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, 2021
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 No. 001-38359
Adicet Bio, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
81-3305277
(I.R.S. Employer
Identification No.)
200 Clarendon Street, Floor 6
Boston, MA 02116
(650) 503-9095
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.0001 per share
Trading Symbol(s)
ACET
Name of each exchange on which registered
The 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
Non-accelerated filer
☐
☒
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☒
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant 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
As of June 30, 2021, the aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates was approximately $226.0 million based on a closing price of
$10.29 per share as quoted by The Nasdaq Global Market as of such date. In determining the market value of non-affiliate common stock, shares of the registrant’s common stock beneficially
owned by officers, directors and affiliates have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of March 10, 2022 there were 39,877,109 shares of common stock, $0.0001 par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K incorporates by reference certain information from the registrant’s definitive Proxy Statement for its 2022 annual meeting of shareholders, scheduled
to be held on June 2, 2022, which the registrant intends to file pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year
end of December 31, 2021. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part of this Form 10-K.
Summary of the Material and Other Risks Associated with Our Business
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
We have a limited operating history and face significant challenges and expense as we build our capabilities.
Our business is highly dependent on the success of ADI-001. If we are unable to obtain approval for ADI-001 and effectively commercialize
ADI-001 for the treatment of patients in our approved indications, our business would be significantly harmed.
Our gamma delta T cell candidates represent a novel approach to cancer treatment that creates significant challenges for us.
Our product candidates are based on novel technologies, which makes it difficult to predict the likely success of such product candidates and
the time and cost of product candidate development and obtaining regulatory approval.
Our clinical trials may fail to demonstrate the safety and efficacy of any of our product candidates, which would prevent or delay regulatory
approval and commercialization.
We may not be able to file investigational new drug (IND) applications to commence additional clinical trials on the timelines we expect, and
even if we are able to, the FDA may not permit us to proceed. We may encounter substantial delays in our clinical trials or may not be able to
conduct our trials on the timelines we expect.
The market opportunities for our product candidates may be limited to those patients who are ineligible for or have failed prior treatments
and may be small.
We do not currently operate our own manufacturing facility and currently depend on the ability of our third-party suppliers and
manufacturers with whom we contract to perform adequately, particularly with respect to the timely production and delivery of our product
candidates, including ADI-001. This reliance on third parties increases the risk that we will not have sufficient quantities of our product
candidates or products or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization
efforts.
We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not
be able to successfully implement our business strategy.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses. A pandemic,
epidemic or outbreak of an infectious disease, such as COVID-19, may materially and adversely affect our business and operations.
Failure to achieve and maintain effective internal control over financial reporting could harm our business and negatively impact the value of
our common stock.
If our collaboration agreement with Regeneron Pharmaceuticals, Inc. (Regeneron) is terminated, or if Regeneron materially breaches its
obligations thereunder, our business, prospects, operating results, and financial condition would be materially harmed.
The U.S. Food and Drug Administration regulatory approval process is lengthy and time-consuming, and we may experience significant
delays in the clinical development and regulatory approval of our product candidates.
If our efforts to protect the proprietary nature of the intellectual property related to our technologies are not adequate, we may not be able to
compete effectively in our market.
We depend on intellectual property licensed from third parties and termination of any of these licenses could result in the loss of significant
rights, which would harm our business.
We will need substantial additional financing to develop our products and implement our operating plans. If we fail to obtain additional
financing, we may be unable to complete the development and commercialization of our product candidates.
i
EXPLANATORY NOTE
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
TABLE OF CONTENTS
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.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
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
Reserved
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
Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
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 Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
ii
Page
3
3
5
5
46
87
87
87
87
88
88
88
89
99
100
100
100
102
102
103
103
103
103
103
103
104
104
104
EXPLANATORY NOTE
Prior to September 15, 2020, we were a clinical-stage biopharmaceutical company known as resTORbio, Inc. (resTORbio) that had historically
focused on developing innovative medicines that target the biology of aging, to prevent or treat age-related diseases with the potential to extend healthy
lifespans. resTORbio was originally incorporated under the laws of the State of Delaware in July 2016 and commenced research and development
operations in March 2017.
On September 15, 2020, we completed our business combination whereby a wholly-owned subsidiary of resTORbio merged with and into Adicet Bio,
Inc. (Former Adicet), with Former Adicet surviving as a wholly-owned subsidiary of resTORbio and changing our name to Adicet Therapeutics, Inc. (such
transactions, the Merger). In connection with the completion of the Merger, resTORbio was renamed Adicet Bio, Inc. (Adicet Bio).
Immediately prior to the Effective Time of the Merger, resTORbio effected a reverse stock split of our common stock at a ratio of 1-for-7 (the Reverse
Stock Split). At the Effective Time of the Merger, each outstanding share of Former Adicet’s capital stock was converted into the right to receive 0.1240
(the Exchange Ratio) shares of Adicet Bio’s common stock.
Unless otherwise noted, all references to common stock share and per share amounts in this Annual Report on Form 10-K have been retroactively
adjusted to reflect the conversion of shares in the Merger based on the Exchange Ratio and Reverse Stock Split. As used herein, the words “Adicet Bio,”
“Adicet,” “the Company,” “we,” “us,” and “our” refer to, for periods following the Merger, Adicet Bio (formerly resTORbio, Inc.), together with its direct
and indirect subsidiaries, and for periods prior to the Merger, Adicet Therapeutics, Inc. (formerly Adicet Bio, Inc.). In addition, the word “resTORbio”
refers to the Company prior to the completion of the Merger, and we sometimes refer to Adicet Therapeutics, Inc. as “Former Adicet.”
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than
statements of historical facts, contained in this Annual Report on Form 10-K, including statements regarding our strategy, future operations, future financial
position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The
words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,”
“would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying
words.
These forward-looking statements include, among other things, statements about:
•
•
•
•
•
•
•
•
•
•
•
•
our ability to execute our clinical trials for ADI-001 in Non-Hodgkin’s lymphoma (NHL), including the ability to successfully complete our
Phase 1 clinical trial and the period during which the results of the trial will become available;
the anticipated timing of our submission of Investigational New Drug (IND) applications or equivalent regulatory filings and initiation of
future clinical trials, including the timing of the anticipated results;
the impact of the ongoing COVID-19 pandemic on our continuing operations, clinical development plans, including the timing of initiation
and completion of studies or trials, financial forecasts and expectations, and other matters related to our business and operations;
the timing of and our ability to obtain and maintain regulatory approvals for our product candidates;
the rate and degree of acceptance and clinical utility of any products for which we receive regulatory approval;
our commercialization, marketing and manufacturing capabilities and strategy;
our intellectual property position and strategy;
our ability to identify additional product candidates with significant commercial potential;
our plans to enter into collaborations for the development and commercialization of product candidates;
the potential benefits of any future collaboration;
our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
the success of competing therapies that are or may become available;
3
•
•
•
•
•
•
•
•
developments relating to our competitors and our industry;
our ability to retain the continued service of our key professionals and to identify, hire, and retain additional qualified professionals;
our financial performance;
our expectations related to the use of cash, cash equivalents and marketable securities;
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
our ability to maintain effective internal control over financial reporting;
the impact of government laws and regulations; and
other risks and uncertainties, including those listed under the caption “Risk Factors.”
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue
reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the
forward-looking statements we make. We have included important factors in the cautionary statements included in this Annual Report on Form 10-K,
particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make.
Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or
investments that we may make or enter into.
You should read this Annual Report on Form 10-K and the documents that we reference herein and have filed or incorporated by reference as exhibits
hereto completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any
obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
This Annual Report on Form 10-K includes statistical and other industry and market data that we obtained from industry publications and research,
surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information
has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We are
responsible for all of the disclosure contained in this Annual Report on Form 10-K, and we believe these industry publications and third-party research,
surveys and studies are reliable.
4
PART I
All brand names or trademarks appearing in this report are the property of their respective owners. Unless the context requires otherwise, references in this
report to “Adicet Bio,” “Adicet,” “ the “Company,” “we,” “us” and “our” refer to Adicet Bio, Inc. and its subsidiaries, as applicable.
Item 1. Business.
Overview
We are a clinical stage biotechnology company discovering and developing allogeneic gamma delta T cell therapies for cancer. We are advancing a
pipeline of “off-the-shelf” gamma delta T cells, engineered with chimeric antigen receptors (CAR) and T cell receptor-like antibodies (TCRL), to enhance
selective tumor targeting, facilitate innate and adaptive anti-tumor immune response, and improve persistence for durable activity in patients. Our approach
to activate, engineer and manufacture allogeneic gamma delta T cell product candidates derived from the peripheral blood cells of unrelated donors allows
us to generate new product candidates in a rapid and cost-efficient manner.
Our lead product candidate, ADI-001, a first-in-class allogeneic gamma delta T cell therapy expressing a CAR targeting CD20, is in an ongoing Phase
1 study for the treatment of Non-Hodgkin's Lymphoma (NHL). Our pipeline also includes ADI-002, an allogeneic gamma delta CAR-T cell therapy
expressing a GPC3-targeted CAR and a cell intrinsic soluble form of interluiken-15 (IL-15), for the treatment of solid tumors. In addition, we are engaged
in discovery and preclinical stage activities directed to expansion of our pipeline of product candidates for both hematological malignancies and solid
tumors.
Our Approach
Our proprietary engineering and manufacturing process begins with isolating and expanding gamma delta T cells from the blood of unrelated donors,
and results in the potential to treat up to 1,000 patients per batch depending on dosing and the CAR target. Gamma delta T cells have unique attributes that
we believe make them especially well-suited to be used for cancer therapy. Approximately 95% of T cells in circulation are so-called alpha beta T cells,
named after the proteins that make up the cells’ T cell receptor (TCR). The remaining T cells include a population that makes up between 1% and 5% of all
T cells, the gamma delta T cells, along with a few other cell types. Distinct among immune cell populations, we believe gamma delta T cells may have the
following combination of attributes:
•
•
•
Can be used in patient irrespective of the tissue-types of the patient i.e., a “universal” product;
Can be used “off-the-shelf” after being expanded from unrelated donors;
Are actively cytotoxic to tumor cells;
• May functionally persist in patients for clinically meaningful periods or time;
•
•
•
Can replicate in an appropriate and measured way after manufacture and administration; Can have their reactivity to tumor cells enhanced further
by the addition of a CAR;
Express both T cell and natural killer (NK) cell receptors, facilitating both adaptive and innate anti-tumor immune responses; and
Can be manufactured potentially in large numbers to facilitate the consistent treatment of many patients and avoids the cumbersome nature and
expense of isolating cells from each patient.
By contrast, approved CAR-T cell therapies, as well as the majority of CAR-T cell therapies in clinical development, are based on a different
population of T cells, known as alpha beta T cells, which have the ability to attack unrelated tissues if they are not immunologically matched to the patient.
For this reason, the majority of alpha-beta-T-cell-derived CAR-T cell products are custom-generated from cells isolated from each patient, or require
significant gene editing to manufacture if the T cells are derived from donors that are unrelated to the patient. Gamma delta T cells, by contrast, do not in
principle require immunological matching and therefore cells isolated from unrelated donors can potentially be administered to any patient. This may
enable cell therapy products based on gamma delta T cells to be manufactured in bulk and distributed as readily available off-the-shelf products. In animal
models and early third-party clinical trials, gamma delta T cells do not expand in healthy tissues, indicating that they may be associated with a lower risk of
life-threatening immune responses. In addition to their ability to circulate, gamma delta T cells have an inherent capacity to locate in tissues and recognize
and attack cancerous cells.
5
In comparison to a number of NK cell therapies currently in development, CAR-modified gamma delta T cells functionally persist in non-clinical
models for protracted periods of time and are designed to persist after single or repeat dosing of patients for clinically meaningful periods. Our
manufacturing process results in highly homogeneous cell populations that we have observed to display potent anti-tumor activity in non-clinical models.
Unlike most NK cells, that only exhibit characteristics on innate lymphocytes, gamma delta T cells display features of both innate and adaptive anti-tumor
immunity and readily recognize and kill tumor cells with and without expression of CARs. Additionally, we believe that our short proprietary process to
manufacturing CAR-modified gamma delta T cells without any “feeder” cell lines compares favorably to manufacturing alternatives used in expanded
allogeneic NK cell-based therapies.
Our Pipeline
Our lead product candidate, ADI-001, a first-in-class allogeneic gamma delta T cell therapy expressing a CAR targeting CD20, is in an ongoing Phase
1 study for the treatment of NHL. On December 6, 2021, we reported positive interim clinical data from the initial dose escalation portion of this study that
showed complete and near complete responses at low doses along with a generally favorable tolerability profile. We aim to provide a further clinical update
for ADI-001 in the first half of 2022.
Our pipeline also includes three other product candidates in the discovery or preclinical phases for which we aim to file investigational new drug
(IND) applications between 2023 and 2025.
As part of a collaboration with Regeneron Pharmaceuticals, Inc. (Regeneron) pursuant to an agreement signed in 2016, Regeneron has the option to
obtain development and commercial rights for a certain number of product candidates, and we have an option to participate in the development and
commercialization of these potential products or are entitled to royalty payments by Regeneron. Immunocellular therapy product candidates developed and
commercialized by us under our agreement with Regeneron will be subject to payment of royalties to Regeneron. On January 28, 2022, Regeneron
exercised its option to license exclusive rights to ADI-002. For additional information on our agreement with Regeneron, please see the section entitled
“Business—Strategic Agreements” of this Annual Report on Form 10-K.
Figure 1. Company Pipeline
Our Strategy
Our objective is to be the leading biotechnology company developing CAR-modified gamma delta T cells for oncology. Key elements of our strategy
include our plans to:
•
Continue to advance clinical development of ADI-001. ADI-001, our lead hematologic cancer product candidate, is currently in an ongoing
Phase 1 study for the treatment of NHL. CD20 is a well validated target for immunotherapy for NHL. Our goal is to capitalize on our leadership
in engineered allogeneic anti-CD20 gamma delta CAR T cell therapy and pursue a broad clinical development plan for multiple subtypes of
NHL.
6
•
•
•
Continue to innovate and invest in the gamma delta T cell platform and pipeline. We expect to continue to develop product candidates in
oncology based on the gamma delta T cell platform using either previously validated antigens or those that we identify and target using our
TCRL technology. We may utilize additional genetic engineering, editing technologies or other technologies with the goal of further improving
the activity and tolerability profile of our product candidates. A key strength of our gamma delta T cell therapy platform lies in our ability to
target antigens of both known and unknown potential and devote our clinical development resources to those antigens that show the most
promise in preclinical in vivo analyses and early human trials.
Exploit the potential for outpatient administration. While we expect that the initial subjects receiving our gamma delta T cell-based therapies
in clinical studies will be hospitalized for a minimum of 24-hour observation after infusion, a favorable tolerability profile may allow
administration of such investigational therapies in an outpatient setting. We believe this would represent a significant competitive advantage for
our gamma delta T cell-based therapies as compared to existing approved CAR-T cell therapies.
Expand and protect our intellectual property. We will continue to aggressively protect the gamma delta T cell production methodology we
have developed as well as specific product candidates based on proprietary antigen-binding domains. For more information on our intellectual
property, see “Business— Our Intellectual Property” of this Annual Report on Form 10-K.
Background
Anticancer Immune Cell Therapy
In recent years, the field of immuno-oncology has advanced numerous therapies for the treatment of cancer. Immuno-oncology deploys the immune
system to attack and, in some cases, to eliminate cancer. One of the key breakthroughs in immuno-oncology involved using T cells, a key element of the
immune system, and turning them into even more potent, tumor-cell-specific killers. Researchers have achieved this improvement and targeting by loading
the T cells with a gene encoding a CAR. These engineered receptors represent a powerful combination of, first, a region that binds to a target on a cancer
cell and tethers the T cell to it; and second, a signal that activates the T cell to eliminate the tethered cancer cell. To our knowledge, all marketed CAR-T
cells contain predominantly alpha beta T cells. While we believe the use of CAR-T cell therapies is promising, conventional CAR-T cell therapies also
have some key flaws that, we believe, can potentially be addressed by using a cell population, specifically, gamma delta T cells rather than alpha beta T
cells.
As of December 31, 2021, four CD19-targeting CAR-T cell therapies have been approved by the FDA for the treatment of B cell lymphomas:
axicabtagene ciloleucel (Yescarta®) and brexucabtagene autoleucel (Tecartus™) developed by Kite Pharma, now Gilead Sciences, Inc. (Gilead);
tisagenlecleucel (Kymriah®), developed by Novartis; and lisocabtagene maraleucel (Breyanzi®) developed by Juno Therapeutics, Inc. (now Bristol Myers
Squibb Company). Among the 111 patients with diffuse large B cell lymphoma, (DLBCL), treated with Yescarta® in a clinical trial, an objective response
rate of 82% was observed with 54% of patients achieving a complete response. This high efficacy, however, is associated with significant adverse events,
with 13% of patients experiencing grade 3 or higher cytokine release syndrome and 28% of patients experiencing grade 3 or higher neurologic events. In
the Yescarta® DLBCL clinical trial, three patients died due to adverse events during treatment and ten patients who were enrolled in the trial were not able
to be treated due to disease progression or complications that arose during the period of time required to generate the patient-specific therapy or because of
the inability to generate the desired CAR-T cells from the patient’s cells. We believe that, despite their progress to date, currently available CAR-T cell
therapies have not reached their full promise, and our gamma delta CAR-T cell approach has the potential to be a significant improvement.
The current generation of approved CAR-T cell therapies for B cell lymphomas represented by Yescarta®, Tecartus™, Breyanzi®, and Kymriah® are
autologous cell therapies, that is, they are based on immune cells isolated from a patient, modified and expanded in a laboratory and then reintroduced into
the same patient. One key reason for taking this autologous approach is that the cytotoxic, or, cell-killing, cells are predominantly alpha beta T cells that are
used to generate these therapies and are cells that the immune system uses to recognize and attack foreign cells. If these types of T cells were to be
introduced into a patient from an unrelated donor, the donor T cells would attack healthy tissues throughout the patient in a process known as graft versus
host disease (GvHD) potentially causing multiple organ failure and death.
The T cells used for first-generation CAR-T cell therapies were derived from a highly abundant subclass of T cells known as alpha beta T cells. Alpha
beta T cells, which comprise approximately 95% of the T cells in circulation in the body, are able to distinguish whether cells that they encounter are either
normal cells that belong in the body or foreign or damaged cells that need to be destroyed. Alpha beta T cells have a receptor on their surface called a TCR
which is made up of alpha and beta protein chains. These TCRs recognize targets, also known as antigens, on cells that are presented by antigen-presenting
molecules encoded by the major histocompatibility complex (MHC). The MHC contains genes that encode a number of proteins with multiple variants,
such that most individuals have a distinct MHC profile. During normal T cell development, those T cells that recognize the combination of the specific
MHC profile and antigens that are presented by healthy cells of the specific individual are eliminated, resulting in a population of T cells that circulate
throughout the body, vigilantly checking for abnormal antigens or foreign cells, including from another individual.
7
In one type of cellular immunotherapy known as adoptive cell therapy, naturally occurring immune cells from a patient are isolated and are activated
using cytokines and tumor-specific antigens to stimulate the growth and expansion of antitumor T cells that already exist at low abundance in the patient.
After activation and expansion in the laboratory, large numbers of T cells that are primed to recognize the tumor are reintroduced into the same patient.
CAR-T cell therapies are a variant of this adoptive cell therapy in which, instead of trying to activate T cells based on the ability of naturally occurring
TCRs to recognize tumor antigens, a CAR designed to recognize a specific tumor antigen is genetically introduced into T cells. These CAR-T cells are then
able to destroy any cells expressing the appropriate antigen completely independent of MHC. However, without further genetic engineering, CAR-T cells
derived from alpha beta T cells still have endogenous TCRs which restrict their use to the original patient.
Limitations of autologous cell therapies
Autologous cell therapies, such as those developed by Kite Pharma and Novartis, have a number of limitations, including but not limited to the
following:
•
Treatment delays imposed by individualized manufacturing. Due to the individualized manufacturing process, patients must wait up to three
to four weeks for the individualized products to be manufactured and administered. In the registrational trials for Yescarta® and Kymriah®, up to
31% of intended patients ultimately did not receive treatment primarily due to complications from the underlying disease that occurred during
manufacturing or due to manufacturing failures.
• Manufacturing variability and failure. It was reported by Novartis in 2018 that variability in product specifications had been observed in the
production of Kymriah®. In addition, in approximately 9% of the cases, no product could be shipped to patients at all due to out-of-specification
issues or from manufacturing failures.
•
•
High cost limits patient access. The high cost of therapy and payer policies can limit access to autologous CAR-T cell therapies. According to a
2019 article published in the journal Managed Care, treating physicians estimate that the costs of autologous CAR-T cell therapies combined
with patient care services are approximately $1 million per patient, generating reluctance of payers to approve these therapies for patients before
they have exhausted other options. These therapies are then relegated to the most heavily pretreated patients who may be unable to withstand the
severe side effects.
Scalability. Because each patient requires a custom manufacturing batch, the production of autologous CAR-T cells at the scale needed to meet
commercial demand and anticipated label and geographic expansions may be challenging.
Autologous cell therapies, such as CAR-T cells derived from alpha beta T cells, have been successful in their initial use in hematological
malignancies. Furthermore, they have provided critical data that demonstrates the potential of immunocellular cancer therapies. However, manufacturing of
these cells imposes some critical limitations that could be minimized if similar allogeneic cell therapies that can be given to any patient, regardless of the
donor of cells, are developed. We believe that allogeneic cell therapies offer great promise for optimizing the access to therapy, overcoming manufacturing-
related and cost-related limitations of autologous cell therapies.
Gamma delta T cells and their allogeneic potential
Gamma delta T cells are a subset of T cells that have TCRs comprising gamma and delta receptor chains. In contrast to alpha beta T cells, gamma
delta T cells are not selective for patient-specific MHC molecules. Therefore, gamma delta T cells from an unrelated donor can be administered to a patient
without inducing GvHD and may recognize tumor-associated antigens in an MHC-independent manner. Gamma delta T cells primarily reside in tissues and
comprise between 1% and 5% of circulating T cells.
Gamma delta T cells correlate with improved outcomes
An analysis of the transcriptional profiles of 5,872 patient tumor samples across 25 malignancies published in Nature Medicine in 2015 found that
gene signatures consistent with gamma delta T cells were the strongest predictors of overall survival.
8
The association of gamma delta T cells with overall survival in solid tumors had a z-score over three, meaning it was over three standard deviations above
the mean, corresponding to a p value less than 0.001.
Figure 2. Analysis of the immune cell composition of tumor samples that gamma delta T cells were highly predictive of overall survival. Adapted
from Gentles et al., Nat Med. 2015; 21(8).
Additionally, high levels of gamma delta T cells have been associated with improved overall survival in acute leukemia patients who received
hematopoietic stem cell transplants (HSCT). In a study published by KT Godder et al. in 2007 in the journal Bone Marrow Transplantation, those patients
with high levels of gamma delta T cells after the transplant had a leukemia free survival at five-years of 54.4% and overall survival of 70.8%. Those with
low levels of gamma delta T cells had a significantly lower five-year leukemia free survival of 19.1% and a five-year overall survival of 19.6%.
Figure 3. HSCT patients who develop high levels of gamma delta T cells have improved survival. Adapted from Godder et al., Bone Marrow
Transplantation 2007; 39.
9
The correlation between high levels of gamma delta T cells and disease-free survival extends to patients with solid tumors. In a study published by
Meraviglia et al in 2017 in the journal OncoImmunology, across a cohort of 557 patients with colorectal cancer, those with high gamma delta T cell levels
had a five-year disease-free survival rate of over 80%, and revealed that disease-free survival probability was significantly higher in CRC patients with
high number of tumor infiltrating gamma delta T cells.
Figure 4. High levels of gamma delta T cells are correlated with increased disease-free survival in colorectal cancer patients. Adapted from
Meraviglia et al., Oncoimmunology 2017; 6 (10).
We believe that these studies and others point to an important role of gamma delta T cells in disease control and overall survival and indicate that
gamma delta T cell-based therapies have the potential to deliver clinically meaningful results.
Advantages of gamma delta T cell-based therapies
Immunotherapies developed using gamma delta T cells have a number of advantages over other therapies developed using other cell types, including
the following:
•
Lack of GvHD. A body of published evidence, mainly in the field of HSCT, supports the safety profile of transfer of allogeneic gamma delta T
cells to patient recipients from unrelated donors. HSCT procedures containing significant numbers of gamma delta T cells were able to proceed
with no signs of acute or chronic GvHD. In many cases, the presence of gamma delta T cells in the HSCT products correlated with improved
clinical outcomes, indicating the antitumor potential of gamma delta T cells. Additionally, a study performed by Martin Wilhelm and colleagues
in 2014 indicated that gamma delta T cells from haploidentical donors could be successfully expanded and infused in large numbers (2.17x106
cells / kg (range, 0.9-3.84)), followed by further expansion (mean, 68-fold) in the patients without any observed GvHD.
• MHC-independent tumor antigen recognition. Gamma delta TCR can recognize tumor associated antigens in a MHC-independent manner,
facilitating the use of products derived from donors who are unrelated to patients which may avoid the need to match the human leukocyte
antigen (HLA)-type of the donor to the patient.
•
•
•
Tumor localization. In addition to being present in the circulation at low frequency, gamma delta T cells have an inherent propensity to home to
tissues and tumors. Their ability to be activated in environments with low levels of oxygen such as those found in the tumor microenvironment
has the potential to increase the activity of gamma delta T cells in solid tumors.
Limited cytokine secretion. Unlike alpha beta T cells, gamma delta T cells can be made to secrete lower levels of certain cytokines such as
interleukin 2 (IL-2). This, combined with lack of recognition of normal, non-malignant, cells by of gamma delta T cells, may lower the risk of
life-threatening cytokine release syndrome.
Limited ability for tumors to escape. Although the initial responses to immunotherapies such as antibodies and CAR-T cells are often
impressive, many patients become refractory or relapse. A common mechanism for the relapse to these therapies is loss of the expression of the
CAR-targeted antigen such as CD19 from tumor cells. Because gamma delta
10
T cells also express innate cytotoxic immune receptors, they can recognize and kill tumor cells even in the absence of the CAR-targeted tumor
antigen.
•
•
•
Ability to manufacture more efficiently and cost-effectively. Unlike alpha beta T cells, therapies based on gamma delta T cells can potentially
be manufactured in bulk and used in the allogeneic or off-the-shelf setting, addressing many of the shortcomings of conventional alpha beta T
cell therapy.
Potential for superior cytotoxic activity. T cells from some cancer patients, for example those with chronic lymphocytic leukemia, often
display an exhausted, or otherwise dysfunctional, phenotype and CAR-T cell products from these cells may perform poorly. Our allogenic cell
therapy is manufactured from unrelated donors whose T cells have been proven to generate highly active CAR-T cell product.
Potential for re-dosing. Along with increased availability of material due to the ability to utilize off-the-shelf donor-derived starting material
from unrelated donors compared to conventional CAR-T cell therapies, the lack of MHC-dependent GvHD also opens up the possibility of being
able to re-dose patients to achieve further clinical activity if they do not obtain an adequate clinical response from initial treatment or if they
relapse. A number of studies with other CAR-T cell therapies have linked the development of cytokine release syndrome with high numbers of
circulating CAR T cells following rapid alpha beta T cell proliferation. Having the option to retreat patients with gamma delta T cells provides
the option of starting with a low dose and re-dosing if required.
Our CAR gamma delta T cell technology
Human gamma delta T cells can be divided into three main subsets based on their TCR delta chain usage: Vδ1, Vδ2 and Vδ3. The most abundant
subset of gamma delta T cells in the circulatory system, the Vδ2 cells, is also the most well-studied. However, it is the Vδ1 subset which primarily resides
in tissues and presents a favorable cytotoxic anti-tumor profile that we are activating and manufacturing using our proprietary platform technology.
Vδ1 gamma delta T cells
Vδ1 cells have properties of both the innate and adaptive immune system, meaning that they can be activated by tumor-specific antigens as well as by
general activators common to damaged or otherwise abnormal cells. Similar to other T cells, they express TCRs, but also express cytotoxicity receptors that
are found on innate immune cells such as NK cells. These gamma delta T cells can induce tumor cell death through multiple mechanisms including the
secretion of cytotoxic proteins such as granzymes and perforin as well as through the secretion of cytokines such as interferon gamma (IFNγ), and tumor
necrosis factor alpha (TNFα).
In in vitro and in vivo preclinical cancer models, Vδ1 cells are more cytotoxic and may have a longer durability than Vδ2 cells. Vδ1 cells are also
more resistant to activation induced cell death (AICD), which has posed significant problems in clinical trials following chronic stimulation of Vδ2 cells.
Vδ1 cells normally reside within tissues and they are able to adapt to lower nutrient availability and decreased oxygen levels, conditions which are similar
to those in the microenvironments or localized areas associated with certain solid tumors. Incubation of these gamma delta T cells in conditions of low
oxygen (hypoxia) that are typical of tumors has been shown to enhance their cytotoxicity.
Anticipated advantages of Vδ1 gamma delta T cells over NK cell based therapies
An alternate approach to the development of allogeneic CAR T cells consists of engineered NK cell-based therapy. While both gamma delta T cell
and NK cell therapy generally are not expected to cause GvHD, NK cells express a broad repertoire of both inhibitory and activating receptors and have
more limited tumor induced secretion of multiple cytokines. We believe that the gamma delta T cell technology we are developing has several advantages
over this approach. Unlike engineered NK cells, Vδ1 gamma delta T cells have the following advantages:
•
•
•
•
•
The presence of gamma delta cells in tumors is strongly correlated with positive clinical outcomes;
Can display tumor-induced secretion of multiple cytokines including expressing high levels of interferon-gamma;
Can be produced as highly homogeneous cell populations that display potent non-clinical anti-tumor activity;
Express activating receptors more predominantly; and
Display features of adaptive immunity including, TCR-mediated, but MHC-independent, tumor antigen recognition, a long lifespan and
persistence for protracted periods of time;
11
We believe these advantages position gamma delta T cell-based therapies to become an attractive alternative to NK based therapies for many oncology
indications and lines of therapy.
Anticipated advantages of Vδ1 gamma delta T cells over other approaches to generate allogeneic CAR-T cells
An alternative approach to the development of allogeneic gamma delta CAR T cells consists of introducing genetic modifications that disable the TCR
in alpha beta T cells derived from donors that are unrelated to the patient. This process prevents these cells from attacking the patient’s healthy cells. We
believe that the unrelated donor-derived gamma delta T cell technology, which lacks the ability to attack healthy cells from unrelated individuals, has a
number of advantages over this approach. In an allogeneic paradigm, unlike alpha beta T cells, Vδ1 gamma delta T cells have the following advantages:
•
•
Do not rely on genetic manipulations to inactivate the alpha beta TCR;
Display properties of both adaptive and innate immune systems and are capable of killing cells even if their specifically targeted CAR antigen is
expressed at low levels or not present;
• May not be prone to exhaustion and are likely to persist longer;
• May maintain the capacity to home to tissues and tumors rather than predominantly residing in circulation; and
• May be less likely to induce cytokine release syndrome due to more limited endogenous IL-2 secretion by activated cells.
We believe these advantages position gamma delta T cell based therapies to become an attractive alternative to alpha beta T cell based therapies.
Anticipated advantages of Vδ1 gamma delta T cells over bispecific antibody T cell recruitment for tumor immunotherapy
An alternative approach to the development of allogeneic CAR T cells consists of bispecific antibodies that are designed to crosslink T cells to
specific targets on the tumor. This approach generally requires healthy and functional T cells able to attack the tumor when guided to the tumor expressing
the target antigen. We believe that the unrelated donor-derived gamma delta T cell technology has a number of potential advantages over this approach.
Unlike bispecific antibodies, Vδ1 gamma delta T cells have the following advantages:
•
•
Do not rely on functional T cells derived from the patient for clinical activity;
Display properties of both adaptive and innate immune systems and are capable of killing cells even if their specifically targeted CAR antigen is
not present;
• Maintain the capacity to home to tissues and tumors rather than predominantly residing in circulation and can actively distribute into localized
tumors; and
• May be less likely to induce cytokine release syndrome due to more limited endogenous IL-2 secretion by activated cells.
We believe these advantages position gamma delta T cell-based therapies to become an attractive to bispecific-based therapies for many oncology
indications and lines of therapy.
Our key anticipated differentiation from gamma delta T cell competitors
We believe that the gamma delta T cell technology that we are developing has a number of potential advantages over the technology of gamma delta T
cell competitor companies, including the following:
•
•
•
•
Robust and practical proprietary antibody-based manufacturing method for gamma delta T cells
Large-scale expansion of blood-derived gamma delta T cells
Ability to selectively expand multiple gamma delta T cell subpopulations including highly potent Vδ1 cells
No potentially pro-tumorigenic Th17-type responses in our Vδ1 subpopulation
12
•
•
In-house CAR target identification and verification process
Ability to effectively target tumor-specific intracellular protein-derived peptides using proprietary TCRL antibodies
We believe these advantages position our gamma delta T cell based therapies to become an attractive approach to the technologies used by other
gamma delta T cell competitor companies.
Production of gamma delta T cells
To produce gamma delta T cell-based product candidates, we isolate peripheral blood mononuclear cells, from unrelated donors that meet all the
safety criteria for human cells, tissues, and cellular and tissue-based products (HCT/P), criteria for donors as outlined by the FDA in Title 21 of the Code of
Federal Regulations (CFR), Part 1271. We then activate Vδ1 gamma delta T cells using a proprietary agonistic antibody and cytokines and expands these
cells before introduction of replication-incompetent retroviral vectors containing the coding sequence for CAR constructs. These CAR-modified cells are
further expanded, routinely greater than 6,000-fold at clinical scale, resulting in cell cultures that primarily consist of the desired gamma delta T cells. To
reduce the chance of a patient developing GvHD, the remaining alpha beta T cells are then depleted using alpha-beta-specific, antibody-based techniques.
The resulting gamma delta T cells are then formulated in an infusible solution to form the final drug product, which is filled into vials and then frozen to
enable delivery of a post-thaw cell dose from each vial of CAR-T cells.
Figure 5. Production process for our CAR gamma delta T cell products.
Figure 6. Fold expansion of gamma delta T cells.
We believe that our manufacturing process, including the generation of the antibodies and retroviral vectors, meets current Good Manufacturing
Practices (cGMPs). We expect to be able to produce tens to hundreds of doses from a single donor, greatly increasing the efficiency of manufacturing
compared to autologous alpha beta T cell therapies. We have chosen to partner with a number of contract manufacturing organizations (CMOs) in the
United States and Europe to access specific capabilities to ensure that the manufacturing process is highly scalable, and fully cGMP-compliant. We believe
this process has the potential to treat up to 1,000 patients per batch.
13
ADI-001, an anti-CD20 CAR gamma delta T cell therapy targeting NHL
B cell NHL overview
NHL is the most common cancer of the lymphatic system. An estimated 77,240 new cases are expected to be diagnosed in the United States in 2020,
according to the web site of the U.S. National Institutes of Health (NIH). According to the cancer.net web site maintained by the American Society for
Clinical Oncology (ASCO), approximately 90% of NHL patients in western countries have B cell lymphomas of various types and DLBCL is the most
common and aggressive type of NHL, accounting for 30% of NHL. The second most common type is follicular lymphoma (FL), which occurs in 20% of
NHL patients. Mantle cell lymphoma (MCL), is diagnosed in 5% to 7% of NHL cases.
Although B cell NHLs represent a heterogeneous set of lymphomas, many cell surface antigens are shared among them, including CD19 and CD20.
First line therapy for patients with aggressive B cell NHLs, such as DLBCL, is chemotherapy in combination with radiation or rituximab, an antibody that
targets CD20. According to the rituximab label as published on the FDA web site, the addition of rituximab to chemotherapy results in an approximately
10% to 15% overall increase in survival at one year compared to chemotherapy alone with almost no increase in toxicity. According to an article published
by K.T. Godder et al. in the journal Bone Marrow Transplantation in 2007, up to 50% of patients become refractory or relapse after treatment. Of those,
according to an article published by Andrew R. Rezvani and David G. Maloney in the journal Best Practice & Research Clinical Haematology in 2011,
approximately 60% percent are resistant to rituximab upon relapse. Subsequent chemotherapy-based therapies typically have limited efficacy in these
patients and, at that point, they become candidates for treatment with allogeneic HSCT or anti-CD19 CAR-T cell therapy. Approximately 35% of patients
treated with anti-CD19 CAR-T cell therapies relapse within one year, according to the label for Kymriah® published on the Novartis web site.
Our solution, ADI-001
ADI-001 is a gamma delta T cell product candidate that targets malignant B-cells via an anti-CD20 CAR and via the gamma delta T cell endogenous
receptors, which we are developing as an allogeneic immunocellular therapy for the treatment of B-cell NHL. ADI-001 is created from Vδ1 gamma delta T
cells isolated from unrelated donors. It is manufactured in bulk under cGMP-compliant conditions and is intended to be supplied as an immediately
available off-the-shelf anti-CD20 CAR-T cell therapy.
ADI-001 contains an anti-CD20 CAR that has a proprietary antigen-binding domain that recognizes a region of CD20 distinct from that recognized by
rituximab. Similar to other CAR-Ts cells including the one used to create Kymriah®, our CAR-T cells contain the clinically validated costimulatory
domain from 4-1BB and the CD3ζ.
Clinical data
In October 2020, the FDA cleared our IND application for ADI-001 for the treatment of NHL. The active IND enabled us to initiate the first-in-human
clinical trial to assess safety and efficacy of ADI-001 in NHL patients in the first quarter of 2021. The Phase 1 study for ADI-001 will enroll up to 80 late-
stage NHL patients at a number of cancer centers across the United States The study includes a dose finding portion followed by dose expansion cohorts to
explore the activity of ADI-001 in multiple subtypes of NHL. Included in this trial will be previously treated patients who were not able to receive
approved autologous CAR-T cell therapies due to medical, technical, logistical, or financial reasons, as well as patients who relapsed after receiving
autologous CAR-T cell therapies.
Patients enrolled in the trial will undergo chemotherapy-based lymphodepletion for three days followed by ADI-001 dosing by infusion on day five.
Patients will be evaluated at four weeks, twelve weeks and then every three months for the first year and at months 18 and 24 after treatment. Once a
recommended dose has been selected, up to 36 patients will be enrolled in indication-specific dose expansion cohorts: DLBCL, MCL, and one for all other
B cell malignancies. Select patients experiencing clinical benefit with ADI-001 may be eligible for retreatment.
An additional cohort in this trial will investigate the potential of IL-2 therapy to boost the activity and durability of ADI-001. Treatment with IL-2 is
supported by preclinical data that we have generated demonstrating that IL-2 improves the antitumor
14
activity of our gamma delta T cells both in vitro and in vivo. Treatment of HSCT patients with IL-2 has also been shown to stimulate the proliferation of
gamma delta T cells in the clinic.
