directors may be removed only for cause by the affirmative vote of the holders of at least
662⁄3% of the votes that all our stockholders would be entitled to cast in an annual election of directors. Only our board of directors is
authorized to fill vacant directorships. In addition the number of directors constituting our board of directors may be set only by
resolution adopted by a majority vote of the directors then in office. These provisions prevent stockholders from increasing the size of our
board of directors and gaining control of our board of directors by filling the resulting vacancies with its own nominees.
2
•
•
•
•
Requirements for advance notification of stockholder nominations and proposals: Our Amended Bylaws establish advance notice
procedures with respect to stockholder proposals and the nomination of candidates for election as directors that specify certain
requirements as to the timing, form and content of a stockholder’s notice. Business that may be conducted at an annual meeting of
stockholders will be limited to those matters properly brought before the meeting. These provisions may make it more difficult for our
stockholders to bring matters before our annual meeting of stockholders or to nominate directors at annual meetings of stockholders.
No written consent of stockholders: Our Amended Certificate provides that all stockholder actions be taken by a vote of the stockholders
at an annual or special meeting, and that stockholders may not take any action by written consent in lieu of a meeting. This limit may
lengthen the amount of time required to take stockholder actions and would prevent the amendment of our Amended Bylaws or removal
of directors by our stockholders without holding a meeting of stockholders.
No stockholder ability to call special meetings: Our Amended Certificate and Amended Bylaws provide that only a majority of the
members of our board of directors then in office may be able to call special meetings of stockholders and only those matters set forth in
the notice of the special meeting may be considered or acted upon at a special meeting of stockholders.
Amendments to certificate of incorporation and bylaws: Any amendment to our Amended Certificate will be required to be approved by
a majority of our board of directors as well as, if required by law or the Amended Certificate, a majority of the outstanding shares entitled
to vote on the amendment and a majority of the outstanding shares of each class entitled to vote thereon as a class, except that the
amendment of provisions to board classification, stockholder action, certificate amendments, and liability of directors must be approved
by not less than 662⁄3% of the outstanding shares entitled to vote on the amendment, voting together as a single class. Any amendment to
our Amended Bylaws must be approved by either a majority of our board of directors or not less than 662⁄3% of the outstanding shares
entitled to vote on the amendment, voting together as a single class.
These provisions are designed to enhance the likelihood of continued stability in the composition of our board of directors and its policies,
to discourage certain types of transactions that may involve an actual or threatened acquisition of us and to reduce our vulnerability to an unsolicited
acquisition proposal. We also designed these provisions to discourage certain tactics that may be used in proxy fights. However, these provisions could
have the effect of discouraging others from making tender offers for our shares and, as a consequence, they may also reduce fluctuations in the market price
of our shares that could result from actual or rumored takeover attempts.
Section 203 of the Delaware General Corporation Law
We are subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly held
Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this
stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner.
Choice of Forum
Our Amended Certificate requires that the Court of Chancery of the State of Delaware be the exclusive forum for the following types of
actions or proceedings under Delaware statutory or common law: (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a
breach of fiduciary duty owed by any director, officer or other employee to us or our stockholders; (3) any action asserting a claim against us or any
director or officer or other employee arising pursuant to the Delaware General Corporation Law, our Amended Certificate or Amended Bylaws; or (4) any
action asserting a claim against us or any director or officer or other employee that is governed by the internal affairs doctrine. This provision would not
apply to claims brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended, or any other claim for which the federal
courts have exclusive jurisdiction. Our Amended Certificate provides further that the federal district courts of the United States will be the exclusive forum
for resolving any complaint asserting a cause of action arising under the Securities Act, subject to and contingent upon a final adjudication in the State of
Delaware of the enforceability of such exclusive forum provision. Although we believe these provisions benefit us by providing increased consistency in
the application of Delaware law for the specified types of actions and proceedings, the provisions may have the effect of discouraging lawsuits against us or
our directors or officers.
3
Transfer Agent and Registrar
American Stock Transfer and Trust Company, LLC serves as the transfer agent and registrar for our common stock.
Listing
Our common stock is listed on The Nasdaq Global Market under the symbol “ETNB.”
4
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
The Board of Directors
89bio, Inc.:
We consent to the incorporation by reference in the registration statements (Nos. 333-237263 and 333-235577) on Form S-8 of 89bio, Inc. of our report
dated March 24, 2021, with respect to the consolidated balance sheet of 89bio, Inc. as of December 31, 2020, the related consolidated statements of
operations and comprehensive loss, stockholders’ equity, and cash flows for the year ended December 31, 2020, and the related notes, which report appears
in the December 31, 2020 annual report on Form 10-K of 89bio, Inc.
San Francisco, California
March 24, 2021
/s/ KPMG LLP
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-235577 and 333-237263 on Form S-8 of our report dated March 18, 2020,
relating to the financial statements of 89bio, Inc. appearing in this Annual Report on Form 10-K for the year ended December 31, 2020.
Exhibit 23.2
/s/ Deloitte & Touche LLP
San Francisco, California
March 24, 2021
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Rohan Palekar, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of 89bio, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: March 24, 2021
By:
/s/ Rohan Palekar
Rohan Palekar
Chief Executive Officer
(principal executive officer)
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Ryan Martins, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of 89bio, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: March 24, 2021
By:
/s/ Ryan Martins
Ryan Martins
Chief Financial Officer
(principal financial and accounting officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of 89bio, Inc. (the “Company”) on Form 10-K for the year ending December 31, 2020, as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company hereby certifies, pursuant to 18
U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Date: March 24, 2021
Date: March 24, 2021
By:
By:
/s/ Rohan Palekar
Rohan Palekar
Chief Executive Officer
(principal executive officer)
/s/ Ryan Martins
Ryan Martins
Chief Financial Officer
(principal financial and accounting officer)
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. §1350, and is not being filed for purposes of Section
18 of the Securities Exchange Act of 1934, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date
hereof, regardless of any general incorporation language in such filing.
Note: A signed original of this written statement required by §906 has been provided to 89bio, Inc. and will be retained by 89bio, Inc. and furnished to the
Securities and Exchange Commission or its staff upon request.