(*) Dose escalation study
Figure 7. Phase 1 ADI-001 study patient flow.
Phase 1 Interim Clinical Data
On December 6, 2021, we reported positive interim clinical data from the initial dose escalation portion of the Phase 1 study evaluating the safety and
tolerability of ADI-001 in NHL that showed complete and near complete responses at low doses along with a generally favorable tolerability profile. We
have since completed dosing of subjects in the second lowest dose level of our Phase 1 study and we are currently enrolling subjects in dose level three. We
aim to provide a clinical update for ADI-001 in the first half of 2022.
As of the November 22, 2021 data cutoff, six patients had been enrolled and received ADI-001. The first two patients enrolled in the lowest dose level
tested did not reach the day 28 assessment and were not evaluable for efficacy per protocol. Three of the four evaluable patients achieved responses,
including two complete responses (CR) and one partial response (PR) that investigators characterized as near complete response. Patients were heavily pre-
treated, with a median of five lines of prior systemic therapy, including a patient who had received prior autologous CD19 CAR T, and achieved complete
response following a single infusion of ADI-001 administered at the lowest dose level.
Of the four efficacy evaluable patients, three received ADI-001 at dose level one (30 million CAR+ cells) and one received ADI-001 at dose level two
(100 million CAR+ cells). In dose level one, one patient achieved a CR, one patient achieved a PR that was characterized as near CR and one patient had
progressive disease (PD). In dose level two, the first patient achieved a CR.
All evaluable patients had been heavily pre-treated with a median of five lines of prior systemic therapies. Of the three patients who achieved PR or
better under Lugano 2014 criteria (ORR=75%, CR=50%), one had FL transformed into a large B-cell tumor with four prior lines of therapy, one had
DLBCL with five prior lines of therapy including two cycles of anti-CD19 CAR T cell therapy, and the third had MCL with five prior lines of therapy.
These patients achieved two CRs and a near CR.
Overall, ADI-001 infusions were generally well-tolerated. No dose-limiting toxicities GvHD, Immune Effector Cell-Associated Neurotoxicity
Syndrome (ICANS), Grade 3 or higher Cytokine Release Syndrome (CRS) have been reported to-date, suggesting a potentially wide therapeutic window
for ADI-001.
A significant increase in circulating IL-15 was observed during the 28-day window following lymphodepletion, potentially providing cytokine support
for the proliferation of ADI-001. Emergence of circulating ADI-001 in the blood was observed by quantitative polymerase chain reaction and by flow
cytometry, demonstrating expansion of ADI-001 in patients. Elevations in additional circulating cytokines, primarily IL-2 and IL-8 were observed during
the first 14 days from dosing, consistent with the activation profile of ADI-001 and similar to the observed time-to-peak for cytokines previously reported
in association with autologous alpha-beta CAR T cells. Importantly, no meaningful increases in IL-6 were seen in association with ADI-001, except for
one patient who experienced COVID-19 infection, suggesting reduced likelihood for ICANS and high-grade CRS.
15
Table 1: Summary of ADI-001 interim data from two dosing cohorts*:
Dose Level
Age/Sex
B-cell lymphoma subtypes
30 million CAR+
cells
62/F
66/F
75/M
62/M
100 million CAR+
cells
(from
Transformed DLBCL
chronic lymphocytic leukemia)
Transformed high grade B cell
tumor (from FL)
DLBCL
MCL
lines of
# Prior
therapies
5 prior lines
4 prior lines
5 prior lines
5 prior lines
Prior CAR T?
No
No
Yes (liso-cel)
No
Best Response (BOR) by Lugano
Criteria (2014)
PD
PR
(Near CR)
CR
CR
*Efficacy evaluable patients as of November 22, 2021 database entry. Data are subject to further review and verification.
Preclinical data
All preclinical experiments were conducted using anti-CD20 CAR-modified gamma delta T cells, a research version of ADI-001. We evaluated the in
vitro potency of our anti-CD20 CAR gamma delta T cells using human-derived laboratory cell lines, known as Raji and Daudi human Burkitt’s lymphoma
cell lines, which are known to express high levels of CD20. Mixing the tumor cells with the anti-CD20 CAR gamma delta T cells resulted in apoptosis, or
cell death, of the tumor cells after four hours. Increasing the ratio of the number of anti-CD20 CAR gamma delta T cells to tumor cells resulted in a higher
percentage of dying tumor cells. Similar potency in the killing of target cells by anti CD20 CAR gamma delta T cells was observed in both Mino cells, a
human MCL line that expresses high levels of CD20; and WILL-2 cells, cells derived from a rituximab-resistant patient with B cell lymphoma that
expresses low levels of CD20. These results suggest that anti-CD20 CAR gamma delta cells can be
16
highly efficient at recognizing and eliminating tumor cells that express any level of CD20. In all cases, our gamma delta T cells that did not have anti-CD20
CAR expression also caused tumor cell death due to innate cytotoxic receptors.
Figure 8. Anti-CD20 CAR gamma delta T cells demonstrated potent cell killing activity across multiple human tumor cell lines.
17
We have tested the antitumor activity of our anti-CD20 CAR gamma delta T cells in multiple tumor models in immunocompromised mice including
Raji tumor models, a Mino tumor model and a Granta tumor model derived from a mantle cell tumor. Five to seven days after tumors were implanted into
these mice, anti-CD20 CAR gamma delta T cells were administered as a single intravenous dose. Human recombinant IL-2 was administered three times a
week for the duration of the study to stimulate the gamma delta T cells. In all cases, treatment using our anti-CD20 CAR gamma delta T cells was able to
arrest tumor growth. The absolute duration of these studies was not pre-specified, however each of the studies were terminated when the growth of tumors
in any of the animals in the no-treatment control group (tumor-only) exceeded a pre-specified limit; in subcutaneous tumor models this limit was generally
tumor growth exceeding 4000mm3. This resulted in the individual studies being run for slightly different durations.
Figure 9. Anti-CD20 CAR gamma delta T cells inhibited tumor growth in multiple animal models.
Treatment of Raji tumors in mice with anti-CD20 CAR gamma delta T cells resulted in the complete elimination of tumors in four out of six mice.
Sixty days after the original — and only – dose of anti-CD20 CAR gamma delta T cells, the four mice with complete responses were re-challenged with
Raji tumor cells. Growth of these newly introduced tumors continued to be suppressed at least until the end of the experiment at day 100. We believe that
these results suggest that our gamma delta cells
18
had a long persistence in vivo and remain active. Other preclinical experiments have shown that they can undergo up to twenty cell doublings and can have
antitumor activity that can extend to six months in animal models.
Figure 10. Gamma delta T cells retained their antitumor activity for at least 90 days in a Raji tumor model. Four of the six mice in the primary
tumor challenge exhibited complete responses, and these four mice were given a second tumor challenge without additional gamma delta CAR T
cells.
We performed a direct analysis of the ability of our gamma delta CAR-T cells to migrate and proliferate in tumors using a fluorescent dye technology
to examine cell division. Gamma delta CAR-T cells were treated with a fluorescent dye that attaches to cellular proteins. As these fluorescent cells divided,
the molecules modified with the fluorescent dye were split among the mother and daughter cells. This resulted in a reduction in the average fluorescence
signal per cell. Quantification of the amount of fluorescence per cell was then used as a surrogate for the number of divisions that a cell has undergone.
Using this assay, we observed that, within six days, our CAR gamma delta T cells had undergone significant cell divisions in tumors with little
replication in blood, spleen, bone marrow or liver. By contrast, in a similar experiment using CAR alpha beta T cells, it was observed that replication
occurred in all tissues examined. We believe that this selective replication in tumors by CAR gamma delta T cells, compared to CAR alpha beta T cells,
may contribute to increased antitumor activity and a lower risk of developing life-threatening systemic immune responses such as cytokine release
syndrome.
Figure 11. Proliferation of CAR gamma delta T cells was primarily localized in tumors, while the proliferation of CAR alpha beta T cells was
observed in all tissues examined.
Interleukin 15 (IL-15) is a cytokine that preferentially stimulates T cell and NK cell activation, proliferation and cytolytic activity. These functional
activities of IL-15 translate to enhanced antitumor responses in multiple tumor models. IL-15 is closely related to a cytokine that is a known activator of
immune responses, IL-2. Both cytokines have the potential to stimulate gamma delta T cells. IL-15 plays a more important role in maintaining T cell
responses that are long-lasting and show high affinity for cancer cell targets, while IL-2 has a more significant role in activating cytotoxic responses.
19
The antitumor activity of our anti-CD20 CAR gamma delta T cells was tested in SRG-15 mice. These are mice that lack much of their mouse immune
system but that do express human IL-15. In these studies, potent antitumor activity against Raji tumors in was observed. Furthermore, this activity was not
accompanied by the development of GvHD. In contrast, mice treated with anti-CD20 CAR alpha beta T cells had antitumor responses, but subsequently
experienced increased mortality due to the development of GvHD.
Figure 12. Anti-CD20 CAR gamma delta T cells do not induce GvHD, whereas treatment with anti-CD20 CAR alpha beta cells caused GvHD that
led to increased mortality.
ADI-002, an anti-GPC3 CAR gamma delta T cell therapy for HCC
HCC disease background
Hepatocellular carcinoma (HCC) is the most prevalent form of liver cancer. The risk of HCC development is increased by a number of environmental
and lifestyle factors such as hepatitis B and hepatitis C virus, alcohol drinking, tobacco smoking, aflatoxin exposure, obesity and diabetes. These factors
lead to wide disparities in disease incidence across geographies. According to a 2013 publication by Sahil Mittal and Hashem B. El-Serag in the Journal of
Clinical Gastroenterology, in the U.S., the incidence is approximately six per 100,000 per year, while in sub-Saharan Africa and Eastern Asia the incidence
is over 20 per 100,000 per year.
Patients diagnosed with HCC generally have a poor prognosis. The majority of patients are diagnosed with advanced disease and they have a five-year
survival rate of approximately 11%, according to cancer.net, the web site of ASCO. Patients are initially treated with combinations of cytotoxic drugs or
radiation. In some cases, they may also receive targeted therapies including kinase inhibitors such as lenvatinib, marketed as Lenvima® by Eisai; and
sorafenib, marketed as Nexavar® by Bayer and subsequently cabozantinib, marketed as Cabometyx® by Exelixis. These therapies, however, have
significant toxicities and limited clinical benefit with progression free survival of less than eight months. Checkpoint immunotherapies such as
pembrolizumab and nivolumab have demonstrated some efficacy in HCC, although response rates are less than 20% according to the label for
pembrolizumab, marketed by Merck as Keytruda®. The combination of both nivolumab and ipilimumab, despite increased toxicities, increased this
response rate to 33%. We believe these results demonstrate that there is significant unmet need in HCC and that there is potential to treat HCC with
immunotherapy.
GPC3, a tumor-associated antigen
GPC3 is a tumor-associated antigen that is expressed in many tumors but in almost no normal tissues other than embryonic liver and kidney or
placenta.
20
Glypican 3 Expression in Tumors*
Tumor Entity
Hepatocellular carcinoma
Squamous cell carcinoma of the lung
Liposarcoma
Testicular nonseminomatous germ cell tumor
Cervical intraepithelial neoplasia (grade 3)
Malignant melanoma
Adenoma of the adrenal gland
Schwannoma
Malignant fibrous histiocytoma
Adenocarcinoma of the stomach (intestinal subtype)
Chromophobe renal cell carcinoma
Invasive lobular carcinoma of the breast
Medullary carcinoma of the breast
Squamous cell carcinoma of the larynx
Small cell carcinoma of the lung
Invasive transitional cell carcinoma of the urinary bladder
Mucinous carcinoma of the breast
Squamous cell carcinoma of the cervix
No. (%) Staining
No. of Cases
Negative
Positive
44
50
29
62
29
48
15
46
29
45
15
46
30
49
49
43
26
41
15 (34)
23 (46)
14 (48)
30 (48)
17 (59)
34 (71)
11 (73)
34 (74)
22 (76)
36 (80)
12 (80)
37 (80)
25 (83)
41 (84)
41 (84)
36 (84)
22 (85)
35 (85)
29 (66)
27 (54)
15 (52)
32 (52)
12 (41)
14 (29)
4 (27)
12 (26)
7 (24)
9 (20)
3 (20)
9 (20)
5 (17)
8 (16)
8 (16)
7 (16)
4 (15)
6 (15)
Figure 13. Screening of a panel of over 4,000 tumor samples found that GPC3 is expressed in numerous cancers. Baumhoer et al., Am. J. Clin.
Pathol. 2008;129.
In a trial conducted by David Ho at the University of Hong Kong and colleagues and published in the journal PLOS One in 2012, high levels of GPC3
are detected by immunohistochemistry in a large proportion of HCC tumor tissue samples, but no GPC3 can be detected in adjacent normal cells.
Figure 14. Immunohistochemistry detected strong signals of GPC3 in liver tumor tissue, but negative staining for GPC3 was detected in the
adjacent non-tumorous tissue. Adapted from Ho et al., PLoS One. 2012;7(5).
Our solution, ADI-002
ADI-002 is an anti-GPC3 CAR gamma delta T cell product candidate that we are developing for the treatment of solid tumors. We believe that
modification of Vγ1 gamma delta T cells, which have an inherent tumor homing ability, with a CAR that is specific for GPC3, may result in a therapeutic
product able to have potent antitumor activity in patients suffering from multiple solid tumors. On January 28, 2022, Regeneron exercised its option to
license the exclusive, worldwide rights to ADI-002 pursuant to our agreement signed in 2016. In conjunction with the exercise of its option, Regeneron
paid us an exercise fee of $20.0 million. We elected not to exercise our option to co-fund the further development of ADI-002. Accordingly, Regeneron is
responsible, at its sole cost, for all development, manufacturing and commercialization of ADI-002 and we are entitled to royalties of any future sales of
such products by Regeneron. See the section titled “Business—Strategic Agreements” of this Annual Report on Form 10-K.
To enhance the proliferative ability and durability of our anti-GPC3 CAR gamma delta T cells, we engineered these cells to express soluble IL-15. We
anticipate that the tumor homing ability of gamma delta T cells will potentially result in expression
21
of IL-15 predominantly in tumors. In combination with the inherent secretion of factors such as interferon gamma from activated gamma delta T cells, the
secretion of IL-15 is anticipated to lead to reversal of immunosuppressive effects in the tumor microenvironment and direct stimulation of the gamma delta
T cells.
We demonstrated in in vitro assays that our anti-GPC3 CAR gamma delta T cells have potent and GPC3-antigen-dependent cell killing activity. When
our anti-GPC3 CAR-T cells were added to HepG2 cells, a cell line expressing GPC3 that was derived from a patient with HCC, an increase in tumor cell
killing was observed. Gamma delta T cells prepared without the addition of our anti-GPC3 CAR were still able to kill the HepG2 cells, only with less
potency at 18 hours. We believe that this CAR-independent killing activity was driven by innate receptors on our gamma delta T cells and that this innate
antitumor activity may provide meaningful antitumor clinical activity in cases in which tumors may lose the expression of the targeted GPC3 antigen. Loss
of tumor-expressed antigens represents a significant mechanism of escape from antitumor activities from other immunotherapies such as anti-CD19 CAR-T
cell therapies. The ability to continue to have antitumor activity driven by the innate immune cell properties of our gamma delta T cells is a distinct
advantage compared to alpha beta T cells, which lack this capability. Our gamma delta T cells had no cell killing activity when added to RAT2 normal
fibroblasts that do not express GPC3.
Figure 15. Expression of an anti-GPC3 CAR in gamma delta T cells led to potentiation of killing of HepG2 hepatocellular carcinoma cell line.
Anti-GPC3 CAR gamma delta T cells had dose-dependent antitumor activity in HepG2 tumors in immunodeficient mice. HepG2 tumor cells were
inoculated into immunocompromised mice and allowed to grow to a volume of 200 mm3 over a period of approximately eight days. A single dose of anti-
GPC3 CAR gamma delta T cells was then administered and tumor growth at day 37 was assessed. High doses of anti-GPC3 gamma delta T cells led to
complete suppression of tumor growth.
Figure 16. Dose-dependent inhibition of HepG2 tumor growth by anti-GPC3 gamma delta T cells
22
Future clinical candidates in solid tumors.
In addition to the product candidates described above, we anticipate many further opportunities for developing product candidates based on our
gamma delta T cell technology. We believe that the spectrum of indications that products such as CAR-T cell therapies have been able to address has been
limited by two factors: the weak ability of alpha beta T cell-based therapies to penetrate solid tumors, and the scarcity of tumor-specific antigens on the cell
surface that can be targeted by antibody-derived binding domains that are an essential component of the CAR constructs. We believe that the tumor homing
ability of our gamma delta T cell technology represents a potential solution to the solid tumor localization problem and our TCRL antibody technology can
be used to identify and target tumor-specific antigens.
The tumor recognition challenge
Therapeutics such as antibodies and CARs recognize cell surface molecules. In HCC and select other tumors, there are proteins such as GPC3 which
are selectively expressed on the surface of tumors cells that can be used as antigens for immune-targeted therapy. The lack of their expression on normal
cells limits the potential of on-target, off-tumor systemic toxicities. Surface-expressed proteins that are strictly expressed only on tumor cells are, however,
rare. In most cases surface expressed antigens such as CD19 and CD20 are expressed both on hematopoietic tumor and normal cells. Therapies that target
CD19 or CD20 therefore result in killing of both tumor and normal cells. In hematological malignancies these therapies result in systemic depletion of
normal B cells. However, this is mechanism-based toxicity can be managed in clinical practice. Challenges arise with antigens such as epidermal growth
factor receptor (EGFR) that is overexpressed on some types of tumor cells, but also expressed on normal epithelial cells elsewhere in the body. Dosing with
anti-EGFR antibodies has led to significant dermatological and cardiac toxicities.
Intracellular proteins represent nearly half of the proteins found in human cells. These proteins provide an untapped reservoir of potential tumor-
specific antigens that are inaccessible to traditional antibody-binding domains. Immune surveillance for these intracellular proteins is normally done by
alpha beta T cells. These intracellular proteins are chopped up by a cell component known as the proteasome into short peptides between eight and ten
amino acids long. These short peptides are then presented to the T cells by the MHC. TCRs on the T cells are then able to recognize the complex of the
peptide and the MHC, triggering creation of T cell populations prepared to attack these specific sequences.
Gamma delta T cells have advantages compared to alpha beta T cells with regard to their potential as allogeneic therapies, their ability to localize to
tumors and their retention of innate immune signaling pathways. However, to be most effective they need to be able to be engineered to attack specific
tumors.
Our solution, TCRLs
We have developed an antibody platform that enables the discovery of TCRL antibodies that recognize peptides that are presented on the cell surface
by specific MHC molecules. In effect, our TCRL antibodies have the same antigen recognition properties as TCRs but are highly specific for a single tumor
antigen and MHC molecule. They do not recognize other MHC molecules or antigens that may be expressed by healthy cells.
Figure 17. Schematic diagram of the interaction between our TCRL antibodies and tumor-specific peptides presented by the MHC.
23
TCRLs are conventional antibodies with antigen binding domains that specifically recognize peptide-MHC complexes that can be used to create
CARs. Introduction of these CARs into our gamma delta T cells enables them to target tumors expressing intracellular tumor antigens when these antigens
are selectively presented by MHC on the surface of tumor cells. Gamma delta CAR-T cells generated using TCRLs open up the potential to bring immune
cell therapy to tumors that lack tumor-specific surface antigens, a group that includes most solid tumors.
The TCRL discovery process starts by carrying out an analysis of the peptides expressed by MHC receptors in a panel of hundreds of tumor and
normal tissues. In searching for candidate peptides, we focus on differentially expressed peptides that are broadly expressed in tumors but that are not
found in normal tissues. Candidate peptides are then validated by expression analysis both in other tissues as well as in databases. Those peptides that,
based on bioinformatic analysis, are predicted to have minimal cross-reactivity with peptides from normal cells are then further prioritized. This peptide
discovery process leads, step-by-step, to the narrowing of the list of potential candidates by approximately one thousand-fold. Once a tractable number of
remaining candidates has been identified, a population that includes the most promising ones, antibodies are then created that are specific to the complex of
an MHC receptor and the bound peptides. These antibodies mimic key aspects of tumor as recognized by the immune system. By creating CARs that
incorporate these antigen-recognition templates in gamma delta T cell-based product candidates, we create a set of candidates designed to specifically
attack tumors by virtue of their intracellular proteins.
Tyrosinase is a well-validated tumor-expressed antigen for which we have developed TCRLs. The specificity for a mouse and a humanized version of
one of these TCRLs was determined by comparing their binding affinity to that of a series of peptides that contained single amino acid changes. It was
learned that changes to any of the internal eight amino acid positions to the amino acid alanine led to reductions in binding of 70% or greater. Substituting
any amino acid in a non-anchor position resulted in substantial loss of binding and indicates the high degree of specificity that the TCRL antibody has for
the targeted MHC peptide complex.
Figure 18. Single amino acid changes to the targeted peptide reduced binding by at least 70 percent.
The antigen-binding domain from a tyrosinase TCRL was incorporated into a CAR and introduced into our gamma delta T cells to assess cell killing
activity against tumor cell lines. These anti-Tyr CAR gamma delta T cells led to cell killing of WM266.4 human metastatic melanoma tumor cells, which
are known to express tyrosinase. Anti-Tyr CAR gamma delta T cells, however, had no cell killing activity when tested against ten other cell lines from
tumors such as colon, bladder and pancreatic cancers, B cell leukemia and retinoblastoma – all of which do not express tyrosinase. That observation points
to a desirable level of specificity for our anti-Tyr CAR gamma delta T cells and to an important in vitro proof of concept.
Furthermore, these anti-Tyr CAR gamma delta T cells had potent antitumor activity in a WM266.4 tumor model leading to tumor shrinkage within
five days of administration and a durable antitumor response through 27 days. Although the TCRL-based
24
CAR that is generated binds to an MHC-peptide complex, it does not induce the GvHD that is seen with alpha beta T cells because it recognizes a single
peptide that has been selected to be highly specific for tumor cells.
Figure 19. Anti-Tyr CAR gamma delta T cells showed potent antitumor activity in a WM266.4 melanoma model.
We have generated TCRLs against a number of solid tumor antigens which are being evaluating in animal models. We believe that the combination of
our gamma delta and TCRL technology provides the basis for a new generation of CAR-T cell therapies that have the potential to transform the treatment
of solid tumors.
Our Intellectual Property
Our gamma delta T cell-based product candidates and substantially all of our intellectual property have been developed by us, with certain antigen
binding domains derived from our collaboration with Regeneron. Additional intellectual portfolio assets were acquired in 2016 via acquisition of Applied
Immune Technologies Ltd. (AIT), which is now our wholly owned subsidiary, Adicet Bio Israel, Ltd. We strive to protect and enhance the proprietary
technology, inventions and improvements that are commercially material to our business, including seeking, maintaining and defending our patent rights.
Our policy is to develop and maintain protection of our proprietary position by, among other methods, filing or in-licensing United States and foreign
patents and applications related to our technology, inventions, and improvements that are material to the development and implementation of our business.
We also rely on trademarks, trade secrets, know-how, continuing technological innovation, confidentiality agreements, and invention assignment
agreements to develop and maintain our proprietary position.
Our patent portfolio includes protection for our lead product candidates, ADI-001 and ADI-002, as well as our other research-stage candidates. As of
February 23, 2022, there are multiple patent families comprising three pending United States non-provisional applications and over 30 corresponding
foreign patent applications pending in such jurisdictions as Australia, Canada, China, Europe, Japan, Russia, and South Africa with claims directed to
reagents and related protocols for gamma delta T cell expansion and resulting compositions of matter encompassing both ADI-001 and ADI-002, which, if
issued, are expected to expire between 2035 and 2038. The first U.S. non-provisional application in our original patent family recently granted as U.S.
Patent No. 11,135,245, expiring on May 19, 2038, and the pending U.S. non-provisional application in our second patent family stands allowed. As of
February 23, 2022, there are also two patent families comprising two U.S. non-provisional applications and over 25 corresponding foreign patent
applications pending in such jurisdictions as Australia, Canada, China, Europe, Israel, Japan, South Korea, Mexico, New Zealand, Russia, Singapore and
South Africa , with claims directed to CAR constructs and antigen binding domains relating to ADI-001 and ADI-002, as well as their methods of use for
certain indications, preconditioning methods, and dosing regimens, where applications claiming the benefit of these PCT applications, if issued, would
expire between 2038 and 2039. Additionally, we have one pending U.S. provisional application directed to certain methods of treatment using ADI-001,
and another pending U.S. provisional application directed to certain proprietary antibodies to GPC3 and methods of use thereof. With respect to ADI-001,
we have a collaboration with Regeneron which grants us access to certain proprietary antigen binding domains covered by Regeneron’s patent rights,
including in particular the antigen binding domain incorporated into ADI-001.
Additionally, there are multiple granted patents and pending patent applications in the United States and internationally directed to our TCRL platform
technology, with actual and, in the case of pending applications, anticipated expiration dates between 2021 and 2037. Although certain earlier patents
relating to our TCRL platform technology will expire in 2021, other patents covering this technology remain in force, or are expected to issue from pending
applications, including three pending patent families directed to certain carcinoma, melanoma and glioblastoma targets, are expected to expire between
2036 and 2037. As a result, we do not expect that the expiration of the earlier patents in our TCRL portfolio, individually or in the aggregate, will have a
material adverse effect on our future operations or financial position.
25
The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we
file, the patent term is 20 years from the date of filing of the first non-provisional application to which priority is claimed. In the U.S., patent term may be
lengthened by patent term adjustment, which compensates a patentee for administrative delays by the United States Patent and Trademark Office in
granting a patent or may be shortened if a patent is terminally disclaimed over an earlier-filed patent. In the U.S., the term of a patent that covers an FDA-
approved drug may also be eligible for a patent term extension of up to five years under the Hatch-Waxman Act, which is designed to compensate for the
patent term lost during the FDA regulatory review process. The length of the patent term extension involves a complex calculation based on the length of
time it takes for regulatory review. A patent term extension under the Hatch-Waxman Act cannot extend the remaining term of a patent beyond a total of 14
years from the date of product approval and only one patent applicable to an approved drug may be extended. Moreover, a patent can only be extended
once, and thus, if a single patent is applicable to multiple products, it can only be extended based on one product. Similar provisions are available in Europe
and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug.
Our commercial success depends in part on our ability to obtain and maintain proprietary protection for our product candidates, as well as novel
discoveries, core technologies, and know-how, as well as our ability to operate without infringing on the proprietary rights of others and to prevent others
from infringing our proprietary rights.
The patent positions of companies like us are generally uncertain and involve complex legal, scientific, and factual questions. In addition, the
coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance.
Consequently, we do not know whether any of our product candidates will be protectable or remain protected by enforceable patents or will be
commercially useful in protecting our commercial products and methods of using and manufacturing the same. We also cannot predict whether the patent
applications it is currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient
proprietary protection from competitors. Any patents that we hold or control may be challenged, circumvented or invalidated by third parties. In addition,
while we have confidence in our agreements and security measures, either may be breached, and we may not have adequate remedies. Further, our trade
secrets may otherwise become known or independently discovered by competitors.
We have licensed various intellectual property and trade secrets to third parties for purposes of collaboration, product development and research and
development.
Strategic Agreements
License and Collaboration Agreement with Regeneron
On July 29, 2016, our wholly owned subsidiary, Adicet Therapeutics, Inc. (Former Adicet), entered into a license and collaboration agreement with
Regeneron, which was amended in April 2019, with such amendment becoming effective in connection with Regeneron’s investment in Former Adicet's
Series B preferred stock financing transaction in July 2019 (as amended, referred to as the Regeneron Agreement) when Former Adicet was an early-stage,
privately held company.
Agreement Structure. The Regeneron Agreement has two principal components: (a) a research collaboration component under which the parties will
research, develop, and commercialize next-generation engineered gamma delta immune cell therapeutics (ICPs) namely engineered gamma delta immune
cells with CARs and TCRs directed to disease-specific cell surface antigens, which includes the grant of certain licenses to intellectual property between
the two parties, and (b) for a certain period following the effective date, a license to us to use certain of Regeneron’s proprietary mice to develop and
commercialize ICPs generated by us, with certain limitations relating to targets under the Regeneron Agreement.
Research Collaboration. Research activities under the collaboration are governed by research plans, which include the strategy, goals, activities, and
responsibilities of the parties with respect to a target. We are primarily responsible for generating, validating, and optimizing ICPs, developing processes
for manufacture of ICPs, and certain preclinical and clinical manufacturing activities for ICP’s; Regeneron’s key responsibility is generating, validating,
and optimizing CARs and TCRs that bind to the applicable target. The parties have formed a joint research committee to monitor and govern the research
and development efforts during the research program term.
Rights to Research Targets. Under the terms of the collaboration, the parties will conduct research on mutually agreed upon targets. Regeneron may
obtain exclusive rights for the targets that it chooses in accordance with the target selection mechanism set forth in the Regeneron Agreement, and we
similarly may obtain exclusive rights for targets it chooses in accordance with such target selection mechanism. We have the right to develop and
commercialize ICPs to the first collaboration target to come out of the research program. On January 28, 2022, we received a payment of $20 million from
Regeneron for exercise of its option to license exclusive rights to ADI-002 and Regeneron potentially has additional options to other ICP targets under the
Regeneron Agreement. For those targets it does not have an option to license, Regeneron has a right of first negotiation for up to two targets. Regeneron
has the right to terminate the research program in its entirety (a) for convenience on six months prior written notice given at any time after December 31,
2019, or (b) following a change of control (as defined in the Regeneron Agreement) of us. The parties mutually agreed to their first product declaration
criteria for collaboration ICP, CD20, in 2018.
26
Rights to Adicet-Developed Targets. Regeneron has an exclusive license to use targeting moieties generated by us by its use of Regeneron’s
proprietary mice to develop and commercialize non-ICPs.
Exclusivity. During the five-year target selection period that expired in July 2021, we were not permitted to directly or indirectly research, develop,
manufacture or commercialize an ICP, or grant a license to do the foregoing, except pursuant to the Regeneron Agreement. For so long as either party is
researching or developing an ICP to a target under the research program, neither party may research, develop, manufacture or commercialize any other ICP
to such target, or grant a license to do the foregoing. And for so long as a party is researching, developing or commercializing an ICP to target that is
licensed to it (and royalty bearing) under the agreement, neither party may research, develop, manufacture or commercialize any other ICP to such target,
or grant a license to permit another party to do the foregoing. These exclusivity obligations are limited to engineered gamma delta immune cells to targets
reasonably considered to have therapeutic relevance in oncology. The Regeneron Agreement includes certain exceptions to the exclusivity obligations of
the parties, including with respect to targets that are rejected by one party in the target selection process, as well as protections in the event of a change of
control of a party where the acquirer has a competing program.
Co-Funding and Profit Sharing. We have an option to co-fund specified portions of the future development costs for, and to co-promote, ICPs to a
target for which Regeneron has exercised an option, and to participate in the profits for such target. We have the right to exercise this right in various
geographic regions, including on a worldwide basis. In the event we exercise such right, the parties will share further development costs and profits
proportionally to their co-funding percentages.
Financial Terms. We received a non-refundable upfront payment of $25.0 million from Regeneron upon execution of the Regeneron Agreement and
received an aggregate of $20.0 million of additional payments for research funding from Regeneron as of December 31, 2021. On January 28, 2022, we
received payment of $20.0 million from Regeneron for exercise of its option to license exclusive rights to ADI-002. Regeneron has additional options to
other ICP targets under the Regeneron Agreement which may entitle us to exercise fees of up to an aggregate of $80.0 million. For each collaboration ICP,
we have a specified period of time to elect to co-fund the future development costs and participate in any potential profits with Regeneron up to a specified
co-funding percentage in various geographic regions. If we do not exercise our right to co-fund the development of such collaboration ICPs, Regeneron
must also pay us high single digit royalties as a percentage of net sales for ICPs to targets for which it has exclusive rights, and low single digit royalties as
a percentage of net sales on any non-ICP product comprising a targeting moiety generated by us through the use of Regeneron’s proprietary mice. We
elected not to exercise our option to co-fund the development of ADI-002. Additionally, under the Regeneron Agreement, we must pay Regeneron mid-
single to low double digit, but less than teens, of royalties as a percentage of net sales of ICPs to targets for which we have exercised exclusive rights, and
low to mid-single digit of royalties as a percentage of net sales of targeting moieties generated from our license to use Regeneron’s proprietary mice.
Royalties are payable until the longer of the expiration or invalidity of the licensed patent rights or twelve (12) years from first commercial sale.
Other Terms. The Regeneron Agreement contains customary representations, warranties and covenants by us and Regeneron and includes (i) an
obligation of ours to use commercially reasonable efforts to develop and commercialize at least one product based on a collaboration ICP that is not an
optioned collaboration ICP for each collaboration target and (ii) an obligation of Regeneron to use commercially reasonable efforts to develop and
commercialize at least one product based on an optioned collaboration ICP for each collaboration target. We and Regeneron are required to indemnify the
other party against all losses and expenses related to breaches of the representations, warranties and covenants under the Regeneron Agreement.
Term and Termination. The term of the Regeneron Agreement expires, on a product-by-product basis, on the expiration of the obligation to pay
royalties for such product. The Regeneron Agreement is subject to early termination by either party upon uncured material breach by the other party. The
licenses to develop and commercialize an ICP to a target that one party has exclusively licensed may be terminated by such party for convenience.
Equity Investments. In connection with the collaboration, Regeneron and we entered into a side letter pursuant to which, among other matters,
Regeneron was granted certain stockholder rights and investment rights in connection with our next equity financing that met certain criteria and in
connection with an initial public offering by us. Regeneron exercised its investment right and purchased approximately $10.0 million of our Series B
preferred stock in a private placement transaction in July 2019.
License Agreement with TRDF
We and our wholly owned subsidiary, Adicet Bio Israel, Ltd. (formerly AIT), are parties to an Amended and Restated License Agreement dated May
21, 2014, as was amended in June 2015 and January 2016, with Technion Research and Development Foundation Ltd. (TRDF) the technology transfer
subsidiary of Technion – Israel Institute of Technology (Technion). The license agreement provides us with an exclusive, royalty-bearing, worldwide
license, with a right to grant sublicenses, to make use of certain TRDF patents and know-how relating to moieties that recognize and bind to TCRLs, along
with certain improvements and research results developed at TRDF and relating to either the licensed patents and know-how of TCRL, in each case for the
purposes of research, development, and commercialization of specified products. We further obtained joint ownership rights in improvements,
developments, and inventions developed in the laboratory of a specified professor under certain conditions, including where we provided specified amounts
of funding for research specific to TCRL compounds. TRDF
27
also grants us an exclusive, worldwide, assignable, sublicensable license to TRDF’s rights in such jointly owned improvements, developments, and
inventions. Technion further agrees not to enforce against us any TCRL-related technology owned by Technion but not licensed to us under the agreement,
and to require its licensees to agree to the same. We are required to meet certain diligence obligations to preserve our exclusive licenses. Either Adicet or
Technion may terminate the agreement or a specific license if the other party materially breaches its obligations under the agreement or with respect to a
specific license granted under it and fails to cure that breach. We have the right to terminate the agreement at any time by providing notice to TRDF.
In return for the license, We are required to pay TRDF, for ten (10) years after the first commercial sale of a product for which it owes royalties under
the agreement, on a licensed-product-by-licensed-product basis, (i) certain royalties in the low single-digit percentages of all net sales by us and any of our
controlled affiliates, and (ii) the lesser of (a) a low single-digit percentage of net sales of our sublicensees, or (b) low double-digit percentage of amounts
received by us or our controlled affiliates in the form of royalties on net sales from our sublicensees, subject to certain reductions. Furthermore, we agreed
to pay for all patent filing and maintenance expenses for the patents included in the licenses granted to us by TRDF, with limited exceptions.
Under the agreement, TRDF reserves the right, for itself, alone or with other certain academic institutions, to utilize the licensed technology solely for
educational and non-commercial research purposes.
The license agreement continues in full force and effect on a product-by-product and country-by-country basis until the expiration of all payment
obligations for any licensed product as described above. Upon the expiration, we will have a fully paid-up, worldwide, non-exclusive license (with the right
to grant sublicenses) to develop, have developed, manufacture, have manufactured, use, market, offer for sale, sell, have sold, import, export, and otherwise
transfer physical possession or title to products for which royalties would have otherwise been due under the agreement.
Manufacturing
We are developing and enabling scalable and propriety cGMP-compliant manufacturing processes. We have invested resources to optimize our
manufacturing process and plans to continue to invest to continuously improve our production and supply chain capabilities over time.
We manufacture cell-based immunotherapy products based on gamma delta T cells obtained from the blood of donors who are unrelated to the
patients that will be treated. These products are classed as allogeneic cell therapy products. Donor-derived blood is fractionated and the fractions containing
gamma delta T cells are frozen prior to use in future manufacturing campaigns. We believe that our freezing and storing of the donor blood products allows
us to efficiently schedule subsequent manufacturing steps. After obtaining blood products from unrelated donors the manufacturing process begins with the
activation of a subpopulation of gamma delta T cells using an antibody that is proprietary to us. This antibody, in combination with other factors including
the cytokine, IL-2, induces gamma delta T cells to proliferate, whereupon we expose the cells to a viral vector that transfers a gene sequence encoding a
CAR, or other gene sequences, to the proliferating cells. This step is referred to as the transduction step. Following the transduction step gamma delta T
cells are induced to proliferate further with IL-2 before an enrichment step that increases the proportion of gamma delta T cells, removes unwanted residual
alpha beta T cells and results in the CAR-modified gamma delta T cells drug product. CAR-modified gamma delta T cell products are then frozen in single-
use vials for long-term storage at cryogenic temperatures. These storage conditions are designed to ensure stability of the cell-based drug products for
protracted periods of time. The storage in singe use vials is designed to simplify the handling and treatment administration. Just prior to administration of
treatment, the vials will be thawed and then the contents infused into the patient. We believe that the single manufacturing process we are developing will
be able to be completed in approximately two weeks and will result in sufficient quantities of drug product to treat numerous patients.
To date, we currently rely, and expects to continue to rely, on third parties for the manufacture of our product candidates and any products that we may
develop. We have chosen to partner with a number of CMOs in the United States and Europe to access specific capabilities to ensure that the manufacturing
process is highly scalable, closed and fully cGMP compliant. This strategy allows us to maintain a more flexible infrastructure while focusing our expertise
on developing our products. In addition to the quality management systems utilized by strategic manufacturing partners, we have established a quality
control and quality assurance program, which includes a set of standard operating procedures and specifications designed to ensure that our products are
manufactured in accordance with cGMPs, and other applicable domestic and foreign regulations.
For example, we currently engage a single US-based third-party manufacturer to provide the active pharmaceutical ingredient for ADI-001. We also
utilize separate third party contractors to manufacture cGMP-compliant starting and critical materials that are used for the manufacturing of our product
candidates, such as donor blood products, gamma delta T cell activating antibody and viral vectors that are used to deliver the applicable CAR gene into the
T cells. We believe all materials and components utilized in the production of the cell line, viral vector and final gamma delta T cell product are available
from qualified suppliers and suitable for pivotal process development in readiness for registration and commercialization. Going forward, we intend to
continue to expand our manufacturing capability through agreements with leading cell therapy CMOs.
28
If any of our current manufacturers becomes unavailable to us for any reason, we believe that there are a number of potential replacements, although
we would likely incur some delay in identifying and qualifying such replacements. We plan to continue to create a robust supply chain with redundant
sources of supply comprised of both internal and external infrastructure.
Competition
The pharmaceutical and biotechnology industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on
proprietary products. We face potential competition from many different sources, including existing and novel therapies developed by biopharmaceutical
companies, academic research institutions, governmental agencies and public and private research institutions, in addition to standard of care treatments.
Novartis and Kite Pharma (now Gilead) were the first to achieve FDA approval for autologous T cell therapies. In August 2017, Novartis obtained
FDA approval to commercialize Kymriah®, for the treatment of children and young adults with B-cell acute lymphoblastic leukemia (ALL) that is
refractory or has relapsed at least twice. In May 2018, Kymriah® received FDA approval for adults with relapsed or refractory (R/R) large B-cell
lymphoma. In October 2017, Kite Pharma obtained FDA approval to commercialize Yescarta®, the first CAR T cell product candidate for the treatment of
adult patients with R/R large B-cell lymphoma. In July 2020, Gilead obtained FDA approval to commercialize Tecartus™, the first CAR T cell product
candidate for the treatment of adult patients with R/R MCL. In February 2021, Bristol Myers Squibb obtained FDA approval to commercialize Breyanzi®
for the treatment of adults with R/R large B-cell lymphoma.
Due to the promising therapeutic effect of T cell therapies in clinical trials, we anticipate increasing competition from existing and new companies
developing these therapies, as well as in the development of allogeneic T cell therapies generally. Potential T cell therapy competitors include, but are not
limited to:
•
•
Allogeneic T cell therapy competition: Atara Biotherapeutics, Inc., Allogene Therapeutics, Inc., Cellectis, S.A., Celyad S.A., CRISPR
Therapeutics AG, Editas Medicine, Inc., Fate Therapeutics Inc., Gilead Sciences, Inc., Intellia Therapeutics, Inc., Poseida Therapeutics, Inc.,
Precision Biosciences, Inc., Immatics Biotechnologies GmbH, GammaDelta Therapeutics Limited, TC BioPharm Limited, Incysus Therapeutics,
Inc. and Gadeta BV.
Autologous T cell therapy competition: Adaptimmune Therapeutics PLC, Autolus Therapeutics plc, bluebird bio, Inc., Bristol-Myers Squibb
Company, Gilead Sciences, Inc., Johnson & Johnson, Iovance Biotherapeutics, Inc., Mustang Bio, Inc., Novartis International AG, TCR²
Therapeutics Inc. and Tmunity Therapeutics, Inc.
Although we believe our development of proprietary processes for engineering and manufacturing gamma delta T cells expressing CARs is unique
due to what we believe is the enormous potential of these cells, it is likely that additional competition may arise from existing companies currently focusing
on development of alpha beta or gamma delta T cell therapies, or from new entrants in the field.
Competition may also arise from non-cell based immune oncology platforms. For instance, we may experience competition from companies, such as
Amgen Inc., Bristol-Myers Squibb Company, F. Hoffmann-La Roche AG, Genmab A/S, GlaxoSmithKline plc, MacroGenics, Inc., Merus N.V., Regeneron
Pharmaceuticals, Inc., and Xencor Inc., that are pursuing bispecific antibodies, which target both the cancer antigen and T cell receptor, thus bringing both
cancer cells and T cells in close proximity to maximize the likelihood of an immune response to the cancer cells. Additionally, companies, such as Amgen
Inc., AbbVie, Daiichi Sankyo Company, Limited, GlaxoSmithKline plc, ImmunoGen, Inc., Immunomedics, Inc., and Seattle Genetics, Inc., are pursuing
antibody drug conjugates, which utilize the targeting ability of antibodies to deliver cell-killing agents directly to cancer cells.
Many of our competitors, either alone or with their collaboration partners, have significantly greater financial resources and expertise in research and
development, preclinical testing, clinical trials, manufacturing, and marketing than we do. Future collaborations and mergers and acquisitions may result in
further resource concentration among a smaller number of competitors.
Our commercial potential could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have
fewer or less severe side effects, are more convenient or are less expensive than products that we may develop. Our competitors also may obtain FDA or
other regulatory approval for their products more rapidly than we may obtain approval for our own products, which could result in our competitors
establishing a strong market position before we are able to enter the market or make our development more complicated. The key competitive factors
affecting the success of all of our programs are likely to be efficacy, safety and tolerability profile, convenience, price, reimbursement and cost of
manufacturing.
These competitors may also vie for a similar pool of qualified scientific and management talent, sites and patient populations for clinical trials, and
investor capital, as well as for technologies complementary to, or necessary for, our programs.
29
Government Regulation and Product Approval
As a biopharmaceutical company that operates in the United States, we are subject to extensive regulation. Our cell products will be regulated as
biologics. With this classification, commercial production of our products will need to occur in registered facilities in compliance with cGMP for biologics.
The FDA categorizes human cell- or tissue-based products as either minimally manipulated or more than minimally manipulated and has determined that
more than minimally manipulated products require clinical trials to demonstrate product safety and efficacy and the submission of a Biologics License
Application (BLA) to the FDA for marketing authorization. Our products are considered more than minimally manipulated and will require evaluation in
clinical trials and the submission and approval of a BLA before we can market them. Generally, before a new drug or biologic can be marketed,
considerable data demonstrating our quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted
for review and approved by the regulatory authority.
Government authorities in the United States (at the federal, state, and local level) and in other countries extensively regulate, among other things, the
research, development, testing, manufacturing, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution,
post-approval monitoring and reporting, marketing and export and import of biopharmaceutical products such as those we are developing. Our product
candidates must be approved by the FDA before they may be legally marketed in the United States and by the appropriate foreign regulatory agency before
they may be legally marketed in foreign countries. Generally, our activities in other countries will be subject to regulation that is similar in nature and scope
as that imposed in the U.S., although there can be important differences. Additionally, some significant aspects of regulation in Europe are addressed in a
centralized way but country-specific regulation remains essential in many respects. The process for obtaining regulatory marketing approvals and the
subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial
resources.
United States Product Development Process
In the U.S., the FDA regulates pharmaceutical and biological products under the Federal Food, Drug and Cosmetic Act (the FDCA), the Public Health
Service Act (the PHSA), and their implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with
appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply
with the applicable United States requirements at any time during the product development process, approval process or after approval, may subject an
applicant to administrative or judicial sanctions. FDA sanctions could include, among other actions, refusal to approve pending applications, withdrawal of
an approval, a clinical hold, warning letters, product recalls or withdrawals from the market, product seizures, total or partial suspension of production or
distribution injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement
action could have a material adverse effect on us. The process required by the FDA before a biological product may be marketed in the United States
generally involves the following:
•
•
•
•
•
•
•
•
completion of nonclinical laboratory tests and key animal studies according to good laboratory practices (GLPs), and applicable requirements for
the humane use of laboratory animals or other applicable regulations;
submission to the FDA of an IND application, which is subject to a waiting period of thirty (30) calendar days, must become effective before
human clinical trials may begin;
approval by an independent Institutional Review Board (IRB) or ethics committee for each clinical site before the trial is commenced;
performance of adequate and well-controlled human clinical trials according to the FDA’s regulations commonly referred to as good clinical
practices (GCPs) and any additional requirements for the protection of human research patients and their health information, to establish the
safety and efficacy of the proposed biological product for our intended use;
submission to the FDA of a BLA for marketing approval that includes substantial evidence of safety, purity, and potency from results of
nonclinical testing and clinical trials;
satisfactory completion of an FDA Advisory Committee review, if applicable;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced to assess
compliance with cGMP, to assure that the facilities, methods and controls are adequate to preserve the biological product’s identity, strength,
quality and purity and, if applicable, the FDA’s current good tissue practices (GTPs) for the use of human cellular and tissue products;
potential FDA audit of the nonclinical study and clinical trial sites that generated the data in support of the BLA; and
30
•
FDA review and approval, or licensure, of the BLA prior to any commercial marketing or sale of the biologic in the U.S.
Before testing any biological product candidate, including our product candidates, in humans, the product candidate enters the preclinical testing
stage. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as
animal studies to assess the potential safety and activity of the product candidate. The conduct of the key preclinical tests must comply with federal
regulations and requirements including GLPs. An IND is a request for authorization from the FDA to administer an investigational product to humans and
must become effective before human clinical trials may begin. The clinical trial sponsor must submit the results of the preclinical tests, together with
manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. Some
preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective thirty (30) days after receipt by the FDA, unless
the FDA raises concerns or questions regarding the proposed clinical trials and requests additional information and or places the trial on a clinical hold
within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The
FDA may also impose clinical holds on a biological product candidate at any time before or during clinical trials due to safety concerns or non-compliance.
If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under terms authorized by the FDA. Accordingly,
we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that, once begun, issues will not arise that suspend
or terminate such trials.
Clinical trials involve the administration of the biological product candidate to patients under the supervision of qualified investigators at independent
clinical sites/hospitals, physicians not employed by or under the trial sponsor’s control. Clinical trials are conducted under protocols detailing, among other
things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject
safety, including stopping rules that assure a clinical trial will be stopped if certain adverse events should occur. Each protocol and any amendments to the
protocol must be submitted to the FDA as part of the IND. Clinical trials must be conducted and monitored in accordance with the FDA’s regulations
comprising the GCP requirements, including the requirement that all research patients provide informed consent. Further, each clinical trial must be
reviewed and approved by an independent institutional review board (IRB) at or servicing each institution at which the clinical trial will be conducted. An
IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the
clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that
must be signed by each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed. Some studies also include
oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides
authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the
clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also
requirements governing the reporting of ongoing clinical studies and clinical study results to public registries.
A sponsor who wishes to conduct a clinical trial outside of the United States may, but need not, obtain FDA authorization to conduct the clinical trial
under an IND. If a foreign clinical trial is not conducted under an IND, the sponsor may submit data from the clinical trial to the FDA in support of a BLA.
A clinical trial outside the United States may also be conducted under the authorization of similar regulatory authorities of the country/region. The FDA
will accept a well-designed and well-conducted foreign clinical study not conducted under an IND if the study was conducted in accordance with GCP
requirements, and the FDA is able to validate the data through an onsite inspection if deemed necessary.
Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
•
•
•
Phase 1. The biological product is typically introduced into healthy human subjects and tested for safety. However, in the case of some products
for severe or life-threatening diseases, such as cancer or the hematological malignancies that we aspire to treat, initial human testing is routinely
conducted directly in ill patients with the approval of relevant ethics committee(s) under the supervision of a licensed physician.
Phase 2. The biological product is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily
evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule.
Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient population at
geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk to benefit ratio of the product and
provide an adequate basis for product labeling.
Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These clinical trials
are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up. In
case of an accelerated BLA approval based on limited clinical data, FDA may mandate a Phase 4 clinical trial prior to full approval. During all phases of
clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinical trial investigators.
Annual progress
31
reports detailing the results of the clinical trials must be submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA, and the
investigators for serious and unexpected adverse events, any findings from other studies, tests in laboratory animals or in vitro testing that suggest a
significant risk for human patients, or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or
investigator brochure. The sponsor must submit an IND safety report within fifteen (15) calendar days after the sponsor determines that the information
qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven (7)
calendar days after the sponsor’s initial receipt of the information.
Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor or its data
safety monitoring board may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research patients are being
exposed to an unacceptable health risk, including risks inferred from other unrelated immunotherapy trials. Similarly, an IRB can suspend or terminate
approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the biological product
has been associated with unexpected serious harm to patients.
Concurrently with clinical trials, companies usually complete additional studies and must also develop additional information about the physical
characteristics of the biological product as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP
requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHSA emphasizes the importance of
manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing
quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency and
purity of the final biological product according to the requirements of the phase of clinical development. Additionally, appropriate packaging must be
selected and tested, and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable
deterioration over its shelf life.
Further, as a result of the ongoing COVID-19 pandemic, the extent and length of which is uncertain, we will be required to develop and implement
additional clinical study policies and procedures designed to help protect study participants from the COVID-19 virus, which may include using
telemedicine visits and remote monitoring of patients and clinical sites. We will also need to ensure data from our clinical studies that may be disrupted as a
result of the pandemic is collected pursuant to the study protocol and is consistent with GCPs, with any material protocol deviation reviewed and approved
by the site IRB. Patients who may miss scheduled appointments, any interruption in study drug supply, or other consequence that may result in incomplete
data being generated during a study as a result of the pandemic must be adequately documented and justified. For example, on March 18, 2020, the FDA
issued a guidance on conducting clinical trials during the pandemic, which describes a number of considerations for sponsors of clinical trials impacted by
the pandemic, including the requirement to include in the clinical study report (or as a separate document) contingency measures implemented to manage
the study, and any disruption of the study as a result of COVID-19; a list of all study participants affected by COVID-19-related study disruption by unique
subject identifier and by investigational site, and a description of how the individual’s participation was altered; and analyses and corresponding
discussions that address the impact of implemented contingency measures (e.g., participant discontinuation from investigational product and/or study,
alternative procedures used to collect critical safety and/or efficacy data) on the safety and efficacy results reported for the study. The FDA has continued to
update and revise its guidance for ongoing clinical trials throughout the COVID-19 public health emergency.
United States Review and Approval Processes
After the completion of clinical trials of a biological product, FDA approval of a BLA must be obtained before commercial marketing of the
biological product. The BLA submission must include results of product safety, efficacy, development, laboratory and animal studies, human trials,
information on the manufacture and composition of the product, proposed labeling and other relevant information. The testing and approval processes
require substantial time and effort and there can be no assurance or guarantee that the FDA will accept the BLA for filing and, even if filed, that any
approval will be granted on a timely basis, if at all.
Under the Prescription Drug User Fee Act (PDUFA), as amended, each BLA must be accompanied by a significant user fee. The FDA adjusts the
PDUFA user fees on an annual basis. PDUFA also imposes an annual program fee for biological products. Fee waivers or reductions are available in certain
circumstances, including a waiver of the application fee for the first application filed by a small business. Additionally, no user fees are assessed on BLAs
for products designated as orphan drugs, unless the product also includes a non-orphan indication.
Within 60 or 74 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before
the agency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and
may request additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject
to review before the FDA accepts it for filing. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has 10 months from the filing
date to complete its initial review of an original BLA and respond to the applicant, and six months from the filing date of an original BLA
32
designated for priority review. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs, and the review process is often
extended by FDA requests for additional information or clarification.
Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA. The FDA reviews the BLA to determine,
among other things, whether the proposed product is safe, potent, and/or effective for its intended use, and has an acceptable purity profile, and whether the
product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, safety, strength, quality, potency and purity. The
FDA may refer applications for novel biological products or biological products that present difficult questions of safety or efficacy to an advisory
committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be
approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations
carefully when making decisions.
During the biological product approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy (REMS) is necessary
to assure the safe use of the biological product. A REMS is a safety strategy to manage a known or potential serious risk associated with a medicine 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. If the FDA concludes a
REMS is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will not approve a BLA without a REMS, if required. Both Kymriah®
and Yescarta® were approved with a REMS.
Before approving a BLA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product 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. For cellular immunotherapy products, the FDA also will not approve the product if the manufacturer is not in
compliance with current good tissues practices (cGTP), to the extent applicable. These are FDA regulations and guidance documents that in part govern the
methods used in, and the facilities and controls used for, the manufacture of human cells, tissue, and HCT/Ps, which are human cells or tissue intended for
implantation, transplant, infusion, or transfer into a human recipient. The primary intent of the GTP requirements is to ensure that cell and tissue-based
products are manufactured in a manner designed to prevent the introduction, transmission and spread of communicable disease. FDA regulations also
require tissue establishments to register and list their HCT/Ps with the FDA and, when applicable, to evaluate donors through screening and testing.
Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure that the clinical trials were conducted in
compliance with IND trial requirements and GCP requirements. To assure cGMP, GTP and GCP compliance, an applicant must incur significant
expenditure of time, money and effort in the areas of training, record keeping, production, and quality control.
Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria
for approval and deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret
the same data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete response letter that describes all of the
specific deficiencies in the BLA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for
example, requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that the applicant might take to
place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the BLA, addressing all of the
deficiencies identified in the letter, or withdraw the application.
If a product receives regulatory approval, the approval may be limited to specific diseases and dosages or the indications for use may otherwise be
limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be
included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a risk
management plan, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical trials, sometimes referred to as
Phase 4 clinical trials, designed to further assess a biological product’s safety and effectiveness, and testing and surveillance programs to monitor the safety
of approved products that have been commercialized.
Pediatric Information
In addition, under the Pediatric Research Equity Act, a BLA or supplement to a BLA must contain data to assess the safety and effectiveness of the
product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for
which the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. A sponsor who is planning to submit
a marketing application for a drug that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of
administration must submit an initial Pediatric Study Plan (PSP), within sixty (60) days of an end-of-Phase 2 meeting or, if there is no such meeting, as
early as practicable before the initiation of the Phase 3 or Phase 2/3 study. The initial PSP must include an outline of the pediatric study or studies that the
sponsor plans to conduct, including study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including
such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from
pediatric studies along with supporting information. The FDA and the sponsor must reach an agreement on the PSP. A sponsor can submit amendments to
an agreed-upon initial PSP at any
33
time if changes to the pediatric plan need to be considered based on data collected from preclinical studies, early phase clinical trials and/or other clinical
development programs.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which is
generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the United States and for which
there is no reasonable expectation that the cost of developing and making available in the United States a drug or biologic for this type of disease or
condition will be recovered from sales in the United States for that drug or biologic. Orphan drug designation must be requested before submitting a BLA.
After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.
The orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review or approval process.
If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the
product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the
same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan
drug exclusivity. Orphan drug exclusivity does not prevent FDA from approving a different drug or biologic for the same disease or condition, or the same
drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver
of the BLA application user fee.
A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received
orphan designation. In addition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was
materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or
condition.
Expedited Development and Review Programs
FDA provides programs intended to facilitate and expedite development and review of new products that are intended to address an unmet medical
need in the treatment of a serious or life-threatening disease or condition. These programs are referred to as fast track designation, priority review
designation, accelerated approval, Regenerative Medicine Advanced Therapy (RMAT) designation, and breakthrough therapy designation.
The fast track program is intended to expedite or facilitate the process for reviewing new products that meet certain criteria. Specifically, new products
are eligible for fast track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address
unmet medical needs for the disease or condition. Fast track designation applies to the combination of the product and the specific indication for which it is
being studied. The FDA may consider for review sections of the BLA on a rolling basis before the complete application is submitted, if the sponsor
provides a schedule for the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and determines that the schedule is
acceptable, and the sponsor pays any required user fees upon submission of the first section of the BLA.
Any product submitted to the FDA for approval, including a product with a fast track designation, may also be eligible for other types of FDA
programs intended to expedite development and review, such as priority review and accelerated approval. A product is eligible for priority review if it has
the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis
or prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a new
product designated for priority review in an effort to facilitate the review. Additionally, a product may be eligible for accelerated approval. Products studied
for their safety and effectiveness in treating serious or life-threatening diseases or conditions may receive accelerated approval upon a determination that
the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier
than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking
into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA
may require that a sponsor of a drug or biological product receiving accelerated approval perform adequate and well-controlled post-marketing clinical
studies. In addition, for products being considered for accelerated approval, the FDA generally requires, unless otherwise informed by the agency, that all
advertising and promotional materials intended for dissemination or publication within 120 days of marketing approval be submitted to the agency for
review during the pre-approval review period, which could adversely impact the timing of the commercial launch of the product.
Regenerative Medicine Advanced Therapy (RMAT), designation was established by the FDA in 2017 to facilitate an efficient development program
for, and expedite review of, any drug that meets the following criteria: (1) it qualifies as a RMAT, which is defined as a cell therapy, therapeutic tissue
engineering product, human cell and tissue product, or any combination product using such therapies or products, with limited exceptions; (2) it is intended
to treat, modify, reverse, or cure a serious or life-threatening disease or condition; and (3) preliminary clinical evidence indicates that the drug has the
potential to address unmet medical needs for such a disease or condition. RMAT designation provides potential benefits that include more frequent
34
meetings with FDA to discuss the development plan for the product candidate and eligibility for rolling review and priority review. Products granted
RMAT designation may also be eligible for accelerated approval on the basis of a surrogate or intermediate endpoint reasonably likely to predict long-term
clinical benefit, or reliance upon data obtained from a meaningful number of sites, including through expansion to additional sites. Once approved, when
appropriate, the FDA can permit fulfillment of post-approval requirements under accelerated approval through the submission of clinical evidence, clinical
studies, patient registries, or other sources of real world evidence such as electronic health records; through the collection of larger confirmatory datasets;
or through post-approval monitoring of all patients treated with the therapy prior to approval.
Breakthrough therapy designation is also intended to expedite the development and review of products that treat serious or life-threatening conditions.
The designation by FDA requires preliminary clinical evidence that a product candidate, alone or in combination with other drugs and biologics,
demonstrates substantial improvement over currently available therapy on one or more clinically significant endpoints, such as substantial treatment effects
observed early in clinical development. Breakthrough therapy designation comes with all of the benefits of fast track designation, which means that the
sponsor may file sections of the BLA for review on a rolling basis if certain conditions are satisfied, including an agreement with FDA on the proposed
schedule for submission of portions of the application and the payment of applicable user fees before the FDA may initiate a review.
Fast Track designation, priority review, RMAT and breakthrough therapy designation do not change the standards for approval but may expedite the
development or regulatory approval process for our products.
Post-Approval Requirements
Any products for which we receive FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping
requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and
distribution requirements, and complying with FDA promotion and advertising requirements, which include, among others, standards for direct-to-
consumer advertising, restrictions on promoting products for uses or in patient populations that are not described in the product’s approved uses (known as
off-label use), limitations on industry-sponsored scientific and educational activities, and requirements for promotional activities involving the internet.
Although a physician may prescribe a legally available product for an off-label use, if the physician deems such product to be appropriate in his/her
professional medical judgment, a manufacturer may not market or promote off-label uses. However, it is permissible to share in certain circumstances
truthful and not misleading information that is consistent with the product’s approved labeling.
Further, additional FDA limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of
products. Product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following initial marketing. Newly
discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and
contraindications, and may also require the implementation of other risk management measures, including a REMS, or the conduct of post-marketing
studies to assess a newly discovered safety issue.
In addition, quality control and manufacturing procedures must continue to conform to applicable manufacturing requirements after approval to ensure
the adequate stability of the product. cGMP regulations require among other things, quality control and quality assurance as well as the corresponding
maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and other entities
involved in the manufacture and distribution of approved products 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 and other laws. Accordingly,
manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. Discovery of
problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including, among other things,
recall or withdrawal of the product from the market. In addition, changes to the manufacturing process are strictly regulated, and depending on the
significance of the change, may require prior FDA approval before being implemented. Other types of changes to the approved product, such as adding
new indications and claims, are also subject to further FDA review and approval.
We rely, and expect to continue to rely, on third parties to produce clinical and commercial quantities of our products in accordance with cGMP
regulations. These manufacturers must comply with cGMP regulations that require, among other things, quality control and quality assurance, the
maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and other entities
involved in the manufacture and distribution of approved biologics 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 requirements and other laws.
The FDA also may require post-marketing testing, known as Phase 4 testing, and surveillance to monitor the effects of an approved product.
Discovery of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative consequences,
including adverse publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising or communications with
doctors, and civil or criminal penalties, among
35
others. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new
warnings and contraindications, and also may require the implementation of other risk management measures. Also, new government requirements,
including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of
our products under development.
U.S. Marketing Exclusivity
The Biologics Price Competition and Innovation Act of 2009 (BPCIA), amended the PHSA to authorize the FDA to approve similar versions of
innovative biologics, commonly known as biosimilars. A competitor seeking approval of a biosimilar must file an application to establish its molecule as
highly similar to an approved innovator biologic, among other requirements. BPCIA, however, bars the FDA from approving biosimilar applications for 12
years after an innovator biological product receives initial marketing approval. This 12-year period of data exclusivity may be extended by six months, for
a total of 12.5 years, if the FDA requests that the innovator company conduct pediatric clinical investigations of the product.
Depending upon the timing, duration and specifics of the FDA approval of the use of our product candidates, some of our United States patents, if
granted, may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred
to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years, as compensation for patent term lost during
product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total
of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the
submission date of a BLA plus the time between the submission date of a BLA and the approval of that application. Only one patent applicable to an
approved product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The United
States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the
future, we may intend to apply for restoration of patent term for one of our currently owned or licensed patents to add patent life beyond its current
expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant BLA.
Pediatric exclusivity is another type of regulatory market exclusivity in the United States Pediatric exclusivity, if granted, adds six months to existing
exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted
based on the voluntary completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial.
Other U.S. Healthcare Laws and Compliance Requirements
In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including
but not limited to, the Centers for Medicare & Medicaid Services (CMS), other divisions of the United States Department of Health and Human Services
(HHS) (e.g., the Office of Inspector General, the United States Department of Justice (DOJ), and individual United States Attorney offices within the DOJ,
and state and local governments). For example, our business practices, including any of our research and future sales, marketing and scientific/educational
grant programs may be required to comply with the anti-fraud and abuse provisions of the Social Security Act, the false claims laws, the patient data
privacy and security provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), transparency requirements, and similar state,
local and foreign laws, each as amended.
The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or
receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging
for the purchase, lease or order of any item, good, facility or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term
remuneration has been interpreted broadly to include anything of value. The federal Anti-Kickback Statute has been interpreted to apply to arrangements
between pharmaceutical manufacturers on one hand and prescribers, purchasers, formulary managers, and other individuals and entities on the other. There
are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are
drawn narrowly and require strict compliance in order to offer protection. Practices that involve remuneration that may be alleged to be intended to induce
prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or 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 Anti-Kickback
Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of the facts and
circumstances. Our practices may not in all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor.
Additionally, the intent standard under the federal Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act of 2010, as
amended by the Health Care and Education Reconciliation Act of 2010, collectively, the Affordable Care Act (ACA), to a stricter standard such that a
person or entity no longer needs to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a
violation. Rather, if “one purpose” of the remuneration is to induce referrals, the federal Anti-Kickback Statute is violated. In addition, the ACA codified
case law that
36
a claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of
the federal civil False Claims Act (discussed below).
The civil monetary penalties statute imposes penalties against any person or entity who, among other things, is determined to have presented or caused
to be presented a claim to, among others, a federal healthcare program that the person knows or should know is for a medical or other item or service that
was not provided as claimed or is false or fraudulent.
The federal civil False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false
claim for payment to, or approval by, the federal government or knowingly making, using, or causing to be made or used a false record or statement
material to a false or fraudulent claim to the federal government. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a
claim includes “any request or demand” for money or property presented to the United States government. For example, pharmaceutical and other
healthcare companies have been, and continue to be, investigated or prosecuted under these laws for allegedly providing free product to customers with the
expectation that the customers would bill federal programs for the product and for causing false claims to be submitted because of the companies’
marketing of the product for unapproved, and thus non-reimbursable, uses.
HIPAA created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to
obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any
healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by trick, scheme or
device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare
benefits, items or services.
Also, many states have similar fraud and abuse statutes or regulations, such as state anti-kickback and false claims laws, which may be broader in
scope and apply regardless of payor. These laws are enforced by various state agencies and through private actions. Some state laws require pharmaceutical
companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant federal government compliance guidance,
require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, and restrict
marketing practices or require disclosure of marketing expenditures. In addition, certain state and local laws require the registration of pharmaceutical sales
representatives.
We may be subject to data privacy and security regulations by both the federal government and the states in which we conduct business. HIPAA, as
amended by the Health Information Technology for Economic and Clinical Health Act (HITECH) and their implementing regulations, impose requirements
on certain types of individuals and entities relating to the privacy, security and transmission of individually identifiable health information. Among other
things, HITECH makes HIPAA’s privacy and security standards directly applicable to business associates that are independent contractors or agents of
covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also
created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave
state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’
fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in specified
circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
We may also be subject to federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate
and timely manner to government programs, as well as federal consumer protection and unfair competition laws, which broadly regulate marketplace
activities that potentially harm consumers.
Additionally, the federal Physician Payments Sunshine Act within the Affordable Care Act, and its implementing regulations, require that certain
manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health
Insurance Program (with certain exceptions) annually report information to CMS related to certain payments or other transfers of value made or distributed
to physicians, as defined by such law, and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, physicians and
teaching hospitals and certain ownership and investment interests held by physicians and their immediate family members. Effective January 1, 2022, these
reporting obligations extend to include transfers of value made to certain non-physician providers (physician assistants, nurse practitioners, clinical nurse
specialists, certified registered nurse anesthetists and anesthesiologist assistants, and certified nurse midwives).
In order to distribute products commercially, we must comply with state laws that require the registration of manufacturers and wholesale distributors
of drug and biological products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such
manufacturers or distributors have no place of business within the state. Some states also impose requirements on manufacturers and distributors to
establish the pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt new technology capable
of tracking and tracing product as it moves through the distribution chain. Several states have enacted legislation requiring pharmaceutical and
biotechnology companies to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales,
marketing, pricing, clinical trials and other activities, and/or register their sales representatives, as well as to prohibit
37
pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales
and marketing, and to prohibit certain other sales and marketing practices. All of our activities are potentially subject to federal and state consumer
protection and unfair competition laws.
If our operations are found to be in violation of any of the federal and state healthcare laws described above or any other governmental regulations that
apply to us, we may be subject to penalties, including without limitation, civil, criminal and administrative penalties, damages, fines, disgorgement,
imprisonment, exclusion from participation in government programs, such as Medicare and Medicaid, refusal to allow us to enter into government
contracts, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, additional reporting requirements and/or
oversight if we become subject to a corporate integrity agreement or similar 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.
Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval. In the
United States and markets in other countries, 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 U.S., third-party payors
include federal and state healthcare programs, private managed care providers, health insurers and other organizations. The process for determining
whether a third-party payor will provide coverage for a product may be separate from the process for setting the price of a product or for establishing the
reimbursement rate that such a payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list, or also
known as a formulary, which might not include all of the FDA-approved products for a particular indication. Third-party payors are increasingly
challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical products, therapies and services, in addition to
questioning their safety and efficacy. We may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and
cost-effectiveness of our products, in addition to the costs required to obtain the FDA approvals. Our product candidates may not be considered medically
necessary or cost-effective. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved.
Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Adequate
third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product
development.
Different pricing and reimbursement schemes exist in other countries. In the European Union (EU), governments influence the price of
pharmaceutical products through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of those
products to consumers. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement
price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the
cost-effectiveness of a particular product candidate to currently available therapies. Other member states allow companies to fix their own prices for
medicines but monitor and control company profits. The downward pressure on health care costs has become very intense. As a result, increasingly high
barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial
pressure on pricing within a country.
The marketability of any product candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-
party payors fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and we expect
will continue to increase the pressure on healthcare pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if
favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage
policies and reimbursement rates may be implemented in the future.
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 U.S., the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by
major legislative initiatives.
38
For example, the ACA has substantially changed healthcare financing and delivery by both governmental and private insurers. Among the ACA
provisions of importance to the pharmaceutical and biotechnology industries, in addition to those otherwise described above, are the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
created an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic
agents apportioned among these entities according to their market share in some government healthcare programs that began in 2011;
increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, retroactive to January 1, 2010,
to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively, and capped the total rebate amount for
innovator drugs at 100% of the Average Manufacturer Price (AMP);
created a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 50% (increase to 70%
pursuant to the Bipartisan Budget Act of 2018, effective as of January 1, 2019) point-of-sale discounts, off negotiated prices of applicable
brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers’ outpatient drugs to be covered
under Medicare Part D;
extended manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care
organizations;
expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional
individuals and added new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level,
thereby potentially increasing manufacturers’ Medicaid rebate liability;
expanded the entities eligible for discounts under the 340B Drug Discount Program;
created a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness
research, along with funding for such research;
expanded healthcare fraud and abuse laws, including the Anti-Kickback Statute and the Foreign Corrupt Practices Act (FCPA), created new
government investigative powers, and enhanced penalties for noncompliance;
created a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that
are inhaled, infused, instilled, implanted, or injected;
required reporting of certain financial arrangements with physicians and teaching hospitals;
required annual reporting of certain information regarding drug samples that manufacturers and distributors provide to physicians;
established a Center for Medicare and Medicaid Innovation at CMS to test innovative payment and service delivery models to lower
Medicare and Medicaid spending; and
created a licensure framework for follow on biologic products.
There remain legal and political challenges to certain aspects of the ACA. On June 17, 2021, the Supreme Court dismissed the most recent judicial
challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Prior to the Supreme Court's decision,
President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining
health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their
existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that
include work requirements, and policies that create barriers to unnecessary barriers to obtaining access to health insurance coverage through Medicaid or
the ACA. It is unclear how other healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the ACA
will impact our business. In addition, other legislative and regulatory changes have been proposed and adopted in the United States since the ACA was
enacted.
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 ACA was enacted:
•
On August 2, 2011, President Obama signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select
Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee on Deficit
Reduction did not achieve a targeted deficit reduction of at least $1.2 trillion for fiscal years 2012 through 2021, triggering the legislation’s
automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2% per
fiscal year, which went into effect beginning on April 1, 2013 and will stay in effect through 2030 unless additional
39
Congressional action is taken. Pursuant to the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, as well
as subsequent legislation, these reductions have been suspended from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic.
Following the temporary suspension, a 1% payment reduction will occur beginning April 1, 2022 through June 30, 2022, and the 2%
payment reduction will resume on July 1, 2022.
On January 2, 2013, the U.S. American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced
Medicare payments to several types of providers.
On April 13, 2017, CMS published a final rule that gives states greater flexibility in setting benchmarks for insurers in the individual and
small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through
such marketplaces.
On May 30, 2018, the Right to Try Act, was signed into law. The law, among other things, provides a federal framework for certain patients
to access certain investigational new drug products that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA
approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA
permission under the FDA expanded access program. There is no obligation for a pharmaceutical manufacturer to make its drug products
available to eligible patients as a result of the Right to Try Act.
On May 23, 2019, CMS published a final rule to allow Medicare Advantage Plans the option of using step therapy for Part B drugs beginning
January 1, 2020.
On December 20, 2019, former President Trump signed into law the Further Consolidated Appropriations Act (H.R. 1865), which repealed
the Cadillac tax, the health insurance provider tax, and the medical device excise tax. It is impossible to determine whether similar taxes
could be instated in the future.
•
•
•
•
•
Additionally, 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 United States Congressional inquiries and federal and state legislative activity 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.
At the federal level, President Biden signed an Executive Order on July 9, 2021 affirming the administration’s policy to (i) support legislative reforms
that would lower the prices of prescription drug and biologics, including by allowing Medicare to negotiate drug prices, by imposing inflation caps, and, by
supporting the development and market entry of lower-cost generic drugs and biosimilars; and (ii) support the enactment of a public health insurance
option. Among other things, the Executive Order also directs HHS to provide a report on actions to combat excessive pricing of prescription drugs, enhance
the domestic drug supply chain, reduce the price that the Federal government pays for drugs, and address price gouging in the industry; and directs the
FDA to work with states and Indian Tribes that propose to develop section 804 Importation Programs in accordance with the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003, and the FDA’s implementing regulations. FDA released such implementing regulations on September 24,
2020, which went into effect on November 30, 2020, providing guidance for states to build and submit importation plans for drugs from Canada. On
September 25, 2020, CMS stated drugs imported by states under this rule will not be eligible for federal rebates under Section 1927 of the Social Security
Act and manufacturers would not report these drugs for “best price” or Average Manufacturer Price purposes. Since these drugs are not considered covered
outpatient drugs, CMS further stated it will not publish a National Average Drug Acquisition Cost for these drugs. If implemented, importation of drugs
from Canada may materially and adversely affect the price we receive for any of our product candidates. Further, on November 20, 2020 CMS issued an
Interim Final Rule implementing the Most Favored Nation, or MFN, Model under which Medicare Part B reimbursement rates would have been be
calculated for certain drugs and biologicals based on the lowest price drug manufacturers receive in Organization for Economic Cooperation and
Development countries with a similar gross domestic product per capita. However, on December 29, 2021 CMS rescinded the Most Favored Nations rule.
Additionally, on November 30, 2020, HHS published a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers
to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a
new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit
managers and manufacturers. Pursuant to court order, the removal and addition of the aforementioned safe harbors were delayed and recent legislation
imposed a moratorium on implementation of the rule until January 1, 2026. Although a number of these and other proposed measures may require
authorization through additional legislation to become effective, and the Biden administration may reverse or otherwise change these measures, both the
Biden administration and Congress have indicated that they will continue to seek new legislative measures to control drug costs.
Individual states in the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical
product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and
transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Individual states in the United
States have also been increasingly passing legislation
40
and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints,
discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage
importation from other countries and bulk purchasing.
We anticipate that these and other healthcare reform efforts will continue to result in additional downward pressure on coverage and the price that we
receive for any approved product, and could materially 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.
The Foreign Corrupt Practices Act
The FCPA prohibits any United States individual or business from offering, paying, promising to pay, or authorizing payment of money or anything of
value, to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to any
foreign official, political party or candidate to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an
act in violation of his or her lawful duty, or to secure any improper advantage in order to assist the individual or business in obtaining or retaining business.
The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring us to
maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and
maintain an adequate system of internal accounting controls. Compliance with the FCPA is expensive and difficult, particularly in countries in which
corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries,
hospitals are owned and operated by the government, and doctors and other hospital employees are considered foreign officials for the purposes of the
statute. Certain payments made in connection with clinical trials and other work have been deemed to be improper payments to government officials and
have led to FCPA enforcement actions. Various laws, regulations and executive orders also restrict the use and dissemination outside of the U.S., or the
sharing with certain non-United States nationals, of information classified for national security purposes, as well as certain products and technical data
relating to those products.
Accordingly, if we expand our presence outside of the U.S., we will need to dedicate additional resources to complying with the laws and regulations
in each jurisdiction in which it plans to operate. Therefore, this may preclude us from developing, manufacturing, or selling certain products and product
candidates outside of the U.S., which could limit our growth potential and increase our development costs.
Packaging and Distribution in the United States
If our products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and
requirements apply. Products must meet applicable child-resistant packaging requirements under the United States Poison Prevention Packaging Act.
Manufacturing, sales, promotion and other activities also are potentially subject to federal and state consumer protection and unfair competition laws.
The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing,
storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products. The failure to comply with any of these laws or
regulatory requirements subjects firms to possible legal or regulatory action. Depending on the circumstances, failure to meet applicable regulatory
requirements can result in criminal prosecution, fines or other penalties, injunctions, exclusion from federal healthcare programs, requests for recall, seizure
of products, total or partial suspension of production, denial or withdrawal of product approvals, or refusal to allow a firm to enter into supply contracts,
including government contracts. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur
significant legal expenses and divert our management’s attention from the operation of our business. Prohibitions or restrictions on sales or withdrawal of
future products marketed by us could materially affect our business in an adverse way.
Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example: (i)
changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or (iv)
additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.
Additional Regulation
In addition to the foregoing, state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety
and Health Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act,
41
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.
Even if we contract with third parties for the disposal of these materials and waste products, we cannot completely eliminate the risk of contamination
or injury resulting from these materials. If our operations result in contamination of the environment or expose individuals to hazardous substances, we
could be liable for damages and governmental fines, and any liability could exceed our resources. We also could incur significant costs associated with civil
or criminal fines and penalties for failure to comply with such laws and regulations. We maintain workers’ compensation insurance to cover costs and
expenses it may incur due to injuries to our employees, but this insurance may not provide adequate coverage against potential liabilities. However, we do
not maintain insurance for environmental liability or toxic tort claims that may be asserted against it. In addition, we may incur substantial costs in order to
comply with current or future environmental, health and safety laws and regulations. Current or future environmental laws and regulations may impair our
research, development or production efforts. In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other
sanctions.
We believe that we are in material compliance with applicable environmental laws and 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.
Europe / Rest of World Government Regulation
In addition to regulations in the U.S., we will be subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials
and any commercial sales and distribution of our products. Whether or not we obtain FDA approval of a product, we must obtain the requisite approvals
from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. Certain
countries outside of the United States have a similar process that requires the submission of a clinical trial application much like the IND prior to the
commencement of human clinical trials. In the EU, for example, a clinical trial application must be submitted to each country’s national health authority
and an independent ethics committee, much like the FDA and IRB, respectively. Once the clinical trial application is approved in accordance with a
country’s requirements, clinical trial development may proceed. Because biologically sourced raw materials are subject to unique contamination risks, their
use may be restricted in some countries.
The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In
all cases, the clinical trials must be conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their
origin in the Declaration of Helsinki.
In April 2014, the EU adopted the new Clinical Trials Regulation (EU) No 536/2014, or Regulation, which replaced the Clinical Trials Directive
2001/20/EC, or Directive, on January 31, 2022. The new Regulation overhauls the current system of approvals for clinical trials in the EU. Specifically, the
new Regulation, which is directly applicable in all EU member states (meaning that no national implementing legislation in each EU member state is
required), aims at simplifying and streamlining the approval of clinical trials in the EU. The main characteristics of the regulation include: a streamlined
application procedure via a single-entry point through the Clinical Trials Information System, or CTIS; a single set of documents to be prepared and
submitted for the application as well as simplified reporting procedures for clinical trial sponsors; and a harmonized procedure for the assessment of
applications for clinical trials.
To obtain regulatory approval of a medicinal product under EU regulatory systems, we must submit an MAA. The centralized procedure provides for
the grant of a single marketing authorization by the European Commission that is valid across all of the EU, and in the additional member states of the
European Economic Area (Iceland, Liechtenstein and Norway). The scientific evaluation of MAAs for Advanced Therapy Medicinal Product, or ATMPS
(which comprise gene therapy, somatic cell therapy and tissue engineered medicines) is primarily performed by a specialized scientific committee called
the Committee for Advanced Therapies, or CAT. The CAT prepares a draft opinion on the quality, safety and efficacy of the ATMP which is the subject of
the MAA, which is sent for final approval to the Committee for Medicinal Products for Human Use, or CHMP. The CHMP recommendation is then sent to
the European Commission, which adopts a decision binding in all EU Member States. The maximum timeframe for the evaluation of an MAA for an
ATMP is 210 days from receipt of a valid MAA, excluding clock stops when additional information or written or oral explanation is to be provided by the
applicant in response to questions asked by the CAT and/or CHMP. Clock stops may extend the timeframe of evaluation of an MAA considerably beyond
210 days. Where the CHMP gives a positive opinion, the EMA provides the opinion together with supporting documentation to the European Commission,
who make the final decision to grant a marketing authorization, which is issued within 67 days of receipt of the EMA’s recommendation. Accelerated
assessment may be granted by the CHMP in exceptional cases, when a medicinal product is of major public health interest, particularly from the viewpoint
of therapeutic innovation. If the CHMP accepts such a request, the timeframe of 210 days for assessment will be reduced to 150 days (excluding clock
stops), but it is possible that the CHMP may revert to the standard time limit for the centralized procedure if it determines that the application is no longer
appropriate to conduct an accelerated assessment.
Products with an orphan designation in the EU can receive ten years of market exclusivity, during which time “no similar medicinal product” for the
same indication may be placed on the market. A “similar medicinal product” is defined as a medicinal
42
product containing a similar active substance or substances as contained in an authorized orphan medicinal product, and which is intended for the same
therapeutic indication. An orphan product can also obtain an additional two years of market exclusivity in the EU where an agreed pediatric investigation
plan for pediatric studies has been complied with. The criteria for designating an “orphan medicinal product” in the EU are similar in principle to those in
the United States. Under Article 3 of Regulation (EC) 141/2000, a medicinal product may be designated as an orphan medicinal product if it meets the
following criteria: (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; and (2) either (i) the
prevalence of such condition must not be more than five in 10,000 persons in the EU when the application is made, or (ii) without the benefits derived from
orphan status, it must be unlikely that the marketing of the medicine would generate sufficient return in the EU to justify the investment needed for its
development; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU, or if
such a method exists, the product will be of significant benefit to those affected by the condition, as defined in Regulation (EC) 847/2000. Orphan
medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and are, upon grant of a marketing authorization, entitled to
ten years of market exclusivity for the approved therapeutic indication. The application for orphan designation must be submitted before the application for
marketing authorization. The applicant will receive a fee reduction for the MAA if the orphan designation has been granted, but not if the designation is
still pending at the time the marketing authorization is submitted. Orphan designation does not convey any advantage in, or shorten the duration of, the
regulatory review and approval process. The 10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the
product no longer meets the criteria for orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market
exclusivity. Otherwise, orphan medicine marketing exclusivity may be revoked only in very select cases, such as if: (i) a second applicant can establish that
its product, although similar, is safer, more effective or otherwise clinically superior; (ii) the marketing authorization holder of the authorized orphan
product consents to a second orphan medicinal product application; or (iii) the marketing authorization holder of the authorized orphan product cannot
supply enough orphan medicinal product.
For other countries outside of the EU, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical trials must be conducted in accordance
with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.
If we or our potential collaborators fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines,
suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
European Union General Data Protection Regulation
In addition to EU regulations related to the approval and commercialization of our products, we may be subject to the EU’s General Data Protection
Regulation (GDPR). The GDPR imposes stringent requirements for controllers and processors of personal data of persons in the EU, including, for
example, more robust disclosures to individuals and a strengthened individual data rights regime, shortened timelines for data breach notifications,
limitations on retention of information, increased requirements pertaining to special categories of data, such as health data, and additional obligations when
we contracts with third-party processors in connection with the processing of the personal data. The GDPR also imposes strict rules on the transfer of
personal data out of the European Union to the United States and other third countries. In addition, the GDPR provides that EU member states may make
their own further laws and regulations limiting the processing of personal data, including genetic, biometric or health data.
The GDPR applies extraterritorially, and we may be subject to the GDPR because of our data processing activities that involve the personal data of
individuals located in the European Union, such as in connection with our EU clinical trials. Failure to comply with the requirements of the GDPR and the
applicable national data protection laws of the EU member states may result in fines of up to €20,000,000 or up to 4% of the total worldwide annual
turnover of the preceding financial year, whichever is higher, and other administrative penalties. GDPR regulations may impose additional responsibility
and liability in relation to the personal data that we process and we may be required to put in place additional mechanisms to ensure compliance with the
new data protection rules.
In addition, further to the U.K.’s exit from the EU on January 31, 2020, the GDPR ceased to apply in the U.K. at the end of the transition period on
December 31, 2020. However, as of January 1, 2021, the U.K.’s European Union (Withdrawal) Act 2018 incorporated the U.K. GDPR into U.K. law. The
U.K. GDPR and the U.K. Data Protection Act 2018 set out the U.K.’s data protection regime, which is independent from but aligned to the EU’s data
protection regime. Non-compliance with the U.K. GDPR may result in monetary penalties of up to £17.5 million or 4% of worldwide revenue, whichever
is higher. Although the UK is regarded as a third country under the EU’s GDPR, the European Commission (“EC”) has now issued a decision recognizing
the UK as providing adequate protection under the EU GDPR and, therefore, transfers of personal data originating in the EU to the UK remain unrestricted.
Like the EU GDPR, the UK GDPR restricts personal data transfers outside the UK to countries not regarded by the UK as providing adequate protection.
The UK government has confirmed that personal data transfers from the UK to the EEA remain free flowing.
43
To enable the transfer of personal data outside of the EEA or the UK, adequate safeguards must be implemented in compliance with European and UK
data protection laws. On June 4, 2021, the EC issued new forms of standard contractual clauses for data transfers from controllers or processors in the
EU/EEA (or otherwise subject to the GDPR) to controllers or processors established outside the EU/EEA (and not subject to the GDPR). The new standard
contractual clauses replace the standard contractual clauses that were adopted previously under the EU Data Protection Directive. The UK is not subject to
the EC’s new standard contractual clauses but has published a draft version of a UK-specific transfer mechanism, which, once finalized, will enable
transfers from the UK. We will be required to implement these new safeguards when conducting restricted data transfers under the EU and UK GDPR and
doing so will require significant effort and cost.
Compliance with these and any other applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and we may
be required to put in place additional mechanisms ensuring compliance with the new data protection rules. If we fail to comply with any such laws or
regulations, we may face significant fines and penalties that could adversely affect our business, financial condition and results of operations.
U.S. Data Privacy Law
California recently enacted legislation, effective January 1, 2020, that has been dubbed the first “GDPR-like” law in the United States. Known as the
California Consumer Privacy Act (CCPA), it creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places
increased privacy and security obligations on entities handling personal data of consumers or households. The CCPA requires covered companies to
provide new disclosures to California consumers, provides such consumers new ways to opt-out of certain sales of personal information, and allows for a
new cause of action for data breaches. As our business progresses, the CCPA may impact (possibly significantly) our business activities and exemplifies the
vulnerability of our business to the evolving regulatory environment related to personal data and protected health information.
Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States, which
could increase our potential liability and adversely affect our business.
Further, a new California privacy law, the California Privacy Rights Act, or CPRA, was passed by California voters on November 3, 2020. The CPRA
will create additional obligations with respect to processing and storing personal information that are scheduled to take effect on January 1, 2023 (with
certain provisions having retroactive effect to January 1, 2022). Additionally, some observers have noted that the CCPA and CPRA could mark the
beginning of a trend toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.
Already, in the United States, we have witnessed significant developments at the state level. For example, on March 2, 2021, Virginia enacted the
Consumer Data Protection Act (the “CDPA”) and, on July 8, 2021, Colorado’s governor signed the Colorado Privacy Act (“CPA”), into law. The CDPA
and the CPA will both become effective January 1, 2023. While the CDPA and CPA incorporate many similar concepts of the CCPA and CPRA, there are
also several key differences in the scope, application, and enforcement of the law that will change the operational practices of regulated businesses. The
new laws will, among other things, impact how regulated businesses collect and process personal sensitive data, conduct data protection assessments,
transfer personal data to affiliates, and respond to consumer rights requests.
A number of other states have proposed new privacy laws, some of which are similar to the above discussed recently passed laws. Such proposed
legislation, if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of
resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or
changes in business practices and policies. The existence of comprehensive privacy laws in different states in the country would make our compliance
obligations more complex and costly and may increase the likelihood that we may be subject to enforcement actions or otherwise incur liability for
noncompliance.
Human Capital
As of December 31, 2021, we had 86 full-time employees and 16 consultants. Of our full-time employees, 24 hold a Ph.D. and 4 hold a M.D. 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.
We offer attractive benefits, including competitive salaries, excellent health insurance, and a 401K match. We are committed to pay equity, regardless
of gender, race/ethnicity, or sexual orientation and conduct comprehensive pay equity analyses on a semi-annual basis. In addition to providing strong
benefits packages to employees, we believe in fostering individual and organizational effectiveness by offering our employees various professional
development opportunities. We believe that investing in our employees’ career growth provides individuals and the organization with the knowledge and
skills to respond effectively to current and future business demands and support to the organization’s development efforts. Our culture is one that actively
supports the application of new knowledge and skills on the job. In 2022, we plan to continue add to our human capital resources as we grow. We are also
monitoring the current landscape of wage inflation and labor shortages in connection with our employees' overall compensation.
44
Corporate Information
Prior to September 15, 2020, we were a clinical-stage biopharmaceutical company known as resTORbio, Inc. that had historically focused on
developing innovative medicines that target the biology of aging, to prevent or treat age-related diseases with the potential to extend healthy lifespan.
resTORbio was originally incorporated under the laws of the State of Delaware in July 2016 and commenced research and development operations in
March 2017.
On September 15, 2020, we completed our business combination whereby a wholly owned subsidiary of resTORbio, Inc. merged with and into Adicet
Bio, Inc., with Adicet Bio, Inc. surviving as a wholly-owned subsidiary of resTORbio and changing our name to Adicet Therapeutics, Inc. In connection
with the completion of the Merger, resTORbio was renamed Adicet Bio, Inc. (Adicet Bio).
Immediately prior to the Effective Time of the Merger, resTORbio effected a reverse stock split of our common stock at a ratio of 1-for-7. At the
Effective Time of the Merger, each outstanding share of former our capital stock was converted into the right to receive 0.1240 shares of resTORbio
common stock.
Our website is located at www.adicetbio.com. Our common stock trades on the Nasdaq Global Market under the symbol “ACET.”
We own or have rights to various trademarks, service marks and trade names that we use in connection with the operation of our business. This
Annual Report on Form 10-K may also contain trademarks, service marks and trade names of third parties, which are the property of their respective
owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this Annual Report on Form 10-K is not intended to, and
does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks and trade names referred to
in this Annual Report on Form 10-K may appear without the ®, ™ or SM symbols, but the omission of such references is not intended to indicate, in any
way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable owner of these trademarks, service marks and
trade names.
Available Information
Our Internet address is www.adicetbio.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
including exhibits, proxy and information statements and amendments to those reports filed or furnished pursuant to Sections 13(a), 14, and 15(d) of the
Securities Exchange Act of 1934, as amended (the Exchange Act), are available through the “Investors” portion of our website free of charge as soon as
reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC). Information on our
website is not part of this Annual Report on Form 10-K or any of our other securities filings unless specifically incorporated herein by reference. In
addition, our filings with the SEC may be accessed through the SEC’s Interactive Data Electronic Applications system at www.sec.gov. All statements
made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the
statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by
law.
45
Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. In evaluating the Company and our business, you should carefully consider the
following risks and uncertainties, together with all other information in this Annual Report on Form 10-K, including our consolidated financial statements
and related notes and “Management’s Discussion and Analysis of Results of Operations and Financial Condition,” as well as our other filings with the
Securities and Exchange Commission (SEC), before investing in our common stock. Any of the risk factors we describe below could adversely affect our
business, financial condition or results of operations. The market price of our common stock could decline if one or more of these risks or uncertainties
actually occur, causing you to lose all or part of your investment in our common stock. The risks and uncertainties we describe below are not the only ones
we face. Additional risks and uncertainties that we currently do not know about or that we currently believe to be immaterial may also impair our business.
Certain statements below are forward-looking statements. See “Special Note Regarding Forward-Looking Statements and Industry Data” in this Annual
Report on Form 10-K.
Risks Related to Our Business and Industry
Risks Related to Operating History
We have a limited operating history and face significant challenges and expense as we build our capabilities.
Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We began operation in
November 2014. We have a limited operating history upon which someone can evaluate our business and prospects and is subject to the risks inherent in
any early stage company, including, among other things, risks that we may not be able to hire sufficient qualified personnel and establish operating controls
and procedures. We currently do not have complete in-house resources to enable our gamma delta T cell platform. As we build our own capabilities, we
expect to encounter risks and uncertainties frequently experienced by growing companies in new and rapidly evolving fields, including the risks and
uncertainties described herein. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a
history of successfully developing and commercializing biopharmaceutical products.
We have incurred net losses in every period since our inception and anticipate that we will incur substantial net losses in the future.
We are an early clinical stage biopharmaceutical company. 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 or an
acceptable safety profile, gain regulatory approval and become commercially viable. We have no products approved for commercial sale and have not
generated any revenue from product sales to date, and we will continue to incur significant research and development and other expenses related to our
ongoing operations. As a result, we are not profitable and have incurred net losses in each period since our inception. To date, we have financed our
operations primarily with proceeds from our license and collaboration agreements and the issuance and sale of our capital stock, including a follow-on
public offering in December 2021 which raised net proceeds of approximately $94.2 million from the sale of our common stock. For the years ended
December 31, 2021 and 2020, we reported net losses of $62.0 million and $36.7 million, respectively. As of December 31, 2021, we had an accumulated
deficit of $168.3 million.
We expect to incur significant expenditures for the foreseeable future, and we expect these expenditures to increase as we continue our research and
development of, and seek regulatory approvals for, product candidates based on our gamma delta T cell platform, including ADI-001. Even if we succeed
in commercializing one or more of our product candidates, we will continue to incur substantial research and development and other expenditures to
develop and market additional product candidates. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors
that may adversely affect our business. 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. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working
capital. Further, even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to
become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our
research and development efforts, diversify our product candidates or even continue our operations, any of which could have a material adverse effect on
our business, financial condition, results of operations, and prospects and cause investors to lose all or part of their investments.
46
Our history of recurring losses and anticipated expenditures could raise substantial doubts about our ability to continue as a going concern.
In our financial statements for the period ending to December 31, 2020, we concluded that our recurring losses from operations and need for
additional financing to fund future operations raised substantial doubt about our ability to continue as a going concern. Similarly, our independent
registered public accounting firm included an explanatory paragraph in its report on our financial statements for the period ended December 31, 2020 with
respect to this uncertainty. As of December 31, 2021, we believe that with our existing cash and cash equivalents we are able to fund our expenses and
capital expenditure requirements beyond twelve months from the issuance of these financial statements and into the second half of 2024. Our ability to
continue as a going concern beyond this point will require us to obtain additional funding. If we are unable to obtain sufficient funding, our business,
prospects, financial condition and results of operations will be materially and adversely affected, and we may be unable to continue as a going concern. If
we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, limit, reduce or terminate our product development or
future commercialization efforts of one or more of our product candidates, or may be forced to reduce or terminate our operations. If we are unable to
continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited
financial statements, and it is likely that investors will lose all or a part of their investment. In our own future required quarterly assessments, we may again
conclude that there is substantial doubt about our ability to continue as a going concern, and future reports from our independent registered public
accounting firm may also contain statements expressing substantial doubt about our ability to continue as a going concern. If we seek additional financing
to fund our business activities in the future and there exists substantial doubt about our ability to continue as a going concern, investors or other financing
sources may be unwilling to provide additional funding to us on commercially reasonable terms, if at all.
Risks Related to Our Product Candidates
Our business is highly dependent on the success of ADI-001. If we are unable to obtain approval for ADI-001 and effectively commercialize ADI-001
for the treatment of patients in our approved indications, our business would be significantly harmed.
Our business and future success depends on our ability to obtain regulatory approval of, and then successfully commercialize, our most advanced
product candidate, ADI-001. ADI-001 is in the early stages of development with an ongoing Phase 1 study to assess the safety and efficacy of ADI-001 in
Non-Hodgkin's Lymphoma (NHL) patients that commenced in March 2021.
Our preclinical or clinical results to date may not predict results for our planned or ongoing trials or any future studies of ADI-001 or any other
allogeneic gamma delta T cell product candidate. Because of the lack of evaluation of allogeneic products and gamma delta T cell therapy products in the
clinic to date, any such product’s failure, or the failure of other allogeneic T cell therapies or gamma delta T cell therapies, may significantly influence
physicians’ and regulators’ opinions in regards to the viability of our entire pipeline of allogeneic T cell therapies, which could have a material adverse
effect on our reputation. If our gamma delta T cell therapy is viewed as less safe or effective than autologous therapies or other allogeneic T cell therapies,
our ability to develop other allogeneic gamma delta T cell therapies may be significantly harmed.
All of our product candidates, including ADI-001 , will require additional clinical and non-clinical development, regulatory review and approval in
multiple jurisdictions, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can
generate any revenue from product sales. In addition, because ADI-001 is our most advanced product candidate, and because our other product candidates
are based on similar technology, if ADI-001 encounters safety or efficacy problems, manufacturing problems, developmental delays, regulatory issues or
other problems, our development plans and business would be significantly harmed, which could have a material adverse effect on our business, reputation
and prospects.
Our gamma delta T cell candidates represent a novel approach to cancer treatment that creates significant challenges for us.
We are developing a pipeline of gamma delta T cell product candidates and a novel antibody platform that are intended for use in patient with certain
cancers. Advancing these novel product candidates creates significant challenges for us, including:
•
•
•
•
manufacturing our product candidates to our specifications and in a timely manner to support our future clinical trials, and, if approved,
commercialization;
sourcing future clinical and, if approved, commercial supplies for the raw materials used to manufacture our product candidates;
understanding and addressing variability in the quality of a donor’s T cells, which could ultimately affect our ability to produce product in a
reliable and consistent manner;
inability to achieve efficacy in cancer patients following treatment with our product candidates;
47
•
•
•
•
•
•
achieving a side effect profile, including graft-versus-host disease (GvHD), from our product candidates that makes them commercially attractive
for further development;
educating medical personnel regarding the potential side effect profile of our product candidates, if approved;
using medicines to manage adverse side effects of our product candidates which may not adequately control the side effects and/or may have a
detrimental impact on the efficacy of the treatment;
conditioning patients with chemotherapy or other lymphodepletion agents in advance of administering our product candidates, which may
increase the risk of adverse side effects;
obtaining regulatory approval, as the U.S. Food and Drug Administration (FDA) and other regulatory authorities have limited experience with
development of allogeneic T cell therapies for cancer; and
establishing sales and marketing capabilities upon obtaining any regulatory approval to gain market acceptance of a novel therapy.
The success of our business, including our ability to obtain financing and generate any revenue in the future, will primarily depend on the successful
development, manufacturing, positive efficacy and safety profile in our clinical trials, regulatory approval and commercialization of our novel product
candidates, which may never occur. We have not yet succeeded and may not succeed in demonstrating efficacy and safety for any of our product candidates
in clinical trials or in obtaining marketing approval thereafter. Given our early stage of development, it may be several years, if at all, before we have
demonstrated the safety and efficacy of a product candidate sufficient to warrant approval for commercialization. If we are unable to develop, or obtain
regulatory approval for, or, if approved, successfully commercialize our product candidates, we may not be able to generate sufficient revenue to continue
our business, which could have a material adverse effect on our results of operations and prospects.
Our product candidates are based on novel technologies, which makes it difficult to predict the likely success of such product candidates and the time
and cost of product candidate development and obtaining regulatory approval.
We have concentrated our research and development efforts on our allogeneic gamma delta T cell therapy and our future success depends on the
successful development of this therapeutic approach. We are in the early stages of developing our platform and product candidates and there can be no
assurance that any development problems we have experienced or may experience in the future will not cause significant delays or result in unforeseen
issues or unanticipated costs, or that any such development problems or issues can be overcome. We may also experience delays in developing a
sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us from completing
our future clinical studies or commercializing our products on a timely or profitable basis, if at all. In addition, our expectations with regard to the
advantages of an allogenic gamma delta T cell therapy platform relative to other therapies may not materialize or materialize to the degree we anticipate.
Further, our scalability and costs of manufacturing may vary significantly as we develop our product candidates and understand these critical factors.
In addition, the clinical study requirements of the FDA, European Medicines Agency (EMA) and other regulatory agencies and the criteria these
regulators use to determine the safety and efficacy of a product candidate are determined according to the type, complexity, novelty and intended use and
market of the potential products. The regulatory approval process for novel product candidates such as ours can be more complex and consequently more
expensive and take longer than for other, better known or extensively studied pharmaceutical or other product candidates. Approvals by the EMA and FDA
for existing autologous CAR-T therapies, such as Kymriah® and Yescarta®, may not be indicative of what these regulators may require for approval of our
therapies. Also, while we expect reduced variability in our products candidates compared to autologous products, we do not have significant clinical data
supporting any benefit of lower variability. More generally, approvals by any regulatory agency may not be indicative of what any other regulatory agency
may require for approval or what such regulatory agencies may require for approval in connection with new product candidates.
Our product candidates may also not perform successfully in clinical trials or may be associated with adverse events that distinguish them from the
autologous CAR-T therapies that have previously been approved or alpha beta T cell therapies that may be approved in the future. Unexpected clinical
outcomes could materially and adversely affect our business, results of operations and prospects.
48
Our product candidates may cause undesirable side effects or have other properties that could halt our clinical development, prevent our regulatory
approval, limit our commercial potential or result in significant negative consequences.
Undesirable or unacceptable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical
trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory
authorities. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics.
Approved autologous CAR-T therapies and those under development have shown frequent rates of cytokine release syndrome and neurotoxicity, and
adverse events have resulted in the death of patients. While we believe our gamma delta T cell approach may lessen such results, similar or other adverse
events for our allogeneic gamma delta T cell product candidates may occur. In addition, while we anticipate our focus on gamma delta T cells may lessen
the likelihood of GvHD relative to therapies relying on unrelated alpha beta T cells, similar or other adverse events for our allogeneic gamma delta T cell
product candidates may occur.
If unacceptable toxicities arise in the development of our product candidates, we could suspend or terminate our trials or the FDA or comparable
foreign regulatory authorities could order us to cease clinical trials or deny approval of our product candidates for any or all targeted indications. The data
safety monitoring board may also suspend or terminate a clinical trial at any time on various grounds, including a finding that the research patients are
being exposed to an unacceptable health risk, including risks inferred from other unrelated immunotherapy trials. Treatment-related side effects could also
affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. Novel therapeutic candidates,
such as those we are developing, may result in novel side effect profiles that may not be appropriately recognized or managed by the treating medical staff.
We anticipate having to train medical personnel using our product candidates to understand the side effect profile of our product candidates for our clinical
trials and upon any commercialization of any of our product candidates. Inadequate training in recognizing or managing the potential side effects of our
product candidates could result in serious adverse events including patient deaths. Based on available preclinical data and on management’s clinical
experience with other cell therapy agents, the safety profile of our pipeline product candidates is expected to include cytokine release syndrome,
neurotoxicity, and possibly additional adverse events. Any of these occurrences may have a material adverse effect our business, financial condition and
prospects.
Risks Related to Clinical Trials
Our clinical trials may fail to demonstrate the safety and efficacy of any of our product candidates, which would prevent or delay regulatory approval
and commercialization.
Before obtaining regulatory approvals for the commercial sale of our product candidates, including ADI-001 and ADI-002, we must demonstrate
through lengthy, complex and expensive preclinical testing and clinical trials that our product candidates are both safe and effective for use in each target
indication. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during
the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-
stage clinical trials.
There is typically an extremely high rate of attrition from the failure of product candidates proceeding through clinical trials. Product candidates in
later stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial clinical
trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy,
insufficient durability of efficacy or unacceptable safety issues, notwithstanding promising results in earlier trials. Most product candidates that commence
clinical trials are never approved as products.
In addition, for ADI-001 and ADI-002 and any future trials that may be completed, we cannot guarantee that the FDA or foreign regulatory authorities
will interpret the results as we do, and more trials could be required before we submit our product candidates for approval. To the extent that the results of
the trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, approval of our product candidates may be
significantly delayed, or we may be required to expend significant additional resources, which may not be available to us, to conduct additional trials in
support of potential approval of our product candidates. Any of the foregoing could have a material adverse effect on our business, prospects and financial
condition.
We may not be able to file investigational new drug (IND) applications to commence additional clinical trials on the timelines we expect, and even if we
are able to, the FDA may not permit us to proceed.
In October 2020, the IND for our lead product candidate, ADI-001, to treat patients with NHL was cleared by the FDA. Even if such regulatory
authorities agree with the design and implementation of the clinical trials set forth in an IND or clinical trial application, we cannot guarantee that such
regulatory authorities will not change their requirements in the future. Moreover, we cannot be sure that submission of an IND for any of our other product
candidates will result in the FDA allowing trials to begin, or that, once begun, issues will not arise that result in a decision by us, by independent
Institutional Review Boards (IRBs) or independent ethics committees, or by the FDA or other regulatory authorities to suspend or terminate clinical trials.
For
49
example, we may experience manufacturing delays or other delays with IND-enabling studies or the FDA or other regulatory authorities may require
additional preclinical studies that we did not anticipate. Moreover, we cannot be assured that submission of an IND will result in the FDA allowing clinical
trials to begin, or that, once begun, issues will not arise that result in a decision by us, by IRBs, or independent ethics committees or by the FDA or other
regulatory authorities to suspend or terminate clinical trials, including as a result of a clinical hold. Additionally, even if such regulatory authorities agree
with the design and implementation of the clinical trials set forth in an IND or clinical trial application, we cannot guarantee that such regulatory authorities
will not change their requirements in the future. The inability to initiate clinical trials any of our product candidates on the timeline currently anticipated or
at all could have a material adverse effect on our business, results of operations and prospects.
We may encounter substantial delays in our clinical trials, or may not be able to conduct our trials on the timelines we expect.
Clinical testing is expensive, time consuming and subject to uncertainty. We cannot guarantee that any clinical studies will be conducted as planned or
completed on schedule, if at all. Even if these trials begin as planned, issues may arise that could suspend or terminate such clinical trials. A failure of one
or more clinical studies can occur at any stage of testing, and our future clinical studies may not be successful. Events that may prevent successful or timely
completion of clinical development include:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
inability to generate sufficient preclinical, toxicology or other in vivo or in vitro data to support the initiation of clinical studies;
delays in sufficiently developing, characterizing or controlling a manufacturing process suitable for advanced clinical trials;
delays in developing suitable assays for screening patients for eligibility for trials with respect to certain product candidates;
delays in reaching a consensus with regulatory agencies on study design;
delays in reaching agreement on acceptable terms with prospective contract research organizations (CROs) and clinical study sites, the terms of
which can be subject to extensive negotiation and may vary significantly among different CROs and clinical study sites;
delays in obtaining required IRB approval at each clinical study site;
imposition of a temporary or permanent clinical hold by regulatory agencies for a number of reasons, including after review of an IND
application or amendment, or equivalent application or amendment; as a result of a safety finding that presents unreasonable risk to clinical trial
participants; a negative finding from an inspection of our clinical study operations or study sites; developments on trials conducted by
competitors for related technology that raises FDA concerns about risk to patients of the technology broadly; or if FDA finds that the
investigational protocol or plan is clearly deficient to meet its stated objectives;
delays in recruiting suitable patients to participate in our clinical studies;
difficulty collaborating with patient groups and investigators;
failure by our CROs, other third parties or it to adhere to clinical study requirements;
failure to perform in accordance with the FDA’s Good Clinical Practice (GCP) requirements or applicable regulatory guidelines in other
countries;
transfer of manufacturing processes to any new contract manufacturing organization (CMO) or our own manufacturing facilities or any other
development or commercialization partner for the manufacture of product candidates;
delays in having patients’ complete participation in a study or return for post-treatment follow-up;
patients dropping out of a study;
occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits;
changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;
50
•
•
•
•
•
changes in the standard of care on which a clinical development plan was based, which may require new or additional trials;
the cost of clinical studies of our product candidates being greater than we anticipate;
clinical studies of our product candidates producing negative or inconclusive results, which may result in us deciding, or regulators requiring us,
to conduct additional clinical studies or abandon product development programs;
delays or failure to secure supply agreements with suitable raw material suppliers, or any failures by suppliers to meet our quantity or quality
requirements for necessary raw materials; and
delays in manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates for use in
clinical studies or the inability to do any of the foregoing.
Our timing of filing on these product candidates is dependent on further preclinical and manufacturing success, which we work on with various third
parties. We cannot be sure that we will be able to submit our INDs in a timely manner, if at all, or that submission of an IND or IND amendment will result
in the FDA allowing testing and clinical trials to begin, or that, once begun, issues will not arise that suspend or terminate such clinical trials. Additionally,
even if such regulatory authorities agree with the design and implementation of the clinical trials set forth in an IND or clinical trial application, we cannot
guarantee that such regulatory authorities will not change their requirements in the future.
Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to generate
revenue. In addition, if we make manufacturing or formulation changes to our product candidates, we may be required to or we may elect to conduct
additional studies to bridge our modified product candidates to earlier versions. Clinical study delays could also shorten any periods during which our
products have patent protection and may allow our competitors to bring products to market before we do, which could impair our ability to successfully
commercialize our product candidates and may harm our business and results of operations.
Monitoring safety of patients receiving our product candidates is challenging, which could adversely affect our ability to obtain regulatory approval
and commercialize.
In our planned clinical trials of our product candidates, we have contracted with and expect to continue to contract with academic medical centers and
hospitals experienced in the assessment and management of toxicities arising during clinical trials. Nonetheless, these centers and hospitals may have
difficulty observing patients and treating toxicities, which may be more challenging due to personnel changes, inexperience, shift changes, house staff
coverage or related issues. This could lead to more severe or prolonged toxicities or even patient deaths, which could result in us or the FDA delaying,
suspending or terminating one or more of our clinical trials, and which could jeopardize regulatory approval. Medicines used at centers to help manage
adverse side effects of ADI-001 and ADI-002 may not adequately control the side effects and/or may have a detrimental impact on the efficacy of the
treatment. Use of these medicines may increase with new physicians and centers administering our product candidates, any of which could have a material
adverse effect on our ability to obtain regulatory approval and commercialize on the timelines anticipated or at all, which could have a material adverse
effect on our business and results of operations.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons, including, without limitation, the impact of the
ongoing COVID-19 pandemic. The timely completion of clinical trials in accordance with the protocols depends, among other things, on our ability to
enroll a sufficient number of patients who remain in the study until the conclusion. The enrollment of patients depends on many factors, including:
•
•
•
•
•
•
the patient eligibility criteria defined in the protocol;
the size of the patient population required for analysis of the trial’s primary endpoints;
the proximity of patients to study sites;
the design of the trial;
Our ability to recruit clinical trial investigators with the appropriate competencies and experience;
Our ability to obtain and maintain patient consents; and
51
•
the risk that patients enrolled in clinical trials will drop out of the trials before the infusion of our product candidates or trial completion.
We intend to conduct a number of clinical trials for product candidates in the fields of cancer in different geographies, all of which have been affected
to varying extents by the ongoing COVID-19 pandemic. We believe that the coronavirus pandemic will have an impact on various aspects of our future
clinical trials. For example, investigators may not want to take the risk of exposing cancer patients to COVID-19 since the dosing of patients is conducted
within an in-patient setting. Other potential impacts of the COVID-19 pandemic on our future various clinical trials include patient dosing and study
monitoring, which may be paused or delayed due to changes in policies at various clinical sites, federal, state, local or foreign laws, rules and regulations,
including quarantines or other travel restrictions, prioritization of healthcare resources toward pandemic efforts, including diminished attention of
physicians serving as our clinical trial investigators and reduced availability of site staff supporting the conduct of our clinical trials, interruption or delays
in the operations of the government regulators, or other reasons related to the COVID-19 pandemic. It is unknown how long these pauses or disruptions
could continue.
In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product
candidates, and this competition will reduce the number and types of patients available to us because some patients who might have opted to enroll in our
trials may instead opt to enroll in a trial being conducted by one of our competitors. Since the number of qualified clinical investigators is limited, some of
our clinical trial sites are also being used by some of our competitors, which may reduce the number of patients who are available for our clinical trials in
that clinical trial site.
Moreover, because our product candidates represent unproven methods for cancer treatment, potential patients and their doctors may be inclined to
use conventional therapies, such as chemotherapy and hematopoietic cell transplantation or autologous CAR-T cell therapies, rather than enroll patients in
our clinical trial. Patients eligible for allogeneic CAR-T cell therapies but ineligible for autologous CAR-T cell therapies due to aggressive cancer and
inability to wait for autologous CAR-T cell therapies may be at greater risk for complications and death from therapy.
Delays in patient enrollment may result in increased costs or may affect the timing or outcome of our ongoing clinical trial and planned clinical trials,
which could prevent completion of these trials and adversely affect our ability to advance the development of our product candidates.
Clinical trials are expensive, time-consuming and difficult to design and implement.
Human clinical trials are expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements.
Because our gamma delta T cell product candidates are based on new technologies and will require the creation of inventory of mass-produced, off-the-
shelf products, we expect that we will require extensive research and development and have substantial manufacturing and processing costs. In addition,
costs to treat patients with NHL cancer and to treat potential side effects that may result from our product candidates can be significant. Accordingly, our
clinical trial costs are likely to be significantly higher than for more conventional therapeutic technologies or drug products, which is expected to have a
material adverse effect on our financial position and ability to achieve profitability.
A variety of risks associated with conducting research and clinical trials abroad and marketing our product candidates internationally could materially
adversely affect our business.
We plan to globally develop our product candidates. Accordingly, we expect that it will be subject to additional risks related to operating in foreign
countries, including:
•
•
•
•
•
•
•
differing regulatory requirements in foreign countries;
unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;
increased difficulties in managing the logistics and transportation of storing and shipping product candidates produced in the United States and
shipping the product candidate to the patient abroad;
import and export requirements and restrictions;
economic weakness, including inflation, or political instability in particular foreign economies and markets;
compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
foreign taxes, including withholding of payroll taxes;
52
•
•
•
•
•
•
•
•
foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing
business in another country;
difficulties staffing and managing foreign operations;
workforce uncertainty in countries where labor unrest is more common than in the United States;
differing payor reimbursement regimes, governmental payors or patient self-pay systems, and price controls;
potential liability under the Foreign Corrupt Practices Act or comparable foreign regulations;
challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect
intellectual property rights to the same extent as the United States;
production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
business interruptions resulting from geo-political actions, including war and terrorism.
These and other risks associated with our potential international operations may materially adversely affect our ability to attain or maintain profitable
operations, which could have a material adverse effect on our business and results of operations.
Risks Related to Marketing Our Product Candidates
The market opportunities for our product candidates may be limited to those patients who are ineligible for or have failed prior treatments and may be
small.
The FDA often approves new therapies initially only for use in patients who are currently not adequately treated with currently approved therapies.
We expect to initially seek approval of ADI-001 and our other product candidates in this setting. Subsequently, for those products that prove to be
sufficiently beneficial, if any, we would expect to seek approval in earlier lines of treatment and potentially as a first line therapy. There is no guarantee that
our product candidates, even if approved, would be approved for earlier lines of therapy, and, prior to any such approvals, we will have to conduct
additional clinical trials, including potentially comparative trials against approved therapies. We are also targeting a similar patient population as
autologous CAR-T product candidates, including approved autologous CAR-T products. Our therapies may not be as safe and effective as autologous
CAR-T therapies and may only be approved for patients who are ineligible for autologous CAR-T therapy.
Our projections of both the number of people who have the cancers we are targeting, as well as the subset of people with these cancers in a position to
receive second or later lines of therapy and who have the potential to benefit from treatment with our product candidates, are based on our beliefs and
estimates. These estimates have been derived from a variety of sources, including scientific literature, patient foundations, or market research and may
prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these cancers. The number of patients may turn out to be
lower than expected. Additionally, the potentially addressable patient population for our product candidates may be limited or may not be amenable to
treatment with our product candidates. Even if we obtain significant market share for our product candidates, because the potential target populations are
small, we may never achieve profitability without obtaining regulatory approval for additional indications.
If we fail to develop additional product candidates, our commercial opportunity will be limited.
One of our core strategies is to pursue clinical development of additional product candidates beyond ADI-001. Developing, obtaining regulatory
approval and commercializing additional gamma delta T cell product candidates will require substantial additional funding and is prone to the risks of
failure inherent in medical product development. We cannot provide you any assurance that it will be able to successfully advance any of these additional
product candidates through the development process.
Even if we receive FDA approval to market additional product candidates for the treatment of cancer, we cannot assure you that any such product
candidates will be successfully commercialized, widely accepted in the marketplace or more effective than other commercially available alternatives. If we
are unable to successfully develop and commercialize additional product candidates, our commercial opportunity will be limited. Moreover, a failure in
obtaining regulatory approval of additional product candidates may have a negative effect on the approval process of any other, or result in losing approval
of any approved, product candidate which could have a material adverse effect on our business and prospects.
53
We currently have no marketing and sales organization and as a company have no experience in marketing products. If we are unable to establish
marketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be able to generate
product revenue.
We currently have no sales, marketing or distribution capabilities and as a company have no experience in marketing products. We may develop a
marketing organization and sales force, which will require significant capital expenditures, management resources and time. We will have to compete with
other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel.
If we are unable or decide not to establish internal sales, marketing and distribution capabilities, we will pursue collaborative arrangements regarding
the sales and marketing of our products; however, there can be no assurance that we will be able to establish or maintain such collaborative arrangements,
or if we are able to do so, that it will have effective sales forces. Any revenue we receive will depend upon the efforts of such third parties, which may not
be successful. We may have little or no control over the marketing and sales efforts of such third parties and our revenue from product sales may be lower
than if we had commercialized our product candidates ourselves. We also face competition in our search for third parties to assist us with the sales and
marketing efforts of our product candidates.
There can be no assurance that we will be able to develop in-house sales and distribution capabilities or establish or maintain relationships with third-
party collaborators to commercialize any product that receives regulatory approval in the United States or overseas. If we are unable to successfully market
and distribute our products, our business, results of operations and prospects could be materially adversely affected.
We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete
effectively.
The biopharmaceutical industry, and the immuno-oncology industry specifically, is characterized by intense competition and rapid innovation. Our
competitors may be able to develop other compounds or drugs that are able to achieve similar or better results. Our potential competitors include major
multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies and universities and other research
institutions. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and
experienced marketing and manufacturing organizations and well-established sales forces. Smaller or early-stage companies may also prove to be
significant competitors, particularly through collaborative arrangements with large, established companies. Mergers and acquisitions in the biotechnology
and pharmaceutical industries may result in even more resources being concentrated in our competitors. Competition may increase further as a result of
advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors, either alone
or with collaborative partners, may succeed in developing, acquiring or licensing on an exclusive basis drug or biologic products that are more effective,
safer, more easily commercialized or less costly than our product candidates or may develop proprietary technologies or secure patent protection that we
may need for the development of our technologies and products.
Specifically, engineered T cells face significant competition in both the chimeric antigen receptor (CAR) and T cell receptor (TCR) technology space
from multiple companies. Even if we obtain regulatory approval of our product candidates, the availability and price of our competitors’ products could
limit the demand and the price we are able to charge for our product candidates. We may not be able to implement our business plan if the acceptance of
our product candidates is affected by price competition or the reluctance of physicians to switch from existing methods of treatment to our product
candidates, or if physicians switch to other new drug or biologic products or choose to reserve our product candidates for use in limited circumstances.
Risks Related to Manufacturing
We do not currently operate our own manufacturing facility and currently depend on the ability of our third-party suppliers and manufacturers with
whom we contract to perform adequately, particularly with respect to the timely production and delivery of our product candidates, including ADI-001.
This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an
acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
We do not currently own or operate any manufacturing facilities. We rely, and expect to continue to rely, on third parties for the manufacture of our
product candidates for preclinical and clinical development. We may not be able to achieve clinical or commercial manufacturing and cell processing on
our own or through our contract manufacturing organizations (CMOs), including timely supply of off-the-shelf product to satisfy demands to support
clinical trials of any of our product candidates. Very few companies have experience in manufacturing gamma delta T cell therapy derived from blood of
unrelated donors and gamma delta T cells require several complex manufacturing steps before being available as a mass-produced, off-the-shelf product.
While we believe our manufacturing and processing approaches are appropriate to support our clinical product development, we have limited experience in
managing the allogeneic gamma delta T cell engineering process, and our allogeneic
54
processes may be more difficult or more expensive than the approaches taken by our competitors. We cannot be sure that the manufacturing processes
employed by or on our behalf will result in T cells that will be safe and effective.
Our operations remain subject to review and oversight by the FDA and the FDA could object to our use of any manufacturing facilities. We must first
receive approval from the FDA prior to licensure to manufacture our product candidates, which we may never obtain. Even if approved, we would be
subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies to ensure strict compliance with current Good
Manufacturing Practices (cGMPs) and other government regulations. Our license to manufacture product candidates will be subject to continued regulatory
review.
Our cost of goods development is at an early stage. The actual cost to manufacture and process our product candidates could be greater than we expect
and could materially and adversely affect the commercial viability of our product candidates.
The manufacture of biopharmaceutical products is complex and requires significant expertise, including the development of advanced manufacturing
techniques and process controls. Manufacturers of cell therapy products often encounter difficulties in production, particularly in scaling out and validating
initial production and ensuring the absence of contamination. These problems include difficulties with production costs and yields, quality control,
including stability of the product, quality assurance testing, operator error, shortages of qualified personnel, as well as compliance with strictly enforced
federal, state and foreign regulations. Furthermore, if contaminants are discovered in our supply of product candidates or in the manufacturing facilities,
such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. We cannot assure you that
any stability or other issues relating to the manufacture of our product candidates will not occur in the future.
Our product candidates and any products that we may develop may compete with other product candidates and approved products for access to
manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for
us.
We may fail to manage the logistics of storing and shipping our product candidates. Storage failures and shipment delays and problems caused by us,
our vendors or other factors not in our control, such as weather, could result in loss of usable product or prevent or delay the delivery of product candidates
to patients.
We may also experience manufacturing difficulties due to resource constraints or as a result of labor disputes. If we were to encounter any of these
difficulties, our ability to provide our product candidates to patients would be jeopardized, which could have a material adverse effect on our business,
results of operations and prospects.
Risks Related to Our Operations
We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able
to successfully implement our business strategy.
Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract and retain highly
qualified managerial, scientific and medical personnel. We are highly dependent on our management, scientific and medical personnel. The loss of the
services of any of our executive officers, other key employees, and other scientific and medical advisors, and our inability to find suitable replacements
could result in delays in product development and harm our business.
We conduct substantially all of our operations at our facilities in the San Francisco Bay Area. This region is headquarters to many other
biopharmaceutical companies and many academic and research institutions. Competition for skilled personnel in this market is intense and may limit our
ability to hire and retain highly qualified personnel on acceptable terms or at all.
To induce valuable employees to remain at the company, in addition to salary and cash incentives, we have provided stock options and restricted stock
units that vest over time. The value to employees of stock options that vest over time may be significantly affected by fluctuations in our stock price that
are beyond our control and may at any time be insufficient to counteract more lucrative offers from other companies. Despite our efforts to retain valuable
employees, members of our management, scientific and development teams may terminate their employment with us on short notice. Although we have
employment agreements with our key employees, these employment agreements provide for at-will employment, which means that any of our employees
could leave our employment at any time, with or without notice. We do not maintain “key person” insurance policies on the lives of these individuals or the
lives of any of our other employees. Our success also depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level and
senior managers as well as junior, mid-level and senior scientific and medical personnel.
55
We will need substantial additional financing to develop our products and implement our operating plans. If we fail to obtain additional financing, we
may be unable to complete the development and commercialization of our product candidates.
We expect to spend a substantial amount of capital in the clinical development of our product candidates, including the ongoing Phase 1 clinical trial
for ADI-001. We will need substantial additional financing to develop our products and implement our operating plans. In particular, we will require
substantial additional financing to enable commercial production of our products and initiate and complete registration trials for multiple products. Further,
if approved, we will require significant additional amounts in order to launch and commercialize our product candidates.
As of December 31, 2021, we believe that with our cash and cash equivalents we are able to fund our expenses and capital expenditure requirements
beyond twelve months from the issuance date of the accompanying consolidated financial statements. However, changing circumstances may cause us to
consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances
beyond our control. We may require additional capital for the further development and commercialization of our product candidates, including funding our
internal manufacturing capabilities and may need to raise additional funds sooner if we choose to expand more rapidly than we presently anticipate.
We cannot be certain that additional funding will be available on acceptable terms, or at all. Other than the funding agreement and our loan agreement
with Pacific Western Bank, we have no committed source of additional capital and if we are unable to raise additional capital in sufficient amounts or on
terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of our product candidates or
other research and development initiatives. Our license agreements may also be terminated if we are unable to meet the payment obligations under the
agreements. We could be required to seek collaborators for our product candidates at an earlier stage than otherwise would be desirable or on terms that are
less favorable than might otherwise be available or relinquish or license on unfavorable terms our rights to our product candidates in markets where we
otherwise would seek to pursue development or commercialization themselves. Additionally, we may not be able to incur indebtedness if the ongoing
macroeconomic effects of the COVID-19 pandemic, including certain actions taken by U.S. or other governmental authorities, such as decreases in short-
term interest rates as announced by the Federal Reserve, cause the closure of banks for an extended period of time or a sudden increase in requests for
indebtedness at one time by many potential borrowers, either or both of which could overwhelm the banking industry. Furthermore, the impact of
geopolitical tension, such as a deterioration in the bilateral relationship between the United States and China or an escalation in conflict between Russia and
Ukraine, including any resulting sanctions, export controls or other restrictive actions, also could lead to disruption, instability and volatility in the global
markets, which may have an impact on our ability to obtain additional funding.
Any of the above events could significantly harm our business, prospects, financial condition and results of operations and cause the price of our
common stock to decline.
We have grown rapidly and will need to continue to grow the size of our organization, and it may experience difficulties in managing this growth.
As our development and commercialization plans and strategies develop, and as we transition into operating as a public company, we have rapidly
expanded our employee base and expect to continue to add managerial, operational, sales, research and development, marketing, financial and other
personnel. Current and future growth imposes significant added responsibilities on members of management, including:
•
•
•
identifying, recruiting, integrating, maintaining and motivating additional employees;
managing our internal development efforts effectively, including the clinical and FDA review process for our product candidates, while
complying with our contractual obligations to contractors and other third parties; and
improving our operational, financial and management controls, reporting systems and procedures.
Our future financial performance and our ability to commercialize our product candidates will depend, in part, on our ability to effectively manage our
growth, and our management may also have to divert a disproportionate amount of our attention away from day-to-day activities in order to devote a
substantial amount of time to managing these growth activities.
We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and
consultants, pursuant to arrangements which expire after a certain period of time, to provide certain services, including certain research and development as
well as general and administrative support. There can be no assurance that the services of independent organizations, advisors and consultants will continue
to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our
outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be
extended, delayed or terminated, and we may not be able to obtain regulatory approval of our product candidates or otherwise
56
advance our business. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and
consultants on economically reasonable terms, or at all.
If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may
not be able to successfully implement the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve
our research, development and commercialization goals, which could have a material adverse effect on our business, results of operations and prospects.
We may form or seek strategic alliances or enter into additional licensing arrangements in the future, and we may not realize the benefits of such
alliances or licensing arrangements.
We may form or seek strategic alliances, create joint ventures or collaborations or enter into additional licensing arrangements with third parties that
we believe will complement or augment our development and commercialization efforts with respect to our product candidates and any future product
candidates that we may develop. Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term
expenditures, issue securities that dilute our existing stockholders or disrupt our management and business. In addition, we face significant competition in
seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to
establish a strategic partnership or other alternative arrangements for our product candidates because they may be deemed to be at too early of a stage of
development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and
efficacy. Any delays in entering into new strategic partnership agreements related to our product candidates could delay the development and
commercialization of our product candidates in certain geographies for certain indications, which would harm our business prospects, financial condition
and results of operations.
If we license products or businesses, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with
our existing operations and company culture. For instance, our License and Collaboration Agreement (the Regeneron Agreement) with Regeneron
Pharmaceuticals, Inc. (Regeneron) requires significant research and development commitments that may not result in the development and
commercialization of product candidates. We cannot be certain that, following a strategic transaction or license, we will achieve the results, revenue or
specific net income that justifies such transaction, which could have a material adverse effect on our business and results of operations.
Risks Related to Business Disruptions
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.
Our operations, and those of our CMO, CROs and other contractors and consultants, could be subject to earthquakes, power shortages,
telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics, such as the COVID-19
pandemic, and other natural or man-made disasters or business interruptions. The occurrence of any of these business disruptions could seriously harm our
operations and financial condition and increase our costs and expenses.
Our ability to manufacture our product candidates could be disrupted if our operations or those of our suppliers are affected by a man-made or natural
disaster, the severity and frequency of which may be amplified by global climate change, or other business interruptions. We have facilities located in
California near major earthquake faults and fire zones. The ultimate impact on us, our significant suppliers and our general infrastructure of being located
near major earthquake faults and fire zones and being consolidated in certain geographical areas is unknown, but our operations and financial condition
could suffer in the event of a major earthquake, fire or other natural disaster.
A pandemic, epidemic or outbreak of an infectious disease, such as the ongoing COVID-19 pandemic, may materially and adversely affect our business
and operations.
Our business, financial position, results of operations or cash flows may be affected by the ongoing global COVID-19 pandemic and the resulting
volatility and uncertainty it has caused, and is likely to continue to cause, in the United States and international markets, including as a result of prolonged
economic downturn or recession. Since January 2020, the COVID-19 pandemic has spread around the world. The continued spread of COVID-19, despite
progress in vaccination efforts, has resulted in significant governmental measures being implemented to control the spread of COVID-19 and its variants,
including quarantines, travel restrictions, social distancing and business shutdowns. Such measures have had, and are likely to continue to have, adverse
impacts on the United States economy of uncertain severity and duration and may negatively impact our operations and those of third parties on which we
rely, including by causing disruptions in the supply of our product candidates and the conduct of current and future clinical trials. In addition, the COVID-
19 pandemic has affected and may further affect the operations of the FDA and other health authorities, which could result in delays of reviews and
approvals, including with respect to our product candidates. The ongoing COVID-19 pandemic is also likely to directly or indirectly impact the pace of
enrollment in our future clinical trials as patients may avoid or may not be able to travel to healthcare facilities and physicians’ offices unless
57
due to a health emergency, and clinical trial sites may be less willing to enroll patients in clinical trials that may compromise a person’s immune system.
Such facilities and offices may also be required to focus limited resources on non-clinical trial matters, including treatment of COVID-19 patients, and may
not be available, in whole or in part, for clinical trial services related to ADI-001 or our other product candidates. Additionally, while the ultimate economic
impact brought by, and the duration of the COVID-19 pandemic is difficult to assess or predict, the impact of the COVID-19 pandemic on the global
financial markets may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity.
The extent to which the ongoing COVID-19 pandemic may continue to impact our business will depend on future developments, which are highly
uncertain and cannot be predicted with confidence, such as the duration and severity of the pandemic, including the continued emergence of new variants,
developments or perceptions regarding the safety of vaccines, or any additional preventative and protective actions taken to contain the pandemic or treat
its impact. We do not yet know the full extent of potential delays or impacts on our business, financing, or clinical trial activities or on healthcare systems
or the global economy as a whole. However, any of the foregoing risks, or other unforeseen risks related to the COVID-19 pandemic, could have a material
impact on our liquidity, capital resources, operations, and business and those of the third parties on which it relies.
Inadequate funding for the FDA and other government agencies, or disruptions in their staffing levels related to the COVID-19 global pandemic, could
hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in
a timely manner or otherwise prevent those agencies from performing normal business functions on which the approval of our product candidates rely,
which would negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels,
adequate staffing, furloughs, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes.
Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies on which our
operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and
unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government
agencies, which would adversely affect our business. For example, over the last several years, including beginning on December 22, 2018, the U.S.
government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA and other government
employees and stop critical activities. Since March 2020 when foreign and domestic inspections of facilities were largely placed on hold, the FDA has been
working to resume routine surveillance, bioresearch monitoring and pre-approval inspections on a prioritized basis. Since April 2021, the FDA has
conducted limited inspections and employed remote interactive evaluations, using risk management methods, to meet user fee commitments and goal dates.
Ongoing travel restrictions and other uncertainties continue to impact oversight operations both domestic and abroad and it is unclear when standard
operational levels will resume. The FDA is continuing to complete mission-critical work, prioritize other higher-tiered inspectional needs (e.g., for-cause
inspections), and carry out surveillance inspections using risk-based approaches for evaluating public health. Should FDA determine that an inspection is
necessary for approval of a marketing application and an inspection cannot be completed during the review cycle due to restrictions on travel, and the FDA
does not determine a remote interactive evaluation to be adequate, FDA has stated that it generally intends to issue, depending on the circumstances, a
complete response letter or defer action on the application until an inspection can be completed. During the COVID-19 public health emergency, a number
of companies announced receipt of complete response letters due to the FDA's inability to complete required inspections for their applications. Regulatory
authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic and may experience
delays in their regulatory activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and
process our regulatory submissions, which could have a material adverse effect on our business, including our ability to access the public markets and
obtain necessary capital in order to properly capitalize and continue our operations.
Risks Related to Healthcare Regulation
Our relationships with customers, physicians including clinical investigators, clinical research organizations and third-party payors are subject,
directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, health information privacy and security laws,
transparency laws, government price reporting and other healthcare laws and regulations. If we or our employees, independent contractors,
consultants, commercial partners, vendors, or other agents violate these laws, we could face substantial penalties.
These laws may impact, among other things, our clinical research program, as well as our proposed and future sales, marketing, and education
programs. In particular, the promotion, sales and marketing of healthcare items and services is subject to extensive laws and regulations designed to prevent
fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting,
marketing and promotion, sales commission, customer incentive and other business arrangements. We may also be subject to federal, state and foreign laws
governing the privacy and
58
security of identifiable patient information. See the section entitled “Business – Government Regulation and Product Approval - Other United States
Healthcare Laws and Compliance Requirements” elsewhere in this Annual Report on Form 10-K.
Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, it is possible that some of
our business activities, or our arrangements with physicians, could be subject to challenge under one or more of such laws. If we or our employees,
independent contractors, consultants, commercial partners and vendors violate these laws, we may be subject to investigations, enforcement actions and/or
significant penalties.
We have adopted a code of business conduct and ethics, but it is not always possible to identify and deter employee misconduct or business
noncompliance, and the precautions we take to detect and prevent inappropriate conduct may not be effective in controlling unknown or unmanaged risks
or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or
regulations. Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. It is possible that
governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law
interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in
defending themselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and
administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare
programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if we become
subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment of our operations,
any of which could adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of any
of our product candidates outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other
foreign laws.
Data protection, privacy and similar laws restrict access, use, and disclosure of information, and failure to comply with or adapt to changes in these
laws could materially and adversely harm our business.
We are subject to federal and state data privacy and security laws and regulations and Laws and expectations relating to privacy continue to evolve.
Changes in these laws may limit our data access, use, and disclosure, and may require increased expenditures. In addition, data protection, privacy and
similar laws protect more than patient information and, although they vary by jurisdiction, these laws can extend to employee information, business contact
information, provider information, and other information relating to identifiable individuals. For example, the California Consumer Privacy Act requires
covered businesses to, among other things, provide disclosures to California consumers regarding the collection, use and disclosure of such consumers’
personal information and afford such consumers new rights with respect to their personal information, including the right to opt out of certain sales of
personal information. In addition, the CPRA as well as comprehensive privacy laws in Colorado and Virginia will become effective in 2023. Further,
numerous other states have proposed similar privacy laws. We believe that further increased regulation in additional jurisdictions is likely in the area of
data privacy. Any of the foregoing may have a material adverse effect on our ability to provide services to patients and, in turn, our results of operations
The collection and use of personal data in the European Union (EU) are governed by the GDPR. The GDPR imposes stringent requirements for
controllers and processors of personal data, including, for example, more robust disclosures to individuals and a strengthened individual data rights regime,
shortened timelines for data breach notifications, limitations on retention of information, increased requirements pertaining to special categories of data,
such as health data, and additional obligations when we contract with third-party processors in connection with the processing of the personal data. The
GDPR also imposes strict rules on the transfer of personal data out of the European Union to the United States and other third countries. In addition, the
GDPR provides that EU member states may make their own further laws and regulations limiting the processing of personal data, including genetic,
biometric or health data.
The GDPR applies extraterritorially, and we may be subject to the GDPR because of our data processing activities that involve the personal data of
individuals located in the European Union, such as in connection with our EU clinical trials. Failure to comply with the requirements of the GDPR and the
applicable national data protection laws of the EU member states may result in fines of up to €20,000,000 or up to 4% of the total worldwide annual
turnover of the preceding financial year, whichever is higher, and other administrative penalties. GDPR regulations may impose additional responsibility
and liability in relation to the personal data that our processes and we may be required to put in place additional mechanisms to ensure compliance with the
new data protection rules. This may be onerous and may interrupt or delay our development activities, and adversely affect our business, financial
condition, results of operations and prospects.
In addition, many jurisdictions outside of Europe are also considering and/or enacting comprehensive data protection legislation. We also continue to
see jurisdictions imposing data localization laws. These regulations may interfere with our intended business activities, inhibit our ability to expand into
those markets or prohibit us from continuing to offer services in those markets without significant additional costs. Because the interpretation and
application of many privacy and data protection laws (including the GDPR), commercial frameworks, and standards are uncertain, it is possible that these
laws, frameworks, and
59
standards may be interpreted and applied in a manner that is inconsistent with our existing data management practices and policies. If so, in addition to the
possibility of fines, lawsuits, breach of contract claims, and other claims and penalties, we could be required to fundamentally change our business
activities and practices or modify our solutions, which could have an adverse effect on our business. Any inability to adequately address privacy and
security concerns, even if unfounded, or comply with applicable privacy and security or data security laws, regulations, and policies, could result in
additional cost and liability to us, damage our reputation, inhibit our ability to conduct trials, and adversely affect our business
Data protection, privacy and similar laws protect more than patient information and, although they vary by jurisdiction, these laws can extend to
employee information, business contact information, provider information, and other information relating to identifiable individuals. Failure to comply with
these laws may result in, among other things, civil and criminal liability, negative publicity, damage to our reputation, and liability under contractual
provisions. In addition, compliance with such laws may require increased costs to us or may dictate that wet not offer certain types of services in the future.
Risks Related to Litigation
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product
candidates.
We face an inherent risk of product liability as a result of the future clinical testing of our product candidates and will face an even greater risk if we
commercialize any products. For example, we may be sued if our product candidates cause or are perceived to cause injury or are found to be otherwise
unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing,
defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted
under state consumer protection acts. If we cannot successfully defend themselves against product liability claims, we may incur substantial liabilities or be
required to limit commercialization of our product candidates. Even successful defense would require significant financial and management resources.
Regardless of the merits or eventual outcome, liability claims may result in:
•
•
•
•
•
•
•
•
•
•
•
decreased demand for our product candidates;
injury to our reputation;
withdrawal of clinical trial participants;
initiation of investigations by regulators;
costs to defend the related litigation;
a diversion of management’s time and our resources;
substantial monetary awards to trial participants or patients;
product recalls, withdrawals or labeling, marketing or promotional restrictions;
loss of revenue;
exhaustion of any available insurance and our capital resources; and
the inability to commercialize any product candidate.
Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or
inhibit the commercialization of products we develop, alone or with corporate collaborators. Our insurance policies may also have various exclusions, and
we may be subject to a product liability claim for which we have no coverage. Assuming we obtain clinical trial insurance for our clinical trials, we may
have to pay amounts awarded by a court or negotiated in a settlement that exceeds our coverage limitations or that are not covered by our insurance, and we
may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any future corporate collaborators entitle it to
indemnification against losses, such indemnification may not be available or adequate should any claim arise.
60
Risks Related to Our Financial Position
Raising funds through lending arrangements may restrict our operations or produce other adverse results.
Our current Loan and Security Agreement with Pacific Western Bank, as amended on October 21, 2021 (the Loan Agreement), sets the interest rate of
the term loans under the Loan Agreement at the greater of (i) 0.25% above the Prime Rate then in effect and (ii) 4.25%. The Loan Agreement contains a
variety of affirmative and negative covenants, including required financial reporting, limitations on certain dispositions of assets, limitations on the
incurrence of additional debt and other requirements. To secure our performance of our obligations under this Loan Agreement, we granted a security
interest in substantially all of our assets, other than certain intellectual property assets, to Pacific Western Bank and issued a warrant to purchase our capital
stock. Our failure to comply with the covenants in the Loan Agreement, the occurrence of a material impairment in our prospect of repayment operations,
business or financial condition, our ability to repay the loan, or in the value, perfection or priority of Pacific Western Bank’s lien on our assets, as
determined by Pacific Western Bank, or the occurrence of certain other specified events could result in an event of default that, if not cured or waived,
could result in the acceleration of all or a substantial portion of our debt, potential foreclosure on our assets and other adverse results. Additionally, we are
bound by certain negative covenants setting forth actions that are not permitted to be taken during the term of the Loan Agreement without consent of
Pacific Western Bank, including, without limitation, incurring certain additional indebtedness, making certain asset dispositions, entering into certain
mergers, acquisitions or other business combination transactions or incurring any non-permitted lien or other encumbrance on our assets. The foregoing
prohibitions and constraints on our operations could result in our inability to: (a) acquire promising intellectual property or other assets on desired timelines
or terms; (b) reduce costs by disposing of assets or business segments no longer deemed advantageous to retain; (c) stimulate further corporate growth or
development through the assumption of additional debt; or (d) enter into other arrangements that necessitate the imposition of a lien on corporate assets.
Moreover, if the conditions set forth in the consent provided by Pacific Western Bank are not satisfied, we would effectively need to terminate the Loan
Agreement and repay any outstanding loan funds or refinance the facility with another lender. As of the date of this Annual Report on Form 10-K, no
amounts have been drawn under the Loan Agreement.
Failure to achieve and maintain effective internal control over financial reporting could harm our business and negatively impact the value of our
common stock.
Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure
controls and procedures, are designed to prevent fraud. 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 control over financial reporting that are
deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements, or may identify other areas for further
attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a
negative effect on the trading price of our stock.
We are required to disclose changes made in our internal controls and procedures on a quarterly basis and our management is required to assess the
effectiveness of these controls annually. However, for as long as we are an emerging growth company (EGC) or a smaller reporting company (SRC), our
independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to
Section 404. We will remain an EGC until the earliest to occur of: (1) the last day of the fiscal year in which we have more than $1.07 billion in annual
revenue; (2) the date we qualify as a large accelerated filer, with at least $700.0 million of equity securities held by non-affiliates; (3) the date on which we
have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period; or (4) the last day of the fiscal year ending after the
fifth anniversary of our initial public offering, which would be December 31, 2023.
We will qualify as a SRC if the market value of our common stock held by non-affiliates is below $250 million (or $700 million if our annual revenue is
less than $100 million) as of June 30 in any given year. An independent assessment of the effectiveness of our internal control over financial reporting
could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal control over financial reporting could
lead to financial statement restatements and require us to incur the expense of remediation.
We and our independent registered public accounting firm previously identified material weaknesses in our internal control over financial reporting,
which have since been remediated. Nevertheless, if we experience additional material weaknesses or deficiencies in the future or otherwise fail to
establish and maintain effective internal controls, we may be unable to produce timely and accurate financial statements, and we may conclude that
our internal control over financial reporting is not effective, which could adversely impact our investors’ confidence and our stock price.
In our Annual Report on Form 10-K for the year ended December 31, 2020, we reported material weaknesses in our internal control over financial
reporting related to deficiencies in our controls over the financial statement close process, including over complex accounting issues, expense classification
and accrued research and development expenses, as well as the cash disbursement process. During 2021, we took a number of actions to improve our
internal control over financial reporting to remediate these material weaknesses, including the hiring key personnel, implementing an Enterprise Resource
Planning (ERP) system, and augmenting our controls to enhance our control environment. As a result of these efforts, management has concluded
61
that the previously disclosed material weaknesses have been remediated as of December 31, 2021.
We expect to continue our efforts to improve our control processes, though there can be no assurance that our efforts will ultimately be successful or
avoid potential future material weaknesses, and we expect to continue incurring additional costs as a result of these efforts. If we are unable to successfully
remediate any future material weaknesses in our internal control over financial reporting, or if we identify any additional material weaknesses, the accuracy
and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding
timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, and
our stock price may decline as a result. We also could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which could
harm our reputation and our financial condition, or divert financial and management resources from our core business.
Risks Related to Taxation
Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
Under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, or the IRC, if a corporation undergoes an “ownership change”
(generally defined as a greater than 50 percentage point change (by value) in the ownership of its equity over a three year period), the corporation’s ability
to use its pre-change net operating loss carryforwards and certain other pre-change tax attributes to offset its post-change income may be limited. We may
have experienced such ownership changes in the past, and we may experience ownership changes in the future as a result of subsequent shifts in our stock
ownership. As of December 31, 2021, we had federal net operating loss carryforwards of approximately $271.6 million, and our ability to utilize those net
operating loss carryforwards could be limited by an “ownership change” as described above.
Comprehensive tax reform legislation could adversely affect our business and financial condition.
The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by
the Internal Revenue Service, or IRS, and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could
adversely affect us or holders of our common stock. In recent years, many changes have been made and changes are likely to continue to occur in the
future.
Additional changes to U.S. federal income tax law are currently being contemplated, and future changes in tax laws could have a material adverse
effect on our business, cash flow, financial condition or results of operations. It cannot be predicted whether, when, in what form, or with what effective
dates, new tax laws may be enacted, or regulations and rulings may be enacted, promulgated or issued under existing or new tax laws, which could result in
an increase in our or our stockholders’ tax liability or require changes in the manner in which we operate in order to minimize or mitigate any adverse
effects of changes in tax law or in the interpretation thereof. You are urged to consult your tax advisor regarding the implications of potential changes in tax
laws on an investment in our common stock.
Risks Related to Third Parties
If our collaboration with Regeneron is terminated, or if Regeneron materially breaches its obligations thereunder, our business, prospects, operating
results, and financial condition would be materially harmed.
Our financial performance may be significantly affected by our Regeneron collaboration that we have entered into to develop next-generation
engineered immune-cell therapeutics with fully human CARs and TCRs directed to disease-specific cell surface antigens in order to enable the precise
engagement and killing of tumor cells. Under the Regeneron Agreement, Regeneron paid us a non-refundable upfront payment of $25.0 million and an
aggregate of $20.0 million of additional payments for research funding as of December 31, 2021, and we will collaborate with Regeneron to identify and
validate targets and develop a pipeline of engineered immune-cell therapeutics for selected targets. Regeneron has the option to obtain development and
commercial rights for a certain number of the product candidates developed by the parties, subject to an option payment for each product candidate. On
January 28, 2022, we received a payment of $20.0 million from Regeneron for exercise of its option to license exclusive rights to ADI-002. If Regeneron
exercises its option on a given product candidate, we then have an option to participate in the development and commercialization for such product. If we
do not exercise our option, we will be entitled to royalties on any future sales of such products by Regeneron. We did not exercise our option to participate
in the development and commercialization of ADI-002. In addition to developing CARs and TCRs for use in novel immune-cell therapies as part of the
collaboration, Regeneron will have the right to use these CARs and TCRs in our other antibody programs outside of the collaboration. Regeneron will also
be entitled to royalties on any future sales of products developed and commercialized by us under the agreement. If Regeneron were to terminate our
collaboration agreement with us, we may not have the resources or skills to replace those of our collaborator, which could require us to seek additional
funding or another collaboration that might not be available on favorable terms or at all, and could cause significant delays in development and/or
commercialization efforts and result in substantial additional costs to us. Termination of such collaboration agreement or the loss of rights provided to us
under such agreement may create substantial new and additional risks to the successful development and commercialization of our products and could
materially harm our financial condition and operating results.
62
Regeneron may change its strategic focus or pursue alternative technologies in a manner that results in reduced, delayed or no revenue to us under the
agreement. Regeneron has a variety of marketed products and product candidates either by itself or under collaboration with other companies, including
some of our competitors, and the corporate objectives of Regeneron may not be consistent with our best interests. Regeneron may change its position
regarding its participation and funding of our and Regeneron joint activities, which may impact our ability to successfully pursue the program.
Our existing and future collaborations will be important to our business. If we are unable to maintain any of these collaborations, or if these
collaborations are not successful, our business could be adversely affected.
We have entered, and plan to enter, into collaborations with other companies, including our collaboration agreement with Regeneron, that we believe
can provide us with additional capabilities beneficial to our business. The collaboration with Regeneron provides us with important technologies, expertise
and funding for our programs and technology, and we expect to receive additional technologies, expertise and funding under this and other collaborations in
the future. Our existing therapeutic collaborations, and any future collaborations we enter into, may pose a number of risks, including the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
collaborators have significant discretion in determining the efforts and resources that they will apply;
collaborators may not perform their obligations as expected;
collaborators may dispute the amounts of payments owed;
collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or may elect not to
continue or renew development or commercialization programs or license arrangements based on clinical trial results, changes in the
collaborators’ strategic focus or available funding, or external factors, such as a strategic transaction that may divert resources or create
competing priorities;
collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product
candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
collaborators could develop independently, or with third parties, products that compete directly or indirectly with our products and product
candidates if the collaborators believe that the competitive products are more likely to be successfully developed or can be commercialized under
terms that are more economically attractive than ours;
product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with our own product candidates or
products, which may cause collaborators to cease to devote resources to the development or commercialization of our product candidates;
collaborators may dispute ownership or rights in jointly developed technologies or intellectual property;
collaborators may fail to comply with applicable legal and regulatory requirements regarding the development, manufacture, sale, distribution or
marketing of a product candidate or product;
collaborators with sales, marketing, manufacturing and distribution rights to one or more of our product candidates that achieve regulatory
approval may not commit sufficient resources to the sale, marketing, manufacturing and distribution of such product or products;
disagreements with collaborators, including disagreements over proprietary rights, contract interpretation, payment obligations or the preferred
course of discovery, development, sales or marketing, might cause delays or terminations of the research, development or commercialization of
product candidates, might lead to additional and burdensome responsibilities for us with respect to product candidates, or might result in
litigation or arbitration, any of which would be time-consuming and expensive;
collaborators may not properly maintain or defend their or our relevant intellectual property rights or may use our proprietary information in such
a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential
litigation and liability;
collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;
if a collaborator of ours is involved in a business combination or cessation, the collaborator might deemphasize or terminate the development or
commercialization of any product candidate licensed to it by us; and
63
•
collaborations may be terminated by the collaborator, and, if terminated, we could be required to raise additional capital to pursue further
development or commercialization of the applicable product candidates, or potentially lose access to the collaborator’s intellectual property.
If our therapeutic collaborations do not result in the successful discovery, development and commercialization of products or if one of our
collaborators terminates our agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration.
If we do not receive the funding we expect under these agreements, our development and commercialization of our technology and product candidates
could be delayed and we may need additional resources to develop product candidates and our technology. All of the risks relating to product discovery,
development, regulatory approval and commercialization described in these risk factors also apply to the activities of our therapeutic collaborators.
In addition to the Regeneron collaboration described above, for some of our programs, we may in the future determine to collaborate with
pharmaceutical and biotechnology companies for discovery, development and potential commercialization of therapeutic products. We face significant
competition in seeking appropriate collaborators because, for example, third parties also have rights to allogeneic T cell technologies. For example, in April
2020, Johnson & Johnson entered into a collaboration agreement with Fate Therapeutics, a company that is also using allogeneic T cell technologies, for up
to four CAR Natural Killer (NK) and CAR-T cell therapies. Our ability to reach a definitive agreement for a collaboration will depend, among other things,
upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s
evaluation of a number of factors. If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may
have to curtail discovery efforts or the development of a product candidate, reduce or delay our development program or one or more of our other
development programs, delay our potential manufacture or commercialization, or reduce the scope of any sales or marketing activities, or increase our
expenditures and undertake development or commercialization activities at our expense. If we elect to fund and undertake discovery, development,
manufacturing or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to
us on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary discovery,
development, manufacturing and commercialization activities, we may not be able to further develop our product candidates, manufacture the product
candidates, bring them to market or continue to develop our technology and our business may be materially and adversely affected.
We are subject to certain exclusivity obligations under our agreement with Regeneron.
During the five-year period following the effective date of the Regeneron agreement, with certain limited exceptions, we may not directly or indirectly
research, develop, manufacture or commercialize a gamma delta immune cell product (ICP) or grant a license to do the foregoing, except pursuant to the
terms of the Regeneron agreement. Both parties also have obligations not to research, develop, manufacture or commercialize an ICP with the same target
as one being developed under a research program or commercialized by a party (and royalty bearing under the agreement), for so long as such activities are
occurring. These exclusivity obligations are limited to engineered gamma delta immune cells to targets reasonably considered to have therapeutic relevance
in oncology. If our collaboration with Regeneron is not successful, including any failure caused by the risks listed in the preceding paragraphs, and the
agreement and research programs are not terminated, we may not be able to enter into collaborations with other companies with respect to ICP’s and our
business could be adversely affected.
The exclusivity obligations under the Regeneron agreement expired on July 29, 2021. Prior to this expiration date, our ability to advance any gamma
delta immune cell therapeutics outside of the scope of the research plan agreed on with Regeneron was limited. The restrictions on internal development
under the Regeneron agreement could lead to delays in our ability to discover and develop gamma delta immune cell therapeutics for targets not covered by
the collaboration with Regeneron and loss of opportunities to obtain additional research funding and advance our own technologies separately from the
Regeneron collaboration. If we are delayed in our ability to advance our technologies due to the Regeneron agreement, our business could be harmed.
We rely and will continue to rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual
duties or meet expected deadlines, we may not be able to obtain regulatory approval of or commercialize our product candidates.
We currently depend and will continue to depend upon independent investigators and collaborators, such as universities, medical institutions, CROs
and strategic partners to conduct our preclinical and clinical trials under agreements with us.
We negotiate budgets and contracts with CROs and study sites, which may result in delays to our development timelines and increased costs. We will
rely heavily on these third parties over the course of our clinical trials, and we control only certain aspects of their activities. Nevertheless, we are
responsible for ensuring that each of our studies is conducted in accordance with applicable protocol, legal, regulatory and scientific standards, and our
reliance on third parties does not relieve us of our regulatory responsibilities. We and these third parties are required to comply with GCPs, which are
regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for product candidates in clinical development. Regulatory
authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of these third parties fail to
comply with applicable GCP regulations, the clinical data generated in our clinical trials may be
64
deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our
marketing applications. We cannot assure you that, upon inspection, such regulatory authorities will determine that any of our clinical trials comply with
the GCP regulations. In addition, our clinical trials must be conducted with biologic product produced under cGMPs and will require a large number of test
patients. Our failure or any failure by these third parties to comply with these regulations or to recruit a sufficient number of patients may require us to
repeat clinical trials, which would delay the regulatory approval process. Moreover, our business may be implicated if any of these third parties violates
federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws.
Any third parties conducting our clinical trials are and will not be our employees and, except for remedies available to us under our agreements with
such third parties, we cannot control whether or not they devote sufficient time and resources to our ongoing preclinical, clinical and nonclinical programs.
These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical
studies or other drug development activities, which could affect their performance on our behalf. If these third parties do not successfully carry out their
contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is
compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our clinical trials may be extended,
delayed or terminated and we may not be able to complete development of, obtain regulatory approval of or successfully commercialize our product
candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase and our
ability to generate revenue could be delayed.
If any of our relationships with trial sites, or any CRO that we may use in the future, terminates, we may not be able to enter into arrangements with
alternative trial sites or CROs or do so on commercially reasonable terms. Switching or adding third parties to conduct our clinical trials will involve
substantial cost and require extensive management time and focus. In addition, there is a natural transition period when a new third party commences work.
As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines.
We currently rely on third parties to manufacture our clinical product supplies, and we may have to rely on third parties to produce and process our
product candidates, if approved.
We currently utilize, and expect to continue to utilize, third parties to manufacture our product candidates. If the field of cell therapy continues to
expand, we may encounter increasing competition and costs for these materials and services. Demand for third-party manufacturing in cell therapy may
grow at a faster rate than existing capacity, which could disrupt our ability to find and retain third-party manufacturers capable of producing sufficient
quantities of our product candidates at an acceptable cost or at all. We have also not yet caused our product candidates to be manufactured or processed on
a commercial scale and may not be able to achieve manufacturing and processing at a commercial scale and therefore may be unable to create an inventory
of mass-produced, off-the-shelf product to satisfy demands for any of our product candidates.
We do not yet have sufficient information to reliably estimate the cost of the commercial manufacturing and processing of our product candidates, and
the actual cost to manufacture and process our product candidates could materially and adversely affect the commercial viability of our product candidates.
As a result, we may never be able to develop a commercially viable product.
In addition, we anticipate reliance on a limited number of third-party manufacturers may adversely affect our operations and exposes us to the
following risks:
• We may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited and the FDA
may have questions regarding any replacement contractor. This may require new testing and regulatory interactions. In addition, a new
manufacturer would have to be educated in, or develop substantially equivalent processes for, production of our products after receipt of FDA
questions, if any.
•
•
•
Our third-party manufacturers might be unable to timely formulate and manufacture our product or produce the quantity and quality required to
meet our clinical and commercial needs, if any.
Contract manufacturers may not be able to execute our manufacturing procedures appropriately.
Our future contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to
supply our clinical trials or to successfully produce, store and distribute our products.
• Manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the Drug Enforcement Administration and corresponding
state agencies to ensure strict compliance with cGMP and other government regulations and corresponding foreign standards. We do not have
control over third-party manufacturers’ compliance with these regulations and standards.
65
• We may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in the
manufacturing process for our products.
•
Our third-party manufacturers could breach or terminate their agreement(s) with us.
If any CMO with whom we contract fails to perform its obligations, we may be forced to manufacture the materials ourselves, for which we may not
have the capabilities or resources, or enter into an agreement with a different CMO, which we may not be able to do on reasonable terms, if at all. In either
scenario, our clinical trials supply could be delayed significantly as we establish alternative supply sources. In some cases, the technical skills required to
manufacture our product candidates may be unique or proprietary to the original CMO and we may have difficulty, or there may be contractual restrictions
prohibiting us from, transferring such skills to a back-up or alternate supplier, or we may be unable to transfer such skills at all. In addition, if we are
required to change CMOs for any reason, we will be required to verify that the new CMO maintains facilities and procedures that comply with quality
standards and with all applicable regulations. We will also need to verify, such as through a manufacturing comparability study, that any new manufacturing
process will produce our product candidates according to the specifications previously submitted to the FDA or another regulatory authority. The delays
associated with the verification of a new CMO could negatively affect our ability to develop product candidates or commercialize our products in a timely
manner or within budget. Furthermore, a CMO may possess technology related to the manufacture of our product candidates that such CMO owns
independently. This would increase our reliance on such CMO or require us to obtain a license from such CMO in order to have another CMO manufacture
our product candidates. In addition, changes in manufacturers often involve changes in manufacturing procedures and processes, which could require that
we conduct bridging studies between our prior clinical supply used in our clinical trials and that of any new manufacturer. We may be unsuccessful in
demonstrating the comparability of clinical supplies which could require the conduct of additional clinical trials.
Our contract manufacturers would also be subject to the same risks we face in developing our own manufacturing capabilities, as described above.
Each of these risks could delay our clinical trials, the approval, if any, of our product candidates by the FDA or the commercialization of our product
candidates or result in higher costs or deprive us of potential product revenue. In addition, we will rely on third parties to perform release tests on our
product candidates prior to delivery to patients. If these tests are not appropriately done and test data are not reliable, patients could be put at risk of serious
harm.
Cell-based therapies rely on the availability of specialty raw materials, which may not be available to us on acceptable terms or at all.
Our product candidates require many specialty raw materials, including viral vectors that deliver the targeting moiety and other genes to the product
candidate. We currently manufacture through contract manufacturers, some of which have limited resources and experience supporting a commercial
product, and such suppliers may not be able to deliver raw materials to our specifications. Those suppliers normally support blood-based hospital
businesses and generally do not have the capacity to support commercial products manufactured under cGMP by biopharmaceutical firms. The suppliers
may be ill-equipped to support our needs, especially in non-routine circumstances like an FDA inspection or medical crisis, such as widespread
contamination. We also do not have contracts with many of these suppliers, and we may not be able to contract with them on acceptable terms or at all.
Accordingly, we may experience delays in receiving key raw materials to support clinical or commercial manufacturing. Additionally, since the beginning
of the COVID-19 pandemic, three vaccines for COVID-19 have received Emergency Use Authorization by the FDA, and one of those later received
marketing approval. Additional vaccines may be authorized or approved in the future. The resultant demand for vaccines and potential for manufacturing
facilities and materials to be commandeered under the Defense Production Act of 1950, or equivalent foreign legislation, may make it more difficult to
obtain materials or manufacturing slots for the materials needed for our clinical trials, which could lead to delays in these trials.
In addition, some raw materials utilized in the manufacture of our candidates are currently available from a single supplier, or a small number of
suppliers. We cannot be sure that these suppliers will remain in business or that they will not be purchased by one of our competitors or another company
that is not interested in continuing to produce these materials for our intended purpose. Further, the lead time needed to establish a relationship with a new
supplier can be lengthy, and we may experience delays in meeting demand in the event we must switch to a new supplier. The time and effort to qualify a
new supplier could result in additional costs, diversion of resources or reduced manufacturing yields, any of which would negatively impact our operating
results. We may be unable to enter into agreements with a new supplier on commercially reasonable terms, which could have a material adverse impact on
our business.
If we or our third-party suppliers use hazardous, non-hazardous, biological or other materials in a manner that causes injury or violates applicable
law, we may be liable for damages.
Our research and development activities involve the controlled use of potentially hazardous substances, including chemical and biological materials.
We and our suppliers are subject to federal, state and local laws and regulations in the United States governing the use, manufacture, storage, handling and
disposal of medical and hazardous materials. Although we believe that our and our suppliers’ procedures for using, handling, storing and disposing of these
materials comply with legally prescribed standards, we and our suppliers cannot completely eliminate the risk of contamination or injury resulting from
medical or
66
hazardous materials. As a result of any such contamination or injury, we may incur liability or local, city, state or federal authorities may curtail the use of
these materials and interrupt our business operations. In the event of an accident, we could be held liable for damages or penalized with fines, and the
liability could exceed our resources. Compliance with applicable environmental laws and regulations is expensive, and current or future environmental
regulations may impair our research, development and production efforts, which could harm our business, prospects, financial condition or results of
operations.
Our internal computer systems, or those used by our CROs or other contractors or consultants, may fail or suffer security breaches.
Our internal computer systems and the systems of our CROs, contractors and consultants are vulnerable to damage from computer viruses and
unauthorized access. Additionally, as a result of the ongoing COVID-19 pandemic, we have transitioned certain of our workforce to a remote working
model. As our employees and our business partners’ employees work from home and access our systems remotely, we may be subject to heightened
security and privacy risks, including the risks of cyberattacks and privacy incidents. While we have not experienced any such material system failure or
security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development
programs and our business operations. For example, the loss of clinical trial data from future clinical trials could result in delays in our regulatory approval
efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or
damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further
development and commercialization of our product candidates could be delayed.
We may not realize the benefits of acquired assets or other strategic transactions.
We actively evaluate various strategic transactions on an ongoing basis. We may acquire other businesses, products or technologies as well as pursue
joint ventures or investments in complementary businesses. The success of our strategic transactions, and any future strategic transactions depends on the
risks and uncertainties involved including:
•
•
•
•
•
•
unanticipated liabilities related to acquired companies or joint ventures;
difficulties integrating acquired personnel, technologies, and operations into our existing business;
retention of key employees;
diversion of management time and focus from operating our business to management of strategic alliances or joint ventures or acquisition
integration challenges;
increases in our expenses and reductions in our cash available for operations and other uses;
disruption in our relationships with collaborators or suppliers as a result of such a transaction; and possible write-offs or impairment charges
relating to acquired businesses or joint ventures.
If any of these risks or uncertainties occur, we may not realize the anticipated benefit of any acquisition or strategic transaction. Additionally, foreign
acquisitions and joint ventures are subject to additional risks, including those related to integration of operations across different cultures and languages,
currency risks, potentially adverse tax consequences of overseas operations and the particular economic, political and regulatory risks associated with
specific countries.
Future acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or
amortization expenses or write-offs of goodwill, any of which could have a material adverse effect on our financial condition.
Risks Related to Government Regulation
Risks Related to Regulatory Approval
The FDA regulatory approval process is lengthy and time-consuming, and we may experience significant delays in the clinical development and
regulatory approval of our product candidates.
The research, testing, manufacturing, labeling, approval, selling, import, export, marketing, and distribution of drug products, including biologics, are
subject to extensive regulation by the FDA and other regulatory authorities in the United States. We are not permitted to market any biological drug product
in the United States until we receive approval of a biologics license application (BLA) from the FDA. We have not previously submitted a BLA to the
FDA, or similar approval filings to comparable
67
foreign authorities. A BLA must include extensive preclinical and clinical data and sufficient supporting information to establish the product candidate’s
safety and effectiveness for each desired indication. The BLA must also include significant information regarding the chemistry, manufacturing and
controls for the product.
We expect the novel nature of our product candidates to create further challenges in obtaining regulatory approval. For example, the FDA has limited
experience with commercial development of allogeneic T cell therapies for cancer. We may also request regulatory approval of future product candidates
by target, regardless of cancer type or origin, which the FDA may have difficulty accepting if our clinical trials only involved cancers of certain origins.
The FDA may also require a panel of experts, referred to as an Advisory Committee, to deliberate on the adequacy of the safety and efficacy data to
support licensure. The opinion of the Advisory Committee, although not binding, may have a significant impact on our ability to obtain licensure of the
product candidates based on the completed clinical trials, as the FDA often adheres to the Advisory Committee’s recommendations. Accordingly, the
regulatory approval pathway for our product candidates may be uncertain, complex, expensive and lengthy, and approval may not be obtained.
We may also experience delays in obtaining regulatory approvals, including but not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
obtaining regulatory authorization to begin a trial, if applicable;
redesigning our study protocols and need to conduct additional studies as may be required by a regulator;
governmental or regulatory delays and changes in regulation or policy relating to the development and commercialization of our product
candidate by the FDA or other comparable foreign regulatory authorities;
the outcome, timing and cost of meeting regulatory requirements established by the FDA, and other comparable foreign regulatory authorities;
the availability of financial resources to commence and complete the planned trials;
negotiating the terms of any collaboration agreements we may choose to initiate or conclude;
reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation
and may vary significantly among different CROs and trial sites;
failure of third-party contractors, such as CROs, or investigators to comply with regulatory requirements, including GCP standards;
clinical sites deviating from trial protocol or dropping out of a trial;
delay or failure in obtaining the necessary approvals from regulators or institutional review boards, or IRBs, in order to commence a clinical trial
at a prospective trial site, or their suspension or termination of a clinical trial once commenced;
Inability to recruit and enroll suitable patients to participate in a trial;
having patients complete a trial, including having patients enrolled in clinical trials dropping out of the trial before the product candidate is
manufactured and returned to the site, or return for post-treatment follow-up;
difficulty in having patients complete a trial or return for post-treatment follow-up;
addressing any patient safety concerns that arise during the course of a trial;
inability to add new clinical trial sites;
varying interpretations of the data generated from our preclinical or clinical trials;
the cost of defending intellectual property disputes, including patent infringement actions brought by third parties;
the effect of competing technological and market developments;
68
•
•
•
•
•
the cost and timing of establishing, expanding and scaling manufacturing capabilities;
inability to manufacture, or obtain from third parties, sufficient quantities of qualified materials under cGMPs, for the completion in preclinical
and clinical studies;
problems with biopharmaceutical product candidate storage, stability and distribution resulting in global supply chain disruptions;
the cost of establishing sales, marketing and distribution capabilities for any product candidate for which we may receive regulatory approval in
regions where we choose to commercialize our products on our own; or
potential unforeseen business disruptions or market fluctuations that delay our product development or clinical trials and increase our costs or
expenses, such as business or operational disruptions, delays, or system failures due to malware, unauthorized access, terrorism, war, natural
disasters, strikes, geopolitical conflicts, restrictions on trade, import or export restrictions, or public health crises, such as the ongoing COVID-19
pandemic.
We could also encounter delays if physicians encounter unresolved ethical issues associated with enrolling patients in clinical trials of our product
candidates in lieu of prescribing existing treatments that have established safety and efficacy profiles. Further, a clinical trial may be suspended or
terminated by us, the IRBs for the institutions in which such trials are being conducted or by the FDA or other regulatory authorities due to a number of
factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial
operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, safety issues or adverse side effects, failure
to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions, lack of adequate funding to
continue the clinical trial, or based on a recommendation by the Data Safety Monitoring Committee. If we experience termination of, or delays in the
completion of, any clinical trial of our product candidates, the commercial prospects for our product candidates will be harmed, and our ability to generate
product revenue will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product development and
approval process and jeopardize our ability to commence product sales and generate revenue.
Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may ultimately lead to the denial of regulatory
approval of our product candidates.
We expect the product candidates we develop will be regulated as biological products, or biologics, and therefore they may be subject to competition
sooner than anticipated.
The Biologics Price Competition and Innovation Act (BPCIA) was enacted as part of the Affordable Care Act to establish an abbreviated pathway for
the approval of biosimilar and interchangeable biological products. The regulatory pathway establishes legal authority for the FDA to review and approve
biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an approved biologic. Under the
BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the reference product was approved under a BLA. The
law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to
uncertainty. While it is uncertain when such processes intended to implement the BPCIA may be fully adopted by the FDA, any such processes could have
a material adverse effect on the future commercial prospects for our biological products.
We believe that any of the product candidates we develop that are approved in the United States as a biological product under a BLA should qualify
for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, potentially
creating the opportunity for generic competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for
any one of the reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a
number of marketplace and regulatory factors that are still developing.
The regulatory landscape that will govern our product candidates is uncertain; regulations relating to more established cell therapy products are still
developing, and changes in regulatory requirements could result in delays or discontinuation of development of our product candidates or unexpected
costs in obtaining regulatory approval.
Government authorities in the United States at the federal, state and local level and in other countries regulate, among other things, the research,
development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-
approval monitoring and reporting, marketing and export and import of drug and biological products. Generally, before a new drug or biologic can be
marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority,
submitted for review and approved by the regulatory authority.
69
Because we are developing novel allogeneic cell immunotherapy product candidates, the regulatory requirements that we will be subject to are not
entirely clear. Even with respect to more established products that fit into the category of cell therapies, the regulatory landscape is still developing. For
example, regulatory requirements governing cell therapy products have changed frequently and may continue to change in the future. Moreover, there is
substantial, and sometimes uncoordinated, overlap in those responsible for regulation of existing cell therapy products.
Complex regulatory environments exist in other jurisdictions in which we might consider seeking regulatory approvals for our product candidates,
further complicating the regulatory landscape. For example, in the EU a special committee called the Committee for Advanced Therapies (CAT) was
established within the EMA in accordance with Regulation (EC) No 1394/2007 on advanced-therapy medicinal products (ATMPs) to assess the quality,
safety and efficacy of ATMPs, and to follow scientific developments in the field. ATMPs include somatic cell therapy products and tissue engineered
products. These various regulatory review committees and advisory groups and new or revised guidelines that they promulgate from time to time may
lengthen the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and
interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or restrictions.
Because the regulatory landscape for our gamma delta CAR-T cell product candidates is new, we may face even more cumbersome and complex
regulations than those emerging for cell therapy products. Furthermore, even if our product candidates obtain required regulatory approvals, such approvals
may later be withdrawn as a result of changes in regulations or the interpretation of regulations by applicable regulatory agencies.
Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease
our ability to generate sufficient product revenue to maintain our business.
The FDA may disagree with our regulatory plan and we may fail to obtain regulatory approval of our product candidates.
The general approach for FDA approval of a new biologic or drug is for the sponsor to provide dispositive data from two well-controlled, Phase 3
clinical studies of the relevant biologic or drug in the relevant patient population. Phase 3 clinical studies typically involve hundreds of patients, have
significant costs and take years to complete. We expect registrational trials for our product candidates to be designed to evaluate the efficacy of the product
candidate in an open-label, non-comparative, two-stage, pivotal, multicenter, single-arm clinical trial in patients who have exhausted available treatment
options. If the results are sufficiently compelling, we intend to discuss with the FDA submission of a BLA for the relevant product candidate. However, we
do not have any agreement or guidance from the FDA that its regulatory development plans will be sufficient for submission of a BLA. In addition, the
FDA may only allow us to evaluate patients that have failed or who are ineligible for autologous therapy, which are extremely difficult patients to treat and
patients with advanced and aggressive cancer, and our product candidates may fail to improve outcomes for such patients.
The FDA may grant accelerated approval for our product candidates and, as a condition for accelerated approval, the FDA may require a sponsor of a
drug or biologic receiving accelerated approval to perform post marketing studies to verify and describe the predicted effect on irreversible morbidity or
mortality or other clinical endpoint, and the drug or biologic may be subject to withdrawal procedures by the FDA that are more accelerated than those
available for regular approvals. In addition, the standard of care may change with the approval of new products in the same indications that we are
studying. This may result in the FDA or other regulatory agencies requesting additional studies to show that our product candidate is superior to the new
products.
Our clinical trial results may also not support approval. In addition, our product candidates could fail to receive regulatory approval for many reasons,
including the following:
•
•
•
•
•
•
the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;
we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that our product candidates are safe
and effective for any of their proposed indications;
the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for
approval, including due to the heterogeneity of patient populations;
we may be unable to demonstrate that our product candidates’ clinical and other benefits outweigh their safety risks;
the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;
the data collected from clinical trials of our product candidates may not be sufficient to the satisfaction of the FDA or comparable foreign
regulatory authorities to support the submission of a BLA or other comparable submission in foreign jurisdictions or to obtain regulatory
approval in the United States or elsewhere;
70
•
•
the FDA or comparable foreign regulatory authorities will inspect our commercial manufacturing facility and may not approve our facility; and
the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our
clinical data insufficient for approval.
We may seek orphan drug designation for some or all of our product candidates across various indications, but we may be unable to obtain such
designations or to maintain the benefits associated with orphan drug designation, including market exclusivity, which may cause our revenue, if any, to
be reduced.
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, defined as a
disease or condition with a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States
when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United States will be recovered from
sales in the United States for that drug or biologic. In order to obtain orphan drug designation, the request must be made before submitting a BLA. In the
U.S., orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and
user-fee waivers. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the
FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
If a product that has orphan drug designation subsequently receives the first FDA approval of that particular product for the disease for which it has
such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a
BLA, to market the same biologic (meaning, a product with the same principal molecular structural features) for the same indication for seven years, except
in limited circumstances such as a showing of clinical superiority to the product with orphan drug exclusivity or if FDA finds that the holder of the orphan
drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or
condition for which the drug was designated. As a result, even if one of our product candidates receives orphan exclusivity, the FDA can still approve other
biologics that do not have the same principal molecular structural features for use in treating the same indication or disease or the same biologic for a
different indication or disease during the exclusivity period. Furthermore, the FDA can waive orphan exclusivity if we are unable to manufacture sufficient
supply of our product or if a subsequent applicant demonstrates clinical superiority over our products.
We may seek orphan drug designation for some or all of our product candidates in specific orphan indications in which there is a medically plausible
basis for the use of these products. Even if we obtain orphan drug designation, exclusive marketing rights in the United States may be limited if we seek
approval for an indication broader than the orphan designated indication and may be lost if the FDA later determines that the request for designation was
materially defective or if we are unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition, or if a
subsequent applicant demonstrates clinical superiority over our products, if approved. In addition, although we may seek orphan drug designation for other
product candidates, we may never receive such designations.
Regenerative Medicine Advanced Therapy (RMAT) designation, even if granted for any of our product candidates, may not lead to a faster
development or regulatory review or approval process and it does not increase the likelihood that our product candidates will receive marketing
approval.
We may seek RMAT designation for one or more of our product candidates. In 2017, the FDA established the RMAT designation to expedite review
of a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, with
limited exceptions intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition and for which preliminary clinical evidence
indicates that the potential to address unmet medical needs for such a disease or condition. RMAT designation provides potential benefits that include more
frequent meetings with FDA to discuss the development plan for the product candidate, and eligibility for rolling review and priority review. Products
granted RMAT designation may also be eligible for accelerated approval on the basis of a surrogate or intermediate endpoint reasonably likely to predict
long-term clinical benefit, or reliance upon data obtained from a meaningful number of sites, including through expansion to additional sites. There is no
assurance that we will be able to obtain RMAT designation for any of our product candidates. RMAT designation does not change the FDA’s standards for
product approval, and there is no assurance that such designation will result in expedited review or approval or that the approved indication will not be
narrower than the indication covered by the designation. Additionally, RMAT designation can be revoked if the criteria for eligibility cease to be met as
clinical data emerges.
71
Positive results from early preclinical studies and clinical trials are not necessarily predictive of the results of any future clinical trials of our product
candidates, and may change as more patient data becomes available and is subject to audit and verification procedures that could result in material
changes in the final data. If we cannot replicate the positive results from our earlier preclinical studies and clinical trials of our product candidates in
our future clinical trials, we may be unable to successfully develop, obtain regulatory approval for and commercialize our product candidate.
From time to time, we may publish interim, top-line or preliminary results from our preclinical studies or clinical trials. Such clinical results 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.
Preliminary or top-line results 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, interim and preliminary data should be viewed with caution until the final data are available. 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 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. Preliminary or “top line” 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 announced. As a result, interim,
“top-line,” and preliminary data should be viewed with caution until the final data are available. Adverse differences between preliminary or interim data
and final data could significantly harm our business prospects. It is also difficult to predict the timing of announcing interim results.
Accordingly, any positive results from our preclinical studies and ongoing and future clinical trials of our product candidates may not necessarily be
predictive of the results from required later clinical trials. Similarly, even if we are able to complete our planned preclinical studies or any future clinical
trials according to our current development timeline, the positive results from such preclinical studies and clinical trials may not be replicated in subsequent
preclinical studies or clinical trial results.
Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving
positive results in early-stage development, and we cannot be certain that we will not face similar setbacks. These setbacks have been caused by, among
other things, preclinical findings made while clinical trials were underway, or safety or efficacy observations made in preclinical studies and clinical trials,
including previously unreported adverse events. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses and
many companies that believed their product candidate performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain FDA or
similar regulatory approval.
If the clinical updates, or the interim, "top-line", or preliminary data that we report differ from actual results, or if others, including regulatory
authorities, disagree with the conclusions reached, our ability to obtain approval for and commercialize our product candidates, our business, operating
results, prospects or financial condition may be harmed.
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining
regulatory approval of our product candidates in other jurisdictions.
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or
maintain regulatory approval in any other jurisdiction, while a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative
effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory
authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate in those countries. Approval
procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United
States, including additional preclinical studies or clinical trials as clinical studies conducted in one jurisdiction may not be accepted by regulatory
authorities in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be
approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.
We may also submit marketing applications in other countries. Regulatory authorities in jurisdictions outside of the United States have requirements
for approval of product candidates with which we must comply prior to marketing in those jurisdictions. Obtaining foreign regulatory approvals and
compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction
of our products in certain countries. If we fail to comply with the regulatory requirements in international markets and/or receive applicable marketing
approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.
Additionally, on June 23, 2016, the UK held a referendum in which a majority of voters approved an exit from the EU, or Brexit, and the UK formally
left the EU on January 31, 2020. There was a transition period during which EU pharmaceutical laws continued to apply to the UK, which expired on
December 31, 2020. However, the EU and the UK have concluded a trade and cooperation agreement, or TCA, which was provisionally applicable since
January 1, 2021 and has been formally applicable since May 1, 2021. The TCA includes specific provisions concerning pharmaceuticals, which include the
mutual recognition of GMP, inspections of manufacturing facilities for medicinal products and GMP documents issued, but does not foresee wholesale
72
mutual recognition of UK and EU pharmaceutical regulations. At present, Great Britain has implemented EU legislation on the marketing, promotion and
sale of medicinal products through the Human Medicines Regulations 2012 (as amended) (under the Northern Ireland Protocol, the EU regulatory
framework will continue to apply in Northern Ireland). The regulatory regime in Great Britain therefore currently aligns in the most part with EU
regulations, however it is possible that these regimes will diverge in future now that Great Britain’s regulatory system is independent from the EU and the
TCA does not provide for mutual recognition of UK and EU pharmaceutical legislation. For example, the new Clinical Trials Regulation, which became
effective in the EU on January 31, 2022 and provides for a streamlined clinical trial application and assessment procedure covering multiple EU Member
States, has not been implemented into UK law, and a separate application will need to be submitted for clinical trial authorization in the UK. The separate,
and potentially diverging, regulatory regimes between Great Britain and the EU may increase our regulatory burden of applying for and obtaining
authorization in Great Britain and the EU.
Even if we receive regulatory approval of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review,
which may result in significant additional expense and we may be subject to penalties if we fail to comply with regulatory requirements or experience
unanticipated problems with our product candidates.
Any regulatory approvals that we receive for our product candidates will require post-market surveillance to monitor the safety and efficacy of the
product candidate. The FDA may also require a risk evaluation and mitigation strategy (REMS), in order to approve our product candidates, which could
entail requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution
methods, patient registries and other risk minimization tools. In addition, if the FDA or a comparable foreign regulatory authority approves our product
candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and
recordkeeping for our product candidates will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of
safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs and GCPs for any clinical trials that we
conduct post-approval. As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMPs
and adherence to commitments made in any BLA, other marketing application and previous responses to inspectional observations. Accordingly, we and
others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and
quality control. In addition, the FDA could require us to conduct another study to obtain additional safety or biomarker information.
Further, we will be required to comply with FDA's promotion and advertising rules, which include, among others, standards for direct-to-consumer
advertising, restrictions on promoting products for uses or in patient populations that are not described in the product’s approved uses (known as “off-label
use”), limitations on industry-sponsored scientific and educational activities and requirements for promotional activities involving the internet and social
media. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to
have improperly promoted off-label may be subject to significant liability. However, physicians may, in their independent medical judgment, prescribe
legally available products for off-label uses. The FDA does not regulate the behavior of physicians in their choice of treatments, but the FDA does restrict
manufacturer’s communications on the subject of off-label use of their products. Later discovery of previously unknown problems with our product
candidates, including adverse events of unanticipated severity or frequency, or with our third-party suppliers or 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. Other potential
consequences include, among other things:
•
•
•
•
•
restrictions on the marketing or manufacturing of our product candidates, withdrawal of the product from the market or voluntary or mandatory
product recalls;
fines, warning letters or holds on clinical trials;
refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license
approvals;
product seizure or detention, or refusal to permit the import or export of our product candidates; and
injunctions or the imposition of civil or criminal penalties.
The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or
delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future
legislation or administrative or executive action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements
or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may
have obtained and we may not achieve or sustain profitability.
73
Even if we obtain regulatory approval of our product candidates, the products may not gain market acceptance among physicians, patients, hospitals,
cancer treatment centers and others in the medical community, adversely affecting our ability to achieve our commercial and financial projections.
The use of engineered gamma delta T cells as a potential cancer treatment is a recent development and may not become broadly accepted by
physicians, patients, hospitals, cancer treatment centers and others in the medical community. We expect physicians in the large bone marrow transplant
centers to be particularly important to the market acceptance of our products and we may not be able to educate them on the benefits of using our product
candidates for many reasons. Additional factors will influence whether our product candidates are accepted in the market, including:
•
•
•
•
•
•
•
•
•
•
•
•
the clinical indications for which our product candidates are approved;
physicians, hospitals, cancer treatment centers and patients considering our product candidates as a safe and effective treatment;
the potential and perceived advantages of our product candidates over alternative treatments;
the prevalence and severity of any side effects;
product labeling or product insert requirements of the FDA or other regulatory authorities;
limitations or warnings contained in the labeling approved by the FDA;
the timing of market introduction of our product candidates as well as competitive products;
the cost of treatment in relation to alternative treatments;
the availability of coverage and adequate reimbursement and pricing by third-party payors and government authorities;
the willingness of patients to pay out-of-pocket in the absence of coverage and adequate reimbursement by third-party payors and government
authorities;
relative convenience and ease of administration, including as compared to alternative treatments and competitive therapies; and
the effectiveness of our sales and marketing efforts.
If our product candidates are approved but fail to achieve market acceptance among physicians, patients, hospitals, cancer treatment centers or others
in the medical community, we will not be able to generate significant revenue. Even if our products achieve market acceptance, we may not be able to
maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our products, are more cost
effective or render our products obsolete.
Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us
to sell our product candidates, if approved, profitably.
Successful sales of our product candidates, if approved, depend on the availability of coverage and adequate reimbursement from third-party payors
including governmental healthcare programs, such as Medicare and Medicaid, managed care organizations and commercial payors, among others.
Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval. In addition,
because our product candidates represent new approaches to the treatment of cancer, we cannot accurately estimate the potential revenue from our product
candidates. See the section entitled “Business – Government Regulation and Product Approval – Coverage, Pricing and Reimbursement” elsewhere in this
Annual Report on Form 10-K.
Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated
with their treatment. Obtaining coverage and adequate reimbursement from third-party payors is critical to new product acceptance.
74
Third-party payors decide which drugs and treatments they will cover and the amount of reimbursement. Reimbursement by a third-party payor may
depend upon a number of factors, including, but not limited to, the third-party payor’s determination that use of a product is:
•
•
•
•
•
a covered benefit under its health plan;
safe, effective and medically necessary;
appropriate for the specific patient;
cost-effective; and
neither experimental nor investigational.
Obtaining coverage and reimbursement of a product from a government or other third-party payor is a time consuming and costly process that could
require us to provide to the payor supporting scientific, clinical and cost-effectiveness data for the use of our products. Even if we obtain coverage for a
given product, if the resulting reimbursement rates are insufficient, hospitals may not approve our product for use in their facility or third-party payors may
require co-payments that patients find unacceptably high. Patients are unlikely to use our product candidates unless coverage is provided, and
reimbursement is adequate to cover a significant portion of the cost of our product candidates. Separate reimbursement for the product itself may or may
not be available. Instead, the hospital or administering physician may be reimbursed only for providing the treatment or procedure in which our product is
used. Further, from time to time, CMS revises the reimbursement systems used to reimburse health care providers, including the Medicare Physician Fee
Schedule and Outpatient Prospective Payment System, which may result in reduced Medicare payments. In some cases, private third-party payers rely on
all or portions of Medicare payment systems to determine payment rates. Changes to government healthcare programs that reduce payments under these
programs may negatively impact payments from private third-party payers and reduce the willingness of physicians to use our product candidates.
In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors. Therefore, coverage and
reimbursement for products can differ significantly from payor to payor. Further, one payor’s determination to provide coverage for a product does not
assure that other payors will also provide coverage for the product. Adequate third-party reimbursement may not be available to enable us to maintain price
levels sufficient to realize an appropriate return on our investment in product development. Because our product candidate may have a higher cost of goods
than conventional therapies, and may require long-term follow-up evaluations, the risk that coverage and reimbursement rates may be inadequate for us to
achieve profitability may be greater. There is significant uncertainty related to insurance coverage and reimbursement of newly approved products. It is
difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our product candidate. Moreover,
payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. Additional state and federal healthcare reform
measures are expected to be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products
and services, which could result in reduced demand for certain pharmaceutical products or additional pricing pressures. Specifically, there have been
several United States Congressional inquiries and federal and state 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. We expect to experience pricing pressures in connection with the sale of any of our product candidates
due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, cost containment initiatives and additional
legislative changes.
We intend to seek approval to market our product candidates in both the United States and in selected foreign jurisdictions. Increased efforts by
governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage
and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our product candidate. If
we obtain approval in one or more foreign jurisdictions for our product candidates, we will be subject to rules and regulations in those jurisdictions. In
some foreign countries, particularly those in Europe, the pricing of biologics is subject to governmental control. In these countries, pricing negotiations
with governmental authorities can take considerable time after obtaining marketing approval of a product candidate. Some of these countries may require
the completion of clinical trials that compare the cost-effectiveness of a particular product candidate to currently available therapies. Other EU member
states allow companies to fix their own prices for medicines but monitor and control company profits. The downward pressure on health care costs has
become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border
imports from low-priced markets exert a commercial pressure on pricing within a country.
The marketability of any product candidates for which we receive regulatory approval for commercial sale may suffer if government and other third-
party payors fail to provide coverage and adequate reimbursement. We expect downward pressure on pharmaceutical pricing to continue. Further, coverage
policies and third-party reimbursement rates may change at any time.
75
Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable
coverage policies and reimbursement rates may be implemented in the future.
The advancement of healthcare reform may negatively impact our ability to sell our product candidates, if approved, profitably.
Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling
healthcare costs. In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health
care system that could impact our ability to sell our product candidates, if approved, profitably. See the section entitled “Business – Government Regulation
and Product Approval – Healthcare Reform” elsewhere in this Annual Report on Form 10-K.
There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the
availability of healthcare and containing or lowering the cost of healthcare. 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.
Additionally, there has been heightened governmental scrutiny in the United States of pharmaceutical and biologics pricing practices in light of the
rising cost of prescription drugs and biologics. Such scrutiny has resulted in various congressional inquiries and proposed and enacted federal and state
legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient
programs, and reform government program reimbursement methodologies for products.
On July 9, 2021, President Biden issued an executive order directing the FDA to, among other things, continue to clarify and improve the approval
framework for generic drugs and biosimilars, including the standards for interchangeability of biological products, facilitate the development and approval
of biosimilar and interchangeable products, clarify existing requirements and procedures related to the review and submission of BLAs, and identify and
address any efforts to impede generic drug and biosimilar competition.
We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S.
Federal Government will pay for healthcare drugs and services, which could result in reduced demand for our drug candidates or additional pricing
pressures. Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to
control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain drug access
and marketing cost disclosure and transparency measures, and designed to encourage importation from other countries and bulk purchasing. Legally
mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, financial condition, results of operations
and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what
pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate
demand for our drugs or put pressure on our drug pricing, which could negatively affect our business, financial condition, results of operations and
prospects. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or
reduce costs of healthcare and/or impose price controls may adversely affect:
•
•
•
•
•
the demand for our product candidates if we obtain regulatory approval;
our ability to set a price that it believes is fair for our products;
our ability to generate revenue and achieve or maintain profitability;
the level of taxes that we are required to pay; and
the availability of capital.
Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors,
which may adversely affect our future profitability.
76
Risks Related to Our Intellectual Property
Risks Related to Our Intellectual Property
If our efforts to protect the proprietary nature of the intellectual property related to our technologies are not adequate, we may not be able to compete
effectively in our market.
We rely upon a combination of patents, trade secret protection and license agreements to protect the intellectual property related to our technologies.
Any disclosure to or misappropriation by third parties of our confidential proprietary information could enable competitors to quickly duplicate or surpass
our technological achievements, thus eroding our competitive position in our market.
Additional patent applications have been filed, and we anticipate additional patent applications will be filed, both in the United States and in other
countries, as appropriate. However, we cannot predict:
•
•
•
•
if and when patents will issue;
the degree and range of protection any issued patents will afford us against competitors including whether third parties will find ways to
invalidate or otherwise circumvent our patents;
whether or not others will obtain patents claiming aspects similar to those covered by our patents and patent applications; or
whether we will need to initiate litigation or administrative proceedings which may be costly whether we win or lose.
Composition of matter patents for biological and pharmaceutical products such as CAR-based product candidates often provide a strong form of
intellectual property protection for those types of products, as such patents provide protection without regard to any method of use. We cannot be certain
that the claims in our pending patent applications covering composition of matter of our product candidates will be considered patentable by the United
States Patent and Trademark Office (USPTO), or by patent offices in foreign countries, or that the claims in any of our issued patents will be considered
valid and enforceable by courts in the United States or foreign countries. Method of use patents protect the use of a product for the specified method. This
type of patent does not prevent a competitor from making and marketing a product that is identical to our product for an indication that is outside the scope
of the patented method. Moreover, even if competitors do not actively promote their product for our targeted indications, physicians may prescribe these
products “off-label.” Although off-label prescriptions may infringe or contribute to the infringement of method of use patents, the practice is common and
such infringement is difficult to prevent or prosecute.
The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. The patent
applications that we own or in-license may fail to result in issued patents with claims that cover our product candidates or uses thereof in the United States
or in other foreign countries. Even if the patents do successfully issue, third parties may challenge the patentability, validity, enforceability or scope thereof,
for example through inter partes review (IPR) post-grant review or ex parte reexamination before the USPTO or oppositions and other comparable
proceedings in foreign jurisdictions, which may result in such patents being cancelled, narrowed, invalidated or held unenforceable. Furthermore, even if
they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing their
products to avoid being covered by our claims. If the breadth or strength of protection provided by the patents and patent applications we hold with respect
to our product candidates is threatened, it could dissuade companies from collaborating with us to develop, and threaten our ability to commercialize, our
product candidates. Further, if we encounter delays in our clinical trials, the period of time during which we could market our product candidates under
patent protection would be reduced. United States patent applications containing or that at any time contained a claim not entitled to a priority date before
March 16, 2013 are subject to the “first to file” system implemented by the America Invents Act (2011).
This first to file system will require us to be cognizant going forward of the time from invention to filing of a patent application. Since patent
applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain that it was the first to file
any patent application related to our product candidates. Furthermore, for United States applications in which all claims are entitled to a priority date before
March 16, 2013, an interference proceeding can be provoked by a third-party or instituted by the USPTO, to determine who was the first to invent any of
the subject matter covered by the patent claims of our applications. For United States applications containing a claim not entitled to priority before March
16, 2013, there is a greater level of uncertainty in the patent law in view of the passage of the America Invents Act, which brought into effect significant
changes to the United States patent laws, including new procedures for challenging patent applications and issued patents.
77
We may not be successful in obtaining or maintaining necessary rights to product components and processes for our development pipeline through
acquisitions and in-licenses.
We may require access to additional intellectual property to develop our current or future product candidates. Accordingly, the growth of our business
will likely depend in part on our ability to acquire, in-license or use these proprietary rights.
Our product candidates may also require specific formulations to work effectively and efficiently and these rights may be held by others. We may be
unable to acquire or in-license any compositions, methods of use, processes or other third-party intellectual property rights from third parties that we
identify. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, which would harm our business. Even if we are able to
obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In that event, we may be required
to expend significant time and resources to develop or license replacement technology. We may need to cease use of the compositions or methods covered
by such third-party intellectual property rights.
The licensing and acquisition of third-party intellectual property rights is a competitive area, and companies, which may be more established, or have
greater resources than we do, may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary or
attractive in order to commercialize our product candidates. More established companies may have a competitive advantage over us due to their size, cash
resources and greater clinical development and commercialization capabilities.
We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming and
unsuccessful.
Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file
infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that one or more of our
patents is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover
the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated, held
unenforceable or interpreted narrowly and could put our patent applications at risk of not issuing. Defense of these claims, regardless of their merit, would
involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of
infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more
licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary
expenditure.
Interference proceedings provoked by third parties or brought by the USPTO may be necessary to determine the priority of inventions with respect to
our patents or patent applications or those of our licensors. An unfavorable outcome could result in a loss of our current patent rights and could require us
to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does
not offer us a license on commercially reasonable terms. Litigation or interference proceedings may result in a decision adverse to our interests and, even if
we are successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent, alone or with our
licensors, misappropriation of our trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as
in the United States.
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, there could 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
substantial adverse effect on the price of our common stock.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other
requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these
requirements.
Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the
patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and
other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other
means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent
application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or
lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees
and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a
material adverse effect on our business.
78
The lives of our patents may not be sufficient to effectively protect our products and business.
Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after its first effective filing date. Although
various extensions may be available, the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are
obtained, once the patent life has expired for a product, we may be open to competition from biosimilar or generic medications. In addition, although upon
issuance in the United States a patient’s life can be increased based on certain delays caused by the USPTO, this increase can be reduced or eliminated
based on certain delays caused by the patent applicant during patent prosecution. If we do not have sufficient patent life to protect our products, our
business and results of operations will be adversely affected.
We may be subject to claims challenging the inventorship of our patents and other intellectual property.
We may in the future be subject to claims that former employees, collaborators, or other third parties have an interest in our patents or other
intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or
others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging
inventorship. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as
exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are
successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
Issued patents covering our product candidates could be found unpatentable, invalid or unenforceable if challenged in court or the USPTO.
If we or one of our licensing partners initiate legal proceedings against a third party to enforce a patent covering one of our product candidates, the
defendant could counterclaim that the patent covering our product candidate, as applicable, is invalid and/or unenforceable. In patent litigation in the
United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and there are numerous grounds upon which a third
party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the United States or
abroad, even outside the context of litigation. Such mechanisms include IPR, ex parte re-examination and post grant review in the United States, and
equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in revocation or amendment to our patents in
such a way that they no longer cover and protect our product candidates. The outcome following legal assertions of unpatentability, invalidity and
unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which
we, our patent counsel and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of unpatentability,
invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of patent
protection could have a material adverse impact on our business.
Risks Related to Third Party Intellectual Property
We depend on intellectual property licensed from third parties and termination of any of these licenses could result in the loss of significant rights,
which would harm our business.
We are dependent on patents, know-how and proprietary technology, both our own and licensed from others. We depend substantially on our license
agreements with Regeneron. These licenses may be terminated upon certain conditions. Any termination of these licenses could result in the loss of
significant rights and could harm our ability to commercialize our product candidates. To the extent these licensors fail to meet their obligations under their
license agreements, which we are not in control of, we may lose the benefits of our license agreements with these licensors. In the future, we may also enter
into additional license agreements that are material to the development of our product candidates.
Disputes may also arise between us and our licensors regarding intellectual property subject to a license agreement, including those related to:
•
•
•
the scope of rights granted under the license agreement and other interpretation-related issues;
whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing
agreement;
our right to sublicense patent and other rights to third parties under collaborative development relationships;
79
•
•
our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product
candidates, and what activities satisfy those diligence obligations; and
the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our
partners.
If disputes over intellectual property that we have licensed or license in the future, prevent or impair our ability to maintain our current licensing
arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.
We are generally also subject to all of the same risks with respect to protection of intellectual property that we license, as we are for intellectual
property that we own, which are described below. If we or our licensors fail to adequately protect this intellectual property, our ability to commercialize
products could suffer.
Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of trade secrets and other proprietary
information.
In addition to the protection afforded by patents, we seek to rely on trade secret protection and confidentiality agreements to protect proprietary know-
how that is not patentable, processes for which patents are difficult to enforce and any other elements of our product discovery and development processes
that involve proprietary know-how, information or technology that is not covered by patents. Trade secrets, however, may be difficult to protect. Although
we require all of our employees to assign their inventions to us, and require all of our employees and key consultants who have access to our proprietary
know-how, information, or technology to enter into confidentiality agreements, we cannot be certain that our trade secrets and other confidential
proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially
equivalent information and techniques. Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same
manner as the laws of the United States As a result, we may encounter significant problems in protecting and defending our intellectual property both in the
United States and abroad. If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, we will not be able to
establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results, and financial
condition.
Third-party claims of intellectual property infringement may prevent or delay our product discovery and development efforts.
Our commercial success depends in part on us avoiding infringement of the patents and proprietary rights of third parties. There is a substantial
amount of litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries. Numerous United States
and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing our product
candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may give
rise to claims of infringement of the patent rights of others.
We are aware of United States and foreign patents held by a third parties relating to gamma delta T cell expansion protocols and related compositions
which, on information and belief, are invalid and/or not infringed. In the event that these patents are successfully asserted against our product candidates,
such as ADI-001 and ADI-002, or the use of our precursor cells in manufacture of these product candidates, such litigation may negatively impact our
ability to commercialize these product candidates in such jurisdictions. We are also aware of several United States and foreign patents held by third parties
relating to certain CAR compositions of matter, methods of making and methods of use which, on information and belief, are invalid and/or not infringed.
Nevertheless, third parties may assert that we infringe their patents or are otherwise employing their proprietary technology without authorization and may
sue us. Generally, conducting clinical trials and other development activities in the United States is not considered an act of infringement. If and when ADI-
001 or ADI-002 or another CAR-based product candidate is approved by the FDA, third parties may then seek to enforce their patents by filing a patent
infringement lawsuit against us. Patents issued in the United States by law enjoy a presumption of validity that can be rebutted only with evidence that is
“clear and convincing,” a heightened standard of proof. We may not be able to prove in litigation that any patent enforced against us is invalid and/or not
infringed.
Additionally, there may be third-party patents of which we are currently unaware with claims to materials, formulations, methods of manufacture or
methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be
currently pending patent applications which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain
patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent
jurisdiction to cover the manufacturing process of our product candidates, constructs or molecules used in or formed during the manufacturing process, or
any final product itself, the holders of any such patents may be able to block our ability to commercialize the product candidate unless we obtained a
license under the applicable patents, or until such patents expire or they are finally determined to be held not infringed, unpatentable, invalid or
unenforceable. Similarly, if any third-party patent were held by a court of competent
80
jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy or patient selection methods,
the holders of any such patent may be able to block our ability to develop and commercialize the product candidate unless we obtained a license or until
such patent expires or is finally determined to be held not infringed, unpatentable, invalid or unenforceable. In either case, such a license may not be
available on commercially reasonable terms or at all. If we are unable to obtain a necessary license to a third-party patent on commercially reasonable
terms, or at all, our ability to commercialize our product candidates may be impaired or delayed, which could in turn significantly harm our business.
Parties making claims against us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop
and commercialize our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a
substantial diversion of employee resources from our business and may impact our reputation. In the event of a successful claim of infringement against us,
we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third
parties, pay royalties, or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. We cannot
predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the
absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates. We
may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and
commercialize our product candidates, which could harm our business significantly.
Risks Related to Intellectual Property Laws
Changes in United States patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and
enforcing patents in the biopharmaceutical industry involve both technological and legal complexity, and is therefore costly, time-consuming and inherently
uncertain. Recent United States Court of Appeals for the Federal Circuit and Supreme Court rulings have narrowed the scope of patent protection available
in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to
obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions
by the United States Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that
would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.
We may not be able to protect our intellectual property rights throughout the world.
We may not be able to protect our intellectual property rights outside the United States Filing, prosecuting, 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 can be 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 state laws in the United States Consequently, we may not be able to prevent third parties from practicing our inventions in all
countries outside the U.S., or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors
may use our technologies in jurisdictions where we 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 our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal
systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property
protection, particularly those relating to biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents or
marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could
result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or
interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any
lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our
intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that it develops
or licenses.
We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of
third parties.
We have received confidential and proprietary information from third parties. In addition, we employ individuals who were previously employed at
other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants or independent contractors have
inadvertently or otherwise used or disclosed confidential information of
81
these third parties or our employees’ former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending
against these claims, litigation could result in substantial cost and be a distraction to our management and employees.
Risks Related to Ownership of Our Common Stock
Risks Related to Ownership Generally
An active trading market for our common stock may not be sustained. If an active trading market is not sustained, our ability to raise capital in the
future may be impaired.
Our shares began trading on The Nasdaq Global Select Market on January 26, 2018. Given the limited trading history of our common stock, there is a
risk that an active trading market for our shares may not be sustained, which could put downward pressure on the market price of our common stock and
thereby affect your ability to sell shares you purchased. An inactive trading market for our common stock may also impair our ability to raise capital to
continue to fund our operations by selling shares and impair our ability to acquire other companies or technologies by using our shares as consideration.
The trading price of our common stock highly volatile, which could result in substantial losses for purchasers of our common stock. Securities class
action or other litigation involving our company or members of our management team could also substantially harm our business, financial condition
and results of operations.
Our stock price is highly volatile. The stock market in general and the market for smaller pharmaceutical and biotechnology companies in particular
have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you
may not be able to sell your common stock at or above the purchase price and you may lose some or all of your investment. The market price for our
common stock may be influenced by many factors, including:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the success of existing or new competitive products or technologies;
regulatory actions with respect to our product candidates or our competitors’ products and product candidates;
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital
commitments;
the timing and results of clinical trials of ADI-001 in NHL;
commencement or termination of collaborations for our development programs;
failure or discontinuation of any of our development programs;
results of clinical trials of product candidates of our competitors;
regulatory or legal developments in the United States and other countries;
developments or disputes concerning patent applications, issued patents or other proprietary rights;
the recruitment or departure of key personnel;
the level of expenses related to any of our product candidates or clinical development programs;
the results of our efforts to develop additional product candidates or products;
actual or anticipated changes in estimates as to financial results or development timelines;
announcement or expectation of additional financing efforts;
sales of our common stock by us, our insiders or other stockholders;
variations in our financial results or those of companies that are perceived to be similar to us;
changes in estimates or recommendations by securities analysts, if any, that cover us;
changes in the structure of healthcare payment systems;
market conditions in the pharmaceutical and biotechnology sectors;
general economic, industry and market conditions; and
the other factors described in this “Risk Factors” section.
82
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk
is especially relevant for biopharmaceutical companies, which have experienced significant stock price volatility in recent years.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject
to stockholder approval.
Our executive officers, directors, and 5% stockholders beneficially owned, in the aggregate, approximately 42.2% of our outstanding voting common
stock. Accordingly, these stockholders will have the ability to influence us through this ownership position and significantly affect the outcome of all
matters requiring stockholder approval. For example, these stockholders may be able to significantly affect the outcome of elections of directors,
amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or
discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.
Risks Related to Market Uncertainties
Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.
The global credit and financial markets have experienced extreme volatility and disruptions in the past several years, including severely diminished
liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about
economic stability. We believe that the state of global economic conditions are particularly volatile and uncertain, not only in light of the COVID-19
pandemic and the potential global recession resulting therefrom, but also due to recent and expected shifts in political, legislative and regulatory conditions
concerning, among other matters, international trade and taxation, and that an uneven recovery or a renewed global downturn may negatively impact our
ability to conduct clinical trials on the scale and timelines anticipated. There can be no assurance that further deterioration in credit and financial markets
and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile
business or political environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, it may
make obtaining any necessary debt or equity financing more difficult, more costly and more dilutive. For example, as a result of political, social, and
economic instability abroad, including as a result of armed conflict, war or threat of war, in particular, the current conflict between Russia and Ukraine,
including resulting sanctions, terrorist activity and other security concerns in general, there could be a significant disruption of global financial markets,
impairing our ability to raise capital when needed on acceptable terms, if at all. 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 stock price and could require us to delay or abandon
clinical development plans. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive
an economic downturn, which could directly affect our ability to attain our operating goals on schedule and on budget. To the extent that our profitability
and strategies are negatively affected by downturns or volatility in general economic conditions, our business and results of operations may be materially
adversely affected.
Risks Related to our Charter and Bylaws
Anti-takeover provisions under our charter documents and Delaware law could delay or prevent a change of control which could limit the market price
of our common stock and may prevent or frustrate attempts by our stockholders to replace or remove our current management.
Our third amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change
of control of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions include:
•
•
•
•
•
a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board will be elected at
one time;
a prohibition on stockholder action through written consent, which requires that all stockholder actions be taken at a meeting of our
stockholders;
a requirement that special meetings of stockholders be called only by the chairman of the board of directors, the chief executive officer, or by
a majority of the total number of authorized directors;
advance notice requirements for stockholder proposals and nominations for election to our board of directors;
a requirement that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to
any other vote required by law, upon the approval of the holders of not less than 75% of the votes that all our stockholders would be entitled
to cast in an annual election of directors;
83
•
•
a requirement of approval of not less than 75% of all outstanding shares of our voting stock to amend any bylaws by stockholder action or to
amend specific provisions of our certificate of incorporation; and
the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and
which preferred stock may include rights superior to the rights of the holders of common stock.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporate Law,
which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These anti-takeover provisions
and other provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for
stockholders or potential acquirors to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors and
could also delay or impede a merger, tender offer or proxy contest involving our company. These provisions could also discourage proxy contests and make
it more difficult for you and other stockholders to elect directors of your choosing or cause us to take other corporate actions you desire. Any delay or
prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline.
Our amended and restated bylaws provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the
State of Delaware will be the sole and exclusive forum for most legal actions 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, employees or agents.
Our amended and restated bylaws specifies that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the
State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action
asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s
stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or the restated certificate of
incorporation or amended and restated bylaws, or (iv) any action asserting a claim against the Company governed by the internal affairs doctrine. This
choice of forum provision contained in our amended and restated bylaws will not apply to any causes of action arising under the Securities Act or the
Exchange Act. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to
have consented to the provisions of our amended and restated bylaws described above; provided, however, that stockholders cannot and will not be deemed
to have waived our compliance with the U.S. federal securities laws and the rules and regulations thereunder.
We believe this provision benefits us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in
resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of
multi-forum litigation. However, the provision may have the effect of discouraging lawsuits against our directors, officers, employees and agents as it may
limit any stockholder’s ability to bring a claim in a judicial forum that such stockholder finds favorable for disputes with us or our directors, officers,
employees or agents. The enforceability of similar choice of forum provisions in other companies’ bylaws or certificates of incorporation has been
challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum
provisions contained in our amended and restated bylaws to be inapplicable or unenforceable in such action. If a court were to find the choice of forum
provision contained in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with
resolving such action in other jurisdictions, which could adversely affect our business, financial condition or results of operations.
General Risk Factors
We are an EGC and the reduced disclosure requirements applicable to EGCs may make our common stock less attractive to investors.
We are an EGC, and, for as long as we continue to be an EGC, we may choose to take advantage of exemptions from various reporting requirements
applicable to other public companies but not to “emerging growth companies.” We will remain an EGC until the earliest to occur of: (1) the last day of the
fiscal year in which we have more than $1.07 billion in annual revenue; (2) the date we qualify as a large accelerated filer, with at least $700.0 million of
equity securities held by non-affiliates; (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior
three-year period; and (4) the last day of the fiscal year ending after the fifth anniversary of our initial public offering. For as long as we remain an
“emerging growth company,” we expect to avail ourselves of the exemptions from various reporting requirements applicable to other public companies but
not to EGCs, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as
amended (Section 404).
84
Assuming we do not surpass one of the thresholds in clauses (1) through (3), our status as an EGC will end on December 31, 2023, which will be the last
day of the fiscal year ending after the fifth anniversary of our initial public offering. As such, we will be subject to the disclosure requirements applicable to
other public companies that were not applicable to us as an EGC. These requirements include:
•
•
•
•
compliance with the auditor attestation requirements of Section 404;
compliance with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm
rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
full disclosure obligations regarding executive compensation; and
compliance with the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden
parachute payments not previously approved.
When our independent registered public accounting firm is required to undertake an assessment of our internal control over financial reporting, the cost of
our compliance with Section 404 will correspondingly increase. Moreover, if we are not able to comply with the requirements of Section 404 applicable to
us in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting
that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or
other regulatory authorities. Additionally, we expect that our loss of EGC status will require additional attention from management and will result in
increased costs to us, which could include higher legal fees, accounting fees and fees associated with investor relations activities, among others.
We are also a SRC and the reduced disclosure requirements applicable to SRCs may make our common stock less attractive to investors.
We are considered a SRC under Rule 12b-2 of the Exchange Act. We are therefore entitled to rely on certain reduced disclosure requirements, such as
an exemption from providing selected financial data and executive compensation information. These exemptions and reduced disclosures in our SEC
filings due to our status as a smaller reporting company also mean our auditors are not required to review our internal control over financial reporting and
may make it harder for investors to analyze our results of operations and financial prospects. We cannot predict if investors will find our common stock less
attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading
market for our common stock and our common stock prices may be more volatile. We will remain a smaller reporting company until our public float
exceeds $250 million or our annual revenues exceed $100 million with a public float greater than $700 million.
We have broad discretion over the use of our cash, cash equivalents, and marketable securities and may not use them effectively.
Our management has broad discretion to use our cash, cash equivalents, and marketable securities to fund our operations and could spend these funds
in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds
effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and
delay the development of our product candidates. Pending our use to fund operations, we may invest our cash, cash equivalents, and marketable securities
in a manner that does not produce income or that loses value.
We do not anticipate paying any cash dividends on our capital stock in the foreseeable future. Accordingly, stockholders must rely on capital
appreciation, if any, for any return on their investment.
We have never declared nor paid cash dividends on our capital stock. We currently plan to retain all of our future earnings, if any, to finance the
operation, development and growth of our business. In addition, the terms of any future debt or credit agreements may preclude us from paying dividends.
As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading
volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our
business. If one or more of the analysts who cover us issues an adverse opinion about our company, our stock price would likely decline. If one or more of
these analysts ceases research coverage of us or fails to regularly publish
85
reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Sales of a substantial number of shares of our common stock by our existing stockholders in the public market could cause our stock price to fall.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market
that holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. Certain holders of our common stock
have rights, subject to 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. Registration of these shares under the Securities Act of 1933, as amended (Securities Act) would result in
the shares becoming freely tradable without restriction under the Securities Act, except for shares held by affiliates, as defined in Rule 144 under the
Securities Act. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock.
On March 12, 2021, we filed a registration statement on Form S-3 (File No. 333-254193) with the SEC, which was declared effective on March 30,
2021 (Shelf Registration Statement), in relation to the registration of common stock, preferred stock, debt securities, warrants and/or units of any
combination thereof for the purposes of selling, from time to time, our common stock, debt securities or other equity securities in one or more offerings. We
also simultaneously entered into a Capital On Demand™ Sales Agreement (Sales Agreement) with JonesTrading Institutional Services, LLC (Sales Agent),
to provide for the offering, issuance and sale of up to an aggregate amount of $75.0 million of our common stock from time to time in “at-the-market”
offerings under the Shelf Registration Statement and subject to the limitations thereof. The Company will pay to the Sales Agent cash commissions of 3%
of the aggregate gross proceeds of sales of common stock under the Sales Agreement. Sales of common stock, debt securities or other equity securities by
us may represent a significant percentage of our common stock currently outstanding. If we sell, or the market perceives that we intend to sell, substantial
amounts of our common stock under the Shelf Registration Statement or otherwise, the market price of our common stock could decline significantly.
We also filed a registration statement on Form S-8 registering the issuance of shares of common stock issued or reserved for future issuance under our
equity compensation plans. Shares registered under this registration statement on Form S-8 can be freely sold in the public market upon issuance and once
vested, subject to volume limitations applicable to affiliates and the lock-up agreements described above. If any of these additional shares are sold, or if it is
perceived that they will be sold, in the public market, the market price of our common stock could decline.
In addition, certain of our employees, executive officers, and directors may enter into Rule 10b5-1 trading plans providing for sales of shares of our
common stock from time to time. Under a Rule 10b5-1 trading plan, a broker executes trades pursuant to parameters established by the employee, director,
or officer when entering into the plan, without further direction from the employee, officer, or director. A Rule 10b5-1 trading plan may be amended or
terminated in some circumstances. Our employees, executive officers, and directors also may buy or sell additional shares outside of a Rule 10b5-1 trading
plan when they are not in possession of material, nonpublic information.
86
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
We have offices in Boston, Massachusetts, and Menlo Park, California. Our principal executive offices are located at 200 Clarendon, Floor 6, Boston,
Massachusetts 02116. The original term of this lease expires on March 31, 2022, and was renewed in February 2022 to expire on July 31, 2022. We also
leased office and laboratory space located in Menlo Park, California. The lease expires on June 30, 2022. In addition, in October 2018, we entered a new
lease for office and laboratory space in Redwood City, California that expires on February 28, 2030. We expect to complete occupancy in the new facility
in the fourth quarter of 2022. We believe that our office and laboratory space is sufficient to meet our current needs and that suitable additional space will
be available as and when needed.
Item 3. Legal Proceedings.
We are not currently subject to any material legal proceedings. From time to time, we may be subject to various legal proceedings and claims that
arise in the ordinary course of our business activities. Although the results of litigation and claims cannot be predicted with certainty, as of the date of this
report, we do not believe we are party to any claim or litigation the outcome of which, if determined adversely to us, would individually or in the aggregate
be reasonably expected to have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on us because of
defense and settlement costs, diversion of management resources and other factors.
Item 4. Mine Safety Disclosures.
Not applicable.
87
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock trades on The Nasdaq Global Market under the symbol “ACET”. Trading of our common stock commenced on January 26, 2018,
in connection with our initial public offering of resTORbio. Prior to that time, there was no established public trading market for our common stock.
As of March 10, 2022, we had approximately 24 holders of record of our common stock. The actual number of holders of our common stock is greater
than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or held by
other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
Dividends
We have never declared or paid any cash dividends on our common stock. We currently intend to retain all available funds and any future earnings, if
any, to fund the development and growth of our business. We do not expect to pay any cash dividends in the foreseeable future. Any future determination to
pay dividends will be made at the discretion of our board of directors and will depend on various factors, including applicable laws, our results of
operations, financial condition, future prospects, then applicable contractual restrictions and any other factors deemed relevant by our board of directors.
Investors should not purchase our common stock with the expectation of receiving cash dividends.
Equity Compensation Plan
The information required by Item 5 of Form 10‑K regarding equity compensation plans is incorporated herein by reference to Item 12 of Part III of
this Annual Report on Form 10‑K.
Recent Sales of Unregistered Securities
Securities Purchase Agreement
On February 12, 2021, we entered into a stock purchase agreement with certain existing investors for $15.0 million of shares of our common stock,
with an initial closing for certain investors held simultaneously with the closing of our February 2021 public offering and a subsequent closing for certain
additional investors. Pursuant to the terms of the private placement, we issued 1,153,840 shares of common stock at a price of $13.00 per share, which was
the price per share of our February 2021 public offering (the Private Placement Shares). We received the full proceeds from the sale and did not pay any
underwriting discounts or commissions with respect to the shares of common stock that sold in the concurrent private placement. Proceeds from the private
placement will be used primarily to fund activities related to our internal discovery research, other pipeline candidates and to fund the continued
development of our gamma delta T cell platform; the external costs for the development of ADI-001 through the completion of a Phase 1 dose expansion
study for ADI-001 in NHL; and the remainder, if any, to fund working capital and other general corporate purposes. The private placement was exempt
from registration pursuant to Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering. Pursuant to the terms of the
private placement, we subsequently filed a Registration Statement on Form S-3 (File No. 333-256088), dated May 21, 2021, pursuant to which we
registered the Private Placement Shares. We have agreed to maintain the effectiveness of the registration statement until such time as all Private Placement
Shares covered by the registration statements have been sold or may be sold under Rule 144 without manner of sale restrictions or volume limitations,
subject to certain exceptions.
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
We did not purchase any of our equity securities during the period covered by this Annual Report on Form 10-K.
Item 6. Reserved.
88
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 included elsewhere in this Annual Report on Form 10-K. This discussion and other parts of this Annual Report on Form 10-K
contain forward-looking statements that involve risks and uncertainties, such as our plans, objectives, expectations, intentions and beliefs. Our actual
results could differ materially from those discussed in 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 entitled “Risk Factors” included elsewhere in this Annual Report on Form
10-K.
Overview
We are a clinical stage biotechnology company discovering and developing allogeneic gamma delta T cell therapies for cancer. We are advancing a
pipeline of “off-the-shelf” gamma delta T cells, engineered with chimeric antigen receptors (CAR) and T cell receptor-like antibodies (TCRL), to enhance
selective tumor targeting, facilitate innate and adaptive anti-tumor immune response, and improve persistence for durable activity in patients. Our approach
to activate, engineer and manufacture allogeneic gamma delta T cell product candidates derived from the peripheral blood cells of unrelated donors allows
us to generate new product candidates in a rapid and cost-efficient manner.
Our lead product candidate, ADI-001, a first-in-class allogeneic gamma delta T cell therapy expressing a CAR targeting CD20, is in an ongoing Phase
1 study for the treatment of Non-Hodgkin's Lymphoma (NHL). Our pipeline also includes ADI-002, an allogeneic gamma delta CAR-T cell therapy
expressing a GPC3-targeted CAR and a cell intrinsic soluble form of interluiken-15 (IL-15), for the treatment of solid tumors In addition, we are engaged
in discovery and preclinical stage activities directed to expansion of our pipeline of product candidates for both hematological malignancies and solid
tumors.
Our proprietary engineering and manufacturing process begins with isolating and expanding gamma delta T cells from the blood of unrelated donors,
and results in the potential to treat up to 1,000 patients per batch depending on dosing and the CAR target. The potential to administer product candidates
based on gamma delta T cells to patients without inducing a graft versus host immune response could mean that our products can potentially be used as
“off-the-shelf” therapies. This is in contrast to products based on alpha beta T cells, which either must be manufactured for each patient from his or her own
T cells, or require significant gene editing to manufacture if the T cells are derived from donors that are unrelated to the patient. Based on what we believe
is the unique potential of these cells and associated modifications, we are initially developing product candidates in oncology, both for hematological
malignancies and for solid tumors. In October 2020, the U.S. Food and Drug Administration (FDA) cleared our Investigational New Drug (IND)
application for ADI-001, our lead product candidate, for the treatment of Non-Hodgkin’s Lymphoma (NHL). In March 2021, we initiated the first-in-
human clinical trial to assess safety and efficacy of ADI-001 in NHL patients. The Phase 1 study for ADI-001 will enroll up to 80 late-stage NHL patients
at a number of cancer centers across the United States. The study includes a dose escalation portion followed by dose expansion cohorts to explore the
activity of ADI-001 in multiple subtypes of NHL. In December 2021, we announced positive interim clinical data from the initial dose escalation portion of
this study.
Recent Developments
Public Offerings and Private Placement
In February 2021, we completed an underwritten public offering of 10,575,513 shares of our common stock, including the exercise in full by the
underwriters of their option to purchase up to an additional 1,344,743 shares of common stock at a public offering price of $13.00 per share. The net
proceeds from the offering, after deducting underwriting discounts and commissions and offering expenses were approximately $128.8 million.
In connection with the February 2021 offering, we also entered into a stock purchase agreement with certain existing investors to purchase 1,153,840
shares of our common stock for $15.0 million at a price per share equal to the public offering price, with an initial closing for certain investors held
simultaneously with the closing of the offering and a subsequent closing for certain additional investors. We received the full proceeds from the sale and
did not pay any underwriting discounts or commissions with respect to the shares of common stock that sold in the concurrent private placement. Pursuant
to the terms of the private placement, we subsequently filed a Registration Statement on Form S-3 (File No. 333-256088), dated May 21, 2021, pursuant to
which we registered the Private Placement Shares. We have agreed to maintain the effectiveness of the registration statement until such time as all Private
Placement Shares covered by the registration statements have been sold or may be sold under Rule 144 without manner of sale restrictions or volume
limitations, subject to certain exceptions.
In December 2021, we completed an underwritten public offering of 7,187,500 shares of our common stock, including the exercise in full by the
underwriters of their option to purchase up to an additional 937,500 shares of common stock, at a public offering price of $14.00 per share. The net
proceeds from the offering, after deducting underwriting discounts and commissions and offering expenses were approximately $94.2 million.
89
At-the-Market (ATM) Offering
On March 12, 2021, we entered into a Sales Agreement (the 2021 Sales Agreement) with JonesTrading Institutional Services (the Agent), pursuant to
which we could sell, from time to time, at our option, up to an aggregate of $75.0 million of shares of our common stock, through the Agent, as our sales
agent. No shares were sold under the 2021 Sales Agreement as of December 31, 2021. In connection with the 2021 Sales Agreement, we terminated a prior
ATM program with Evercore Group L.L.C. and H.C. Wainwright & Co., L.L.C.
Loan Agreement
On October 21, 2021, we amended our Loan and Security Agreement (the Loan Agreement) with Pacific Western Bank (PacWest)(the Loan
Amendment) under which PacWest will provide one or more Term Loans, as well as Non-Formula Ancillary Services which shall not exceed $5.5 million
in the aggregate. Non-Formula Ancillary Services are defined as automated clearinghouse transactions, corporate credit card services, letters of credit, or
other treasury management services. The aggregate sum of the outstanding Term Loans and Non-Formula Ancillary Services shall at no time exceed $15.0
million, which each Term Loan to be in an amount of not less than $1.0 million. As of December 31, 2021, we had outstanding Non-Formula Ancillary
Services of $4.4 million. Accordingly, as of December 31, 2021, the Company has $10.6 million available under the Term Loan. Pursuant to the Loan
Amendment, the interest rate for the Term Loans shall be set at an annual rate equal to the greater of (i) 0.25% above the Prime Rate then in effect and (ii)
4.25%.
As of the date of this Annual Report on Form 10-K, we were in compliance with such covenants and had no indebtedness outstanding under the Loan
Agreement.
Impact of COVID-19 Pandemic
In December 2019, a novel strain of coronavirus, COVID-19, was reported in China. The spread of COVID-19 from China to other countries has
resulted in the World Health Organization (WHO) declaring the outbreak of COVID-19 as a “pandemic,” or a worldwide spread of a new disease, on
March 11, 2020. Since then, COVID-19 has spread globally and new variants of the virus have emerged. Many countries around the world have imposed
quarantines and restrictions on travel and mass gatherings to slow the spread of the virus and have closed non-essential businesses. The continued spread of
COVID-19, despite progress in vaccination efforts, has resulted in significant governmental measures being implemented to control the spread of COVID-
19 and its variants. These measures may result in a period of business, supply, and drug product manufacturing disruption, and in reduced operations, any
of which could materially affect our business, financial condition and results of operations.
In response to the COVID-19 pandemic, we tasked members of our Executive Leadership team, Human Resources, Facilities and Operations and
Employee Communications to develop guidelines and processes intended to raise awareness of new health and well-being protocols and potentially helpful
practices for cross-functional teamwork for our employees. We implemented remote working and shift scheduling, provided our team members practical
recommendations based on guidelines from the Centers for Disease Control and Prevention, State of California Department of Health Care Services, State
of Massachusetts Department of Public Health, OSHA and other regional government entities. In addition, we are committed to updating these
recommendations and communicating new pertinent information when available. While doing so we are sensitive to ensuring any guidance provided may
vary by locality based on government orders and regulations.
Thus far we have not experienced a significant disruption or delay in our operations as it relates to the clinical development of our drug candidates.
However, we anticipate that the impact of the COVID-19 pandemic may create difficulties in our clinical trials for a variety of reasons, including future
regulations regarding, or the inability or unwillingness of patients to, travel to participate in clinical trials, or to participate in clinical trials that are
administered in medical facilities that also treat COVID-19, potential delays in the FDA’s review and approval processes and/or shortages of medical
supplies that may force medical professionals to focus on non-clinical procedures, including treatment of COVID-19. The duration and ultimate impact of
the ongoing COVID-19 pandemic on clinical trials generally, and on our trials particularly, is currently unknown.
In addition, the spread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While the potential economic
impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of
global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market
correction resulting from the spread of COVID-19 and its variants could materially affect our business. Possible effects may also include absenteeism in
our labor workforce, unavailability of products and supplies used in operations, and a decline in value of assets held by us, including property and
equipment, and marketable debt securities.
90
Financial Operations Overview
Revenue
We have no products approved for commercial sale and do not expect to generate revenue from product sales unless and until we successfully
complete development and obtain regulatory approval for our product candidates, which we expect will not be for at least several years, if ever. Our
revenues to date are generated from our License and Collaboration Agreement with Regeneron Pharmaceuticals, Inc. (Regeneron) and the agreement
referred to as the “Regeneron Agreement”. The primary purpose of the Regeneron Agreement is to establish a strategic relationship to identify and validate
appropriate targets and work together to develop a pipeline of engineered immune cell products (Collaboration ICPs) for the selected targets. The
Regeneron Agreement provides for the following: (i) licenses to our technology, (ii) research and development services, (iii) services or obligations in
connection with participation in the research committee, (iv) information sharing, and (v) manufacturing services to manufacture of Collaboration ICPs for
the research programs. The Regeneron Agreement provides Regeneron an option to obtain an exclusive, royalty-bearing development and commercial
license under our intellectual property to develop and commercialize the optioned Collaboration ICPs ready for an IND submission.
We received a non-refundable upfront payment of $25.0 million from Regeneron upon execution of the Regeneron Agreement on July 29, 2016 and
have received an aggregate of $20.0 million of additional payments for research funding from Regeneron as of December 31, 2020. In addition, Regeneron
may have to pay us additional amounts in the future consisting of up to an aggregate of $80.0 million of option exercise fees for a certain number of
Collaboration ICPs. On January 28, 2022, we received a payment of $20.0 million from Regeneron for exercise of its option to license exclusive rights to
ADI-002 and Regeneron potentially has additional options to other Collaboration ICP targets under the Regeneron Agreement. We declined to exercise our
option to co-fund the development of ADI-002 with Regeneron, and accordingly, Regeneron must also pay us high single digit royalties as a percentage of
net sales for ADI-002 or any other optioned ICPs to targets for which it has exclusive rights and low single digit royalties as a percentage of net sales on
any non-ICP product comprising a target generated by us through the use of Regeneron’s proprietary mice. We must pay Regeneron mid-single to low
double digit royalties as a percentage of net sales of Collaboration ICPs to targets for which we have exercised exclusive rights, and low to mid-single digit
royalties as a percentage of net sales of targeting moieties generated from our license to use Regeneron’s proprietary mice. Royalties are payable until the
longer of the expiration or invalidity of the licensed patent rights or 12 years from first commercial sale.
We use a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize under the
Regeneron Agreement. In applying the cost-based input method of revenue recognition, we use actual costs incurred relative to budgeted costs to fulfill the
combined performance obligation. Revenue is recognized based on actual costs incurred as a percentage of total budgeted costs as we complete our
performance obligations over the research term of five years. A cost-based input method of revenue recognition requires us to estimate costs to complete
our performance obligations, which requires significant judgment to evaluate assumptions related to cost estimates. The cumulative effect of revisions to
estimated costs to complete our performance obligations is recorded in the period in which changes are identified and amounts can be reasonably estimated.
Operating Expenses
Research and Development
Research and development expenses, which consist primarily of costs incurred in connection with the development of our product candidates, are
expensed as incurred. Research and development expenses consist primarily of:
•
•
•
•
employee related costs, including salaries, benefits and stock-based compensation expenses for research and development employees;
costs incurred under agreements with consultants, contract manufacturing organizations (CMOs) and contract research organizations (CROs);
lab materials, supplies, and maintenance of equipment used for research and development activities; and
allocated facility-related costs, such as rent, utilities, insurance, repairs and maintenance, depreciation and amortization, information technology
costs and general support services.
We do not allocate our costs by product candidate, as a significant amount of research and development expenses are not tracked by product
candidate, and we believe the allocation of such costs would be arbitrary and would not provide a meaningful assessment as we have used our employee
and infrastructure resources across multiple product candidate research and development programs.
91
We are focusing substantially all of our resources on the development of our product candidates. At this time, we cannot reasonably estimate or know
the nature, timing and estimated costs of the efforts that will be necessary to complete the development of our product candidates. We are also unable to
predict when, if ever, material net cash inflows will commence from sales of our product candidates. The duration, costs, and timing of clinical trials and
development of our product candidates will depend on a variety of factors, including:
•
•
•
•
•
•
•
•
•
•
•
the scope, rate of progress and expense of clinical trials and other research and development activities;
clinical trial results;
uncertainties in clinical trial enrollment rate or design;
significant and changing government regulation;
the timing and receipt of any regulatory approvals;
the FDA’s or other regulatory authority’s influence on clinical trial design;
establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
commercializing product candidates, if and when approved, whether alone or in collaboration with others;
obtaining and maintaining patent and trade secret protection and regulatory exclusivity for product candidates;
continued applicable safety profiles of the products following approval; and
retention of key research and development personnel.
A change in the outcome of any of these variables with respect to the development of a product candidate could significantly change the costs, timing
and viability associated with the development of that product candidate. For example, if the FDA, or another regulatory authority, were to require us to
conduct clinical trials beyond those that it currently anticipates will be required for the completion of clinical development of a product candidate, or if we
experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time
on the completion of clinical development. Furthermore, we are unable to predict when or if our product candidates will receive regulatory approval with
any certainty.
We are focusing substantially all of our resources on the development of our product candidates. We expect our research and development expenses to
increase substantially during the next few years, as we seek to initiate clinical trials for our product candidates, complete our clinical program, pursue
regulatory approval of our product candidates and prepare for a possible commercial launch. Predicting the timing or the cost to complete our clinical
program or validation of our commercial manufacturing and supply processes is difficult and delays may occur because of many factors, including factors
outside of our control. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently
anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial
resources and time on the completion of clinical development. Furthermore, we are unable to predict when or if our product candidates will receive
regulatory approval with any certainty.
General and Administrative
General and administrative expenses consist principally of payroll and personnel expenses, including salaries and bonuses, benefits and stock-based
compensation expenses, professional fees for legal, consulting, accounting and tax services, allocated overhead expenses, including rent, equipment,
depreciation, information technology costs and utilities, and other general operating expenses not otherwise classified as research and development
expenses.
We anticipate that our general and administrative expenses will increase for the foreseeable future due to anticipated expenses related to the Merger
and future expenses related to operating as a public company, including expenses related to personnel costs, expanded infrastructure and higher consulting,
legal and accounting services costs associated with complying with the applicable Nasdaq and SEC requirements, investor relations costs and director and
officer insurance premiums.
Interest Income
Interest income consists primarily of interest income earned on our cash and cash equivalents and marketable debt securities.
92
Interest Expense
Interest expense consists primarily of the non-cash amortization of costs incurred in connection with the Loan Agreement entered into with PacWest
in April 2020, and subsequently amended in October 2021.
Other Income (Expense), Net
In 2020, other income (expense), net primarily consists of changes in the fair value of our redeemable convertible preferred stock tranche liability and
redeemable convertible preferred stock warrant liability prior to their conversion to warrants to purchase common stock upon closing of the Merger. In
2021, other income (expense), net primarily consists of state franchise and capital taxes not related to income.
Results of Operations
Comparison of the Years Ended December 31, 2021 and 2020
The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):
Revenue – related party
Operating expenses
Research and development
General and administrative
Total operating expenses
Loss from operations
Interest income
Interest expense
Other income (expense), net
Loss before income tax benefit
Income tax expense (benefit)
Net loss
* Not meaningful
Revenue
Year Ended December 31,
2020
2021
Change
% Change
$
9,730 $
17,903 $
(8,173 )
(46 )%
48,943
22,220
71,163
(61,433 )
91
(176 )
(606 )
(62,124 )
(125 )
(61,999 ) $
34,334
22,760
57,094
(39,191 )
785
(134 )
(953 )
(39,493 )
(2,815 )
(36,678 ) $
14,609
(540 )
14,069
(22,242 )
(694 )
(42 )
347
(22,631 )
2,690
(25,321 )
$
43 %
(2 )%
25 %
57 %
(88 )%
31 %
(36 )%
57 %
*%
69 %
Revenue decreased by $8.2 million, or 46%, for the year ended December 31, 2021 compared to the year ended December 31, 2020 resulting from the
decrease in revenue recognized under the Regeneron Agreement. This decrease in revenue was primarily due to our achievement of a milestone under the
Regeneron Agreement in June 2020 relating to the selection of a clinical candidate for ADI-002. This resulted in an increase in the transaction price of
$10.0 million and recognition of an additional cumulative catch-up of revenue of $5.0 million in June 2020.
Research and development
(1)
Payroll and personnel expenses
Costs incurred under agreements with consultants, CMOs, and CROs
Lab materials, supplies, and maintenance of equipment used for research
and development activities
Other research and development expenses
Total research and development expenses
(2)
Year Ended December 31,
2021
2020
21,267 $
14,853
4,649
8,174
48,943 $
15,490
11,195
4,401
3,248
34,334
$
$
(1) Employee related costs, including salaries, benefits, bonuses, and stock-based compensation expenses for research and development employees.
(2) Allocated facility-related costs, such as rent, utilities, insurance, repairs and maintenance, depreciation and amortization, information technology costs and general support
services.
93
Research and development expenses increased by $14.6 million, or 43%, during the year ended December 31, 2021 compared to the year ended
December 31, 2020. The increase in research and development expenses was primarily due to an increase of $5.8 million in personnel expenses, including
salaries, benefits, and bonuses due to increases in headcount of employees involved in research and development activities, as well as an increase in stock-
based compensation expense of $3.1 million due to higher option grant activity. In addition, there was an increase of $3.7 million in fees incurred for CRO,
CMO, consultants, and other externally sponsored research and $4.9 million increase in facility and other expenses. This increase was primarily due to
ramping up of clinical development activities related to ADI-001, our leading product candidate.
General and administrative
General and administrative expenses decreased by $0.5 million, or 2%, during the year ended December 31, 2021 as compared to the same period in
2020. The decrease in general and administrative expenses was primarily due to a decrease of $6.3 million in professional fees primarily related to
decreases of $5.1 million in legal fees and $1.7 million in audit fees, due to higher expenses associated with the Merger in 2020.
These decreases in professional fees were offset by an increase of $0.5 million in other professional fees consisting of investor relations, IT
management, and other enterprise solutions. In addition, the decreases in general and administrative expenses were offset by a $3.1 million increase in
payroll and personnel expenses, which includes salaries, benefits, bonuses, and temporary contractor fees due to higher stock-based compensation expenses
of $4.2 million caused by increased option grant activity and higher salaries and benefits of $1.0 million reduced by lower temporary contractor fees of
$2.2 million.
Further, there was an increase of $2.8 million in facilities and other expenses, primarily related to rent, depreciation costs, and director and officer
liability insurance.
Interest income
Interest income decreased by $0.7 million, or 88%, during the year ended December 31, 2021 compared to the year ended December 31, 2020, which
was primarily attributable to the decrease in average balance of marketable debt securities in 2021 and decrease in interest rates, which lowered return on
investments.
Interest Expense
Interest expense increased by less than $0.1 million during the year ended December 31, 2021 as compared to the same period in 2020 due to the non-
cash amortization of costs incurred in connection with the Loan Agreement that was entered in April 2020 and subsequently amended in October 2021.
Other income (expense), net
Other income (expense), net decreased by $0.3 million, or 36%, during the year ended December 31, 2021 compared to the year ended December 31,
2020. The decrease was primarily due to a realized gain recognized in 2020 related to a change in fair value of the redeemable preferred stock warrant
liability prior to their conversion to warrants to purchase common stock upon closing of the Merger in September 2020 offset by $0.2 million related to the
derecognition of fixed assets related to the sublease of the Boston lease in August 2021, $0.6 million of franchise taxes, and less than $0.1 million of
realized loss due to foreign exchange.
Income tax expense (benefit)
We recognized an income tax benefit of $0.1 million during the year ended December 31, 2021 compared to the income tax benefit of $2.8 million for
the year ended December 31, 2020. The reduction in benefit relates to the nature of discrete tax benefit during the year ended December 31, 2020, as a
result of the recognition of a net operating loss carryback under the CARES Act. Income tax benefit of $0.1 million for the year ended December 31, 2021
was primarily due to the tax effect of the reduction in the deferred tax liability associated with the basis differences from in-process research and
development (IPR&D).
Liquidity and Capital Resources
As of December 31, 2021, our principal source of liquidity was cash and cash equivalents, which totaled $277.5 million. Our net losses were $62.0
million and $36.7 million for the years ended December 31, 2021 and 2020, respectively.
Sources of Liquidity
Since our formation in 2014, we have funded our operations with an aggregate of $116.3 million in gross cash proceeds from the sale of redeemable
convertible preferred stock and an aggregate of $45.0 million received to date from Regeneron under the Regeneron Agreement. In September 2020,
following the closing of the Merger, all outstanding shares of the redeemable
94
convertible preferred stock converted into 12,048,671 shares of common stock. We also acquired $64.1 million of cash, cash equivalents, and restricted
cash owned by resTORbio, as part of the Merger.
In February 2021, we completed an underwritten public offering of 10,575,513 shares of our common stock, including the exercise in full by the
underwriters of their option to purchase up to an additional 1,344,743 shares of common stock, at a public offering price of $13.00 per share. The net
proceeds from the offering, after deducting underwriting discounts and commissions and offering expenses were approximately $128.8 million. In
connection with the offering, we also entered into a stock purchase agreement with certain existing investors to purchase 1,153,840 shares of our common
stock for $15.0 million at a price per share equal to the public offering price, with an initial closing for certain investors held simultaneously with the
closing of the offering and a subsequent closing for certain additional investors.
In December 2021, we completed an underwritten public offering of 7,187,500 shares of our common stock, including the exercise in full by the
underwriters of their option to purchase up to an additional 937,500 shares of common stock, at a public offering price of $14.00 per share. The net
proceeds from the offering, after deducting underwriting discounts and commissions and offering expenses were approximately $94.2 million.
Loan Agreement
On October 21, 2021, we amended the Loan Agreement with PacWest (the Loan Amendment) under which PacWest will provide one or more Term
Loans, as well as Non-Formula Ancillary Services which shall not exceed $5.5 million in the aggregate. Non-Formula Ancillary Services are defined as
automated clearinghouse transactions, corporate credit card services, letters of credit, or other treasury management services. The aggregate sum of the
outstanding Term Loans and Non-Formula Ancillary Services shall at no time exceed $15.0 million, which each Term Loan to be in an amount of not less
than $1.0 million. As of December 31, 2021, we had outstanding Non-Formula Ancillary Services of $4.4 million. Accordingly, as of December 31, 2021,
the Company has $10.6 million available under the Term Loan. Pursuant to the Loan Amendment, the interest rate for the Term Loans shall be set at an
annual rate equal to the greater of (i) 0.25% above the Prime Rate then in effect and (ii) 4.25%.
As of the date of this Annual Report on Form 10-K, we were in compliance with such covenants and had no indebtedness outstanding under the Loan
Agreement.
At-the-Market (ATM) Offering
On March 12, 2021, we entered into the 2021 Sales Agreement with the Agent, pursuant to which we could sell, from time to time, at our option, up to
an aggregate of $75.0 million of shares of our common stock, through the Agent, as our sales agent. No shares were sold under the 2021 Sales Agreement
as of December 31, 2021.
Future Funding Requirements
We have incurred losses since inception and have incurred losses of $62.0 million and $36.7 million for the years ended December 31, 2021 and 2020,
respectively. As of December 31, 2021, we had an accumulated deficit of $168.3 million.
As of December 31, 2021, we had cash and cash equivalents of $277.5 million. We believe that our cash and cash equivalents will be sufficient for us
to continue as a going concern for at least 12 months from the issuance date of our consolidated financial statements as of and for the year ended December
31, 2021 included elsewhere in this Annual Report on Form 10-K. We have based these estimates on assumptions that may prove to be wrong, and we
could deplete our available capital resources sooner than we expect. Because of the risks and uncertainties associated with research, development, and
commercialization of product candidates, we are unable to estimate the exact amount of our working capital requirements.
All of our revenue to date is generated from the Regeneron Agreement, which is a collaboration and license agreement. We do not expect to generate
any significant product revenue until we obtain regulatory approval of and commercialize any of our product candidates or enter into additional
collaborative agreements with third parties, and we do not know when, or if, either will occur. We expect to continue to incur significant losses for the
foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates and
begin to commercialize any approved products. We are subject to all of the risks typically related to the development of new product candidates, and we
may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business.
We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future. We may seek to raise
capital through private or public equity or debt financings, collaborative or other arrangements with
95
corporate sources, or through other sources of financing. We anticipate that we will need to raise substantial additional capital, the requirements for which
will depend on many factors, including:
•
•
•
•
•
•
•
•
•
•
•
•
the scope, timing, rate of progress and costs of our drug discovery efforts, preclinical development activities, laboratory testing and clinical trials
for our product candidates;
the number and scope of clinical programs we decide to pursue;
the cost, timing and outcome of preparing for and undergoing regulatory review of our product candidates;
the scope and costs of development and commercial manufacturing activities;
the cost and timing associated with commercializing our product candidates, if they receive marketing approval;
the extent to which we acquire or in-license other product candidates and technologies;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending
intellectual property-related claims;
our ability to establish and maintain collaborations on favorable terms, if at all;
our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the
development of our product candidates and, ultimately, the sale of our products, following FDA approval;
our implementation of operational, financial and management systems;
the impact of the COVID-19 pandemic on United States and global economic conditions that may impact our ability to access capital on terms
anticipated, or at all; and
the post-merger costs associated with being a public company.
A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly
change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we
will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans.
Adequate funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative
impact on our financial condition and our ability to pursue our business strategies. If we are unable to raise additional funds when needed, we may be
required to delay, reduce, or terminate some or all of our development programs and clinical trials or we may also be required to sell or license to other
rights to our product candidates in certain territories or indications that we would prefer to develop and commercialize ourselves. If we are required to enter
into collaborations and other arrangements to supplement our funds, we may have to give up certain rights that limit our ability to develop and
commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could materially affect our business
and financial condition.
See the section of this Annual Report on Form 10-K titled “Risk Factors” for additional risks associated with our substantial capital requirements.
Summary Statement of Cash Flows
The following table sets forth the primary sources and uses of our cash, cash equivalents, and restricted cash for each of the periods presented below
(in thousands):
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Net increase in cash, cash equivalents and restricted cash
96
Year Ended December 31,
2021
2020
$
$
(51,052 ) $
(2,796 )
242,685
188,837 $
(41,552 )
115,217
303
73,968
Cash Flows from Operating Activities
The use of cash in all periods resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital. The
increases in cash used in operating activities for the years ended December 31, 2021 and 2020 were primarily due to increased external research and
development expenses as we continue to develop our product candidates, and increased internal and external expenses related to the initiation of our Phase
1 clinical trial. Higher costs associated with increased employee headcount related to expanded development activities also contributed to the increase in
cash used in operating activities.
These factors were partially offset by lower professional services costs in 2021. Non-cash charges for the year ended December 31, 2021 also include
$12.5 million of stock-based compensation expense, compared to $5.3 million for the year ended December 31, 2020. The changes in prepaid expenses and
other current assets, accounts payable, and accrued and other liabilities resulted from the timing of payments to our service providers.
We currently lease an office space in Boston, MA under a non-cancellable operating lease (the Boston Lease), with an expiration date of July 31,
2026. The Boston Lease was amended on April 1, 2019, to relocate into a premises in the same building with additional space. The initial annual base rent
for this lease was $0.6 million and increases 2% annually. On July 19, 2021, we subleased the office space in Boston, MA. The term of the sublease started
on September 1, 2021 and will end on July 30, 2026. The aggregate base rent due to us under the Sublease Agreement is approximately $3.5 million.
Pursuant to the Sublease Agreement, we agreed to transfer certain furniture located in the subleased premises to the sublessee for $1.00. We remain liable
for the lease payments under the Boston Lease.
We also have an office facility in Menlo Park, CA under a non-cancellable operating lease (the Menlo Park Lease), with an expiration date of March
31, 2022 (subject to any optional extension). This lease was amended on June 25, 2021 to extend the term of lease from March 31, 2022 to June 30, 2022
and replace the previously leased premises (known as 173 and 175-177 Jefferson Drive) with a nearby premises (known as 235 Constitution Drive). The
lease commenced on July 15, 2021 and expires on June 30, 2022. In connection with these changes, we incur monthly rent payments ranging from $87,286
to $89,904, increasing over the remaining term of the lease. This lease was amended on September 30, 2019 to include additional office space, with an
expiration date of March 31, 2022 (subject to any optional extension). The initial annual base rent for the Menlo Park Lease is an aggregate of $1.0 million,
and such amount will increase 3% annually. On October 28, 2018, we executed an additional non-cancelable lease agreement for a new office and
laboratory facility in Redwood City, CA (the Redwood City Lease), with an expiration date of February 28, 2030. The initial annual base rent for the
Redwood City Lease is an aggregate of $1.3 million, and such amount will increase 3% annually.
On July 30, 2021, we entered a short-term lease agreement with the Boston Properties, Inc. for a temporary office space located at 200 Clarendon
Street, Boston, MA. The initial lease term commenced on July 30, 2021 and expire on November 30, 2021. In October 2021, we extended the lease term to
March 31, 2022 and most recently, in February 2022, extended the lease term to July 31, 2022. The base rent is less than $0.1 million per month.
Cash Flows from Investing Activities
Net cash used in investing activities was $2.8 million for the year ended December 31, 2021, which consisted of purchases of property and equipment
of $13.0 million related to the construction of our new building in Redwood City, CA, partially offset by proceeds from sales and maturities of marketable
debt securities of $10.3 million.
Net cash provided by investing activities was $115.2 million for the year ended December 31, 2020, which consisted of cash and restricted cash
acquired in connection with the Merger of $64.1 million, proceeds from maturities of marketable debt securities of $57.8 million, partially offset by
purchases of marketable debt securities of $5.7 million and purchases of property and equipment of $1.0 million.
Cash Flows from Financing Activities
Net cash provided by financing activities was $242.7 million for the year ended December 31, 2021, which was related to net cash proceeds received
from our public offerings and concurrent private placement in February 2021 and December 2021 of $238.1 million, and cash proceeds of $4.8 million
from exercise of stock options and purchases under our Employee Stock Purchase Plan (ESPP), offset by debt issuance costs of approximately $0.2 million.
Net cash provided by financing activities was $0.3 million for the year ended December 31, 2020, due to cash proceeds of $0.5 million from exercise of
stock options partly offset by payment of debt issuance costs of $0.2 million.
97
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our 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 GAAP. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities in our consolidated financial statements.
Actual results may differ from these estimates under different assumptions or conditions and could have a material impact on our reported results. While
our significant accounting policies are more fully described in the Notes to our consolidated financial statements included elsewhere in this Annual Report
on Form 10-K, we believe the following accounting policies to be the most critical in understanding the judgments and estimates we use in preparing our
consolidated financial statements:
Revenue Recognition
We earn all of our revenue in connection with our license and collaboration agreement with Regeneron, which allows Regeneron to utilize our
technology and know-how to develop product candidates.
For elements of collaboration arrangements that are accounted for pursuant to ASC Topic 606, Revenue from Contracts with Customers, or ASC 606,
we identify the performance obligations and allocate the total consideration we expect to receive on a relative standalone selling price basis to each
performance obligation. Key assumptions to determine the standalone selling price may include forecasted revenues, development timelines,
reimbursement rates for personnel costs, the expected number of targets or indications expected to be pursued, discount rates and probabilities of technical
and regulatory success.
We recognize revenue associated with each performance obligation as the control over the promised goods or services transfer to our collaboration
partner which occurs either at a point in time or over time. If control transfers over time, revenue is recognized by using a method of measuring progress
that best depicts the transfer of goods or services, for example based on actual costs incurred relative to total forecasted costs to be incurred over the period
the transfer of goods or services occurs. We evaluate the measure of progress and related inputs each reporting period and any resulting adjustments to
revenue are recorded on a cumulative catch-up basis. Revenue to be recognized is equal to the total transaction price multiplied by the ratio of actual
expense incurred divided by total forecasted expense.
Accrued CMO, CRO, and Research and Development Expenses
We have entered into various agreements with CMOs and CROs. Our research and development accruals are estimated based on the level of services
performed, progress of the studies, including the phase or completion of events, and contracted costs. The estimated costs of research and development
provided, but not yet invoiced, are included in accrued and other current liabilities on the consolidated balance sheet. If the actual timing of the
performance of services or the level of effort varies from the original estimates, we will adjust the accrual accordingly. Payments made to CMOs and CROs
under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets on the
consolidated balance sheets until the services are rendered. To date, our estimated accruals have not differed materially from the actual costs.
Stock-Based Compensation
We use a fair value-based method to account for all stock-based compensation arrangements with employees and non-employees, including stock
options and restricted stock awards. Our determination of the fair value of stock options on the date of grant utilizes the Black-Scholes option pricing
model. The fair value of the option granted is recognized on a straight-line basis over the period during which an optionee is required to provide services in
exchange for the option award, known as the requisite service period, which usually is the vesting period. For awards that have a performance condition,
the Company recognizes compensation expense based on its assessment of the probability that the performance condition will be achieved, using an
accelerated attribution model, over the explicit or implicit service period. We account for forfeitures as they occur. In determining fair value of the stock
options granted, we use the Black–Scholes option-pricing model, which requires the input of subjective assumptions. These assumptions include estimating
the length of time employees will retain their vested stock options before exercising them (expected term), the estimated volatility of our common stock
price over the expected term (expected volatility), risk-free interest rate and expected dividends. Changes in the following assumptions can materially affect
the estimate of fair value and ultimately how much stock-based compensation expense is recognized; and the resulting change in fair value, if any, is
recognized in our consolidated statement of operations and comprehensive loss during the period the related services are rendered. These inputs are
subjective and generally require significant analysis and judgment to develop. Changes in the following assumptions can materially affect the estimate of
the fair value of stock-based compensation:
•
Expected Term — The expected term is calculated using the simplified method which is used when there is insufficient historical data about
exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the contractual
term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the maximum
contractual expiration date is used as the expected term under this method. For awards with multiple vesting-tranches, the times from grant until
the mid-points for each of the tranches may be averaged to provide an overall expected term.
98
•
•
•
Expected Volatility — The Company has limited trading history. As such, the expected volatility was determined by examining the historical
volatilities of a peer group of comparable publicly traded companies in biotechnology and pharmaceutical related industries to be representative
of our expected future stock price volatility. For purposes of identifying these peer companies, we consider the industry, stage of development,
size and financial leverage of potential comparable companies. For each grant, we measure historical volatility over a period equivalent to the
expected term.
Risk-Free Interest Rate — The risk-free interest rate is based on the implied yield currently available on United States Treasury zero-coupon
issues with a remaining term equivalent to the expected term of the stock award.
Expected Dividend Rate — We have not paid and does not anticipate paying dividends in the near future. Accordingly, we estimate the dividend
yield to be zero.
Common Stock Valuations
Prior to our Merger, the estimated fair value of the common stock underlying our stock options and stock awards was determined at each grant date by
our board of directors, with assistance from management and external appraisers. All options to purchase shares of our common stock were intended to be
exercisable at a price per share not less than the per-share fair value of our common stock underlying those options on the date of grant. The approach to
estimate the fair value of our common stock was consistent with the methods outlined in the American Institute of Certified Public Accountants’ Practice
Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (Practice Aid). Subsequent to the Merger, the fair value of our
common stock is determined based on the closing market price.
Emerging Growth Company and Smaller Reporting
In April 2012, the Jumpstart Our Business Startups Act of 2012 (the JOBS Act) was enacted. Section 107 of the JOBS Act provides that an emerging
growth company (EGC), can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or
the Securities Act, for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until
those standards would otherwise apply to private companies.
We have elected to use the extended transition period for new or revised accounting standards during the period in which we remain an emerging
growth company; however, we may adopt certain new or revised accounting standards early. We will remain an emerging growth company until the earliest
to occur of: (1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (2) the date we qualify as a large accelerated
filer, with at least $700.0 million of equity securities held by non-affiliates; (3) the date on which we have issued more than $1.0 billion in non-convertible
debt securities during the prior three-year period; and (4) last day of the fiscal year ending after the fifth anniversary of our initial public offering, which
would be December 31, 2023.
We are also a smaller reporting company meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual
revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the
market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently
completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time
we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller
reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial
statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure
obligations regarding executive compensation.
Recently Issued and Adopted Accounting Pronouncements
See the section titled “Summary of Significant Accounting Policies” in Note 2 to our financial statements included elsewhere in this Annual Report on
Form 10-K for additional information.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk
As of December 31, 2021, we had cash and cash equivalents of $277.5 million, which consisted of cash and money market funds. Interest income is
sensitive to general level of interest rates; however, due to the nature of these investments, an immediate 10% change in interest rates would not have a
material impact on our cash and cash equivalents, financial position, or results of operations.
99
Foreign Currency Exchange Risk
Our headquarters are located in the United States, where a majority of our general and administrative expenses and research and development costs
are incurred in U.S. Dollars. As we grow our business, our results of operations and cash flows may be subject to fluctuations due to foreign currency
exchange rates. To date, we do not believe foreign currency exchange rate fluctuations have had a significant impact on our results of operations for any
periods presented herein.
Inflation Risk
Our assets are primarily monetary, consisting of cash and cash equivalents. Because of their liquidity, these assets are not directly affected by inflation.
Since we intend to retain and continue to use our equipment, furniture, fixtures and office equipment, computer hardware and software and leasehold
improvements, we believe that the incremental inflation related to replacement costs of such items will not materially affect our operations. Inflation
generally affects us by increasing our cost of labor, clinical trial and manufacturing costs. We do not believe that inflation had a material effect on our
business, financial condition or results of operations during the years ended December 31, 2021 and 2020.
Item 8. Financial Statements and Supplementary Data.
All financial statements and supplementary data required to be filed hereunder are filed as listed under Item 15(a) of this Annual Report on Form 10-K
and are incorporated herein by this reference.
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
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer (our principal executive officer and principal
financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. 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.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. These limitations include the possibility of human
error, the circumvention or overriding of the controls and procedures and reasonable resource constraints. In addition, because we have designed our
system of controls based on certain assumptions, which we believe are reasonable, about the likelihood of future events, our system of controls may not
achieve its desired purpose under all possible future conditions. Accordingly, our disclosure controls and procedures provide reasonable assurance, but not
absolute assurance, of achieving their objectives.
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) and
15d-15(f) under the Exchange Act) for the Company. Our internal control over financial reporting is designed to provide reasonable assurances regarding
the reliability of financial reporting and the preparation of our
100
consolidated financial statements in accordance with U.S. generally accepted accounting principles, or GAAP, and includes those policies and procedures
that:
•
•
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of
the Company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with
authorization of management and directors of the Company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's
assets that could have a material affect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
or compliance with the policies or procedures may deteriorate.
Our management, with the participation of its Chief Executive Officer and Chief Financial Officer, assessed our internal control over financial
reporting as of December 31, 2021. Management based its assessment on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and concluded that our internal control over financial reporting was effective at the
reasonable assurance level as of December 31, 2021.
This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to a transition
period established by rules of the SEC for “emerging growth companies”.
Remediation of Previously Reported Material Weakness
During the preparation of our consolidated financial statements as of and for the year ended December 31, 2020, we identified material weaknesses in
our internal control over financial reporting. The material weaknesses we identified were as follows:
•
•
•
•
we did not design or maintain an effective control environment commensurate with our financial reporting requirements due to lack of a
sufficient number of accounting professionals with the appropriate level of experience and training;
we did not design and maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial
accounting, reporting and disclosures, and monitoring controls maintained at the corporate level were not at a sufficient level of precision to
provide the appropriate level of oversight of activities related to our internal control over financial reporting;
we did not design and maintain effective controls over segregation of duties with respect to the preparation and review of account
reconciliations as well as creating and posting manual journal entries; and
we did not design and maintain formal accounting policies, processes and controls to analyze, account for and disclose complex transactions.
We took a number of actions in 2021 to improve our internal control over financial reporting to remediate these material weaknesses. The remediation
efforts and progress summarized below are intended to address and remediate the identified material weaknesses:
•
•
•
In the first quarter of 2021, we engaged a permanent Vice President, Corporate Controller, and a Senior Manager of Finance, together with
third-party consultants, to improve and oversee all aspects of accounting operations, financial reporting, and Sarbanes-Oxley Act of 2002, as
amended, compliance;
We also successfully implemented a new Enterprise Resource Planning (ERP) system, Microsoft 365 Business Central, in January 2021,
replacing QuickBooks and providing efficiency and financial controls. We provided appropriate training to all key accounting personnel who
are responsible for posting and reviewing journal entries; and
In the first quarter of 2021, we reevaluated our existing internal controls and, in the second quarter, we implemented additional controls to
enhance our internal control environment. Since the third quarter of 2021, we have been performing internal control testing to ensure these
controls are operating effectively as designed and implemented.
101
For the year ended December 31, 2021, we completed our testing of the design and operating effectiveness of the implemented controls and
determined they were effective. As a result, we have concluded the material weaknesses identified in fiscal year 2020 have been remediated as of
December 31, 2021.
We cannot assure you that material weaknesses or significant deficiencies will not occur in the future or that we will be able to remediate such
weaknesses or deficiencies in a timely manner, which could impair our ability to accurately and timely report our financial position, results of operations or
cash flows. For additional information, see the related risks in the section titled "Risk Factors" of this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
Other than as stated above, 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 year ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting. As a result of the COVID-19 pandemic, since March 2020, we have requested that our employees work remotely, as appropriate. We
have not identified any material changes in our internal control over financial reporting as a result of these changes to the working environment. We are
continually monitoring and assessing the COVID-19 situation to determine any potential impacts on the design and operating effectiveness of our internal
controls over financial reporting.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.
Not applicable.
102
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
The information required by this item regarding directors, executive officers and corporate governance will be included in our 2022 Proxy Statement,
which we intend to file with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K, and is incorporated
herein by reference.
We have adopted a code of business conduct and ethics for directors, officers, and employees, known as the Code of Business Conduct and Ethics.
The Code of Business Conduct and Ethics is available on our website at http://www.adicetbio.com under the Corporate Governance section of our Investors
page. We will promptly disclose on our website (i) the nature of any amendment to the policy that applies to our principal executive officer, principal
financial officer, or controller, or persons performing similar functions and (ii) the nature of any waiver, including an implicit waiver, from a provision of
the policy that is granted to one of these specified individuals, the name of such person who is granted the waiver and the date of the waiver. Shareholders
may request a free copy of the Code of Business Conduct and Ethics from our Compliance Officer, c/o Adicet Bio, Inc., 200 Clarendon Street, Floor 6,
Suite #6041, Boston, MA 02116.
Item 11. Executive Compensation.
The information required by this item regarding executive compensation will be included in our 2022 Proxy Statement, which we intend to file with
the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item regarding security ownership of certain beneficial owners and management and securities authorized for
issuance under equity compensation plans will be included in our 2022 Proxy Statement, which we intend to file with the SEC within 120 days of the end
of our fiscal year pursuant to General Instruction G(3) of Form 10-K, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item regarding certain relationships and related transactions and director independence will be included in our 2022
Proxy Statement, which we intend to file with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K,
and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services.
Our independent public accounting firm is KPMG LLP, Boston Massachusetts (PCAOB Auditor ID: 185).
The information required by this item regarding principal accounting fees and services will be included in our 2022 Proxy Statement, which we intend
to file with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K, and is incorporated herein by
reference.
103
Item 15. Exhibits and Financial Statement Schedules.
(a) The following documents are included in this Annual Report on Form 10-K:
PART IV
(1) The following Report and Consolidated Financial Statements of the Company are included in this Annual Report:
•
•
•
•
•
•
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules:
•
All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the
financial statements or the notes thereto.
(3) Exhibits. The exhibits filed as part of this Annual Report on Form 10-K are set forth on the Exhibit Index immediately preceding the signature page of
this Annual Report on Form 10-K. The Exhibit Index is incorporated herein by reference.
Item 16. 10-K Summary
We have elected not to include summary information.
104
ADICET BIO, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (KPMG LLP, Boston, MA, Auditor Firm ID: 185)
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2021 and 2020
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the years ended December
31, 2021 and 2020
Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Adicet Bio, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Adicet Bio, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the
related consolidated statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit), and cash
flows for the years then ended, 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, 2021 and 2020, and the results of its operations
and its cash flows for the years then ended, 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 audits. 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 audits 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 audits, 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 audits 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 audits 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 audits provide a reasonable basis
for our opinion.
/s/ KPMG LLP
We have served as the Company’s auditor since 2020.
Boston, Massachusetts
March 15, 2022
F-2
Adicet Bio, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents
Short-term marketable debt securities
Accounts Receivable—related party
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use asset
Goodwill
In-process research and development
Restricted cash
Long-term marketable debt securities
Other non-current assets
Total assets
Liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit)
Current liabilities:
Accounts payable
Contract liabilities—related party, current
Accrued and other current liabilities
Operating lease liability
Total current liabilities
Operating lease liability, net of current maturities
Contingent consideration liability
Deferred tax liability
Other non-current liabilities
Total liabilities
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 10,000,000 shares authorized as of December 31, 2021 and December 31,
2020, respectively; none issued and outstanding as of December 31, 2021 and December 31, 2020, respectively
Common stock, $0.0001 par value, 150,000,000 shares authorized as of December 31, 2021 and December 31,
2020, respectively; 39,736,914 and 19,677,249 shares issued and outstanding as of December 31, 2021 and
December 31, 2020, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income
Total stockholders’ equity
Total liabilities, redeemable convertible preferred stock, and stockholders’ equity
December 31,
2021
2020
277,544 $
—
185
4,709
282,438
14,643
20,358
19,462
—
150
—
1,887
338,938 $
3,263
4,805
6,682
1,567
16,317
19,377
—
—
115
35,809
84,330
10,284
—
5,722
100,336
2,790
23,066
20,089
1,190
4,527
—
1,837
153,835
1,552
13,980
5,732
1,215
22,479
20,424
980
125
—
44,008
—
—
4
471,449
(168,324 )
—
303,129
338,938 $
2
216,126
(106,325 )
24
109,827
153,835
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Adicet Bio, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
Revenue—related party
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Interest income
Interest expense
Other income (expense), net
Loss before income tax benefit
Income tax expense (benefit)
Net loss
Net loss per share attributable to common stockholders, basic and diluted
Weighted-average shares used in computing net loss per share
attributable to common stockholders, basic and diluted
Other comprehensive income (loss):
Unrealized gain (loss) on marketable debt securities, net of tax
Total other comprehensive income (loss)
Comprehensive loss
Year Ended December 31,
2021
2020
$
9,730 $
17,903
48,943
22,220
71,163
(61,433 )
91
(176 )
(606 )
(62,124 )
(125 )
(61,999 ) $
(2.00 ) $
34,334
22,760
57,094
(39,191 )
785
(134 )
(953 )
(39,493 )
(2,815 )
(36,678 )
(5.01 )
30,952,152
7,319,977
(24 )
(24 )
(62,023 ) $
1
1
(36,677 )
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Adicet Bio, Inc.
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands, except share amounts)
Balance at December 31, 2019
Issuance of common stock upon exercise of stock options
Stock-based compensation expense
Conversion of shares of redeemable convertible preferred stock
to shares of common stock in connection with the Merger
Exchange of common stock in connection with the Merger
Issuance of common stock upon accelerated vesting of restricted
stock units in connection with merger
Conversion of redeemable convertible preferred stock
warrants to common stock warrants
Net loss
Other comprehensive loss
Balance at December 31, 2020
Issuance of common stock upon exercise of stock options
Issuance of common stock related to financing, net of issuance costs
of $823,940
Issuance of common stock for cashless exercise of warrants
Issuance of common stock resulting from Employee Stock Purchase
Plan
Stock-based compensation expense
Net loss
Other comprehensive loss
Balance at December 31, 2021
Redeemable Convertible
Preferred Stock
Shares
Amount
97,166,921
—
—
114,083
—
—
Common Stock
Shares
2,155,578
210,752
—
(97,166,921 )
—
(114,083 ) 12,048,671
5,207,695
—
Amount
—
1
—
1
—
—
—
—
—
2
—
2
—
Additional
Paid-In
Capital
Accumulated
Deficit
9,258
459
5,263
114,082
83,516
626
2,922
—
—
216,126
4,688
237,995
—
(69,647 )
—
—
—
—
—
—
(36,678 )
—
(106,325 )
—
—
—
—
54,553
—
—
—
—
—
—
— 19,677,249
1,125,339
—
— 18,916,853
1,806
—
—
—
—
—
— 39,736,914 $
15,667
—
—
—
—
—
—
—
4 $
129
12,511
—
—
471,449 $
—
—
(61,999 )
—
(168,324 ) $
—
—
—
—
—
—
—
—
—
—
—
—
— $
Accumulated
Other
Comprehensiv
e
Income (Loss)
23
—
—
Total
Stockholders’
Equity
(Deficit)
(60,366 )
460
5,263
114,083
83,516
626
2,922
(36,678 )
1
109,827
4,688
237,997
—
129
12,511
(61,999 )
(24 )
303,129
—
—
—
—
—
1
24
—
—
—
—
—
—
(24 )
— $
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Adicet Bio, 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 and amortization expense
Noncash lease expense
Stock-based compensation expense
Loss on disposal of assets for lease
Net amortization of premiums and accretion of discounts on investments
Change in fair value of redeemable convertible preferred stock warrant liability
Impairment of in-process research and development
Gain on remeasurement of contingent consideration liability
Amortization of deferred debt issuance costs
Changes in operating assets and liabilities:
Accounts Receivable—related party
Prepaid expenses and other current assets
Other non-current assets
Accounts payable
Contract liabilities—related party
Operating lease liabilities
Accrued and other current liabilities
Other non-current liabilities
Net cash used in operating activities
Cash flows from investing activities
Cash and restricted cash acquired in connection with the Merger
Proceeds from sales of marketable debt securities
Purchases of marketable debt securities
Proceeds from maturities of marketable debt securities
Purchase of property and equipment
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from issuance of common stock, net of issuance costs
Proceeds from Employee Stock Purchase Plan
Proceeds from exercise of stock options
Deferred issuance costs
Net cash provided by financing activities
Net change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, at the beginning of the period
Cash, cash equivalents and restricted cash, at the end of the period
Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets:
Cash and cash equivalents
Restricted cash
Cash, cash equivalents and restricted cash in consolidated balance sheets
Supplemental cash flow information
Cash paid for income taxes
Cash received for income tax refunds
Supplemental disclosures of noncash investing and financing activities
Purchase of property and equipment included in accounts payable and accrued liabilities
Common stock offering costs included in accrued liabilities at period end
Right-of-use assets recognized upon adoption of Topic 842
Operating lease right-of-use asset obtained in exchange for operating lease liability
Conversion of redeemable convertible preferred stock into common stock
Conversion of redeemable convertible preferred stock warrants into common stock warrants
Fair value of net assets acquired in Merger
Adjustment to Goodwill
Issuance of redeemable convertible preferred stock warrants in connection with the Loan Agreement
The accompanying notes are an integral part of these financial statements.
F-6
Year Ended December 31,
2021
2020
$
(61,999 ) $
(36,678 )
1,538
2,529
12,511
31
10
—
1,190
(980 )
175
(30 )
1,634
42
1,137
(9,175 )
(511 )
855
(9 )
(51,052 )
—
7,500
—
2,750
(13,046 )
(2,796 )
238,129
129
4,688
(261 )
242,685
188,837
88,857
277,694 $
277,544 $
150
277,694 $
43 $
2,766 $
651 $
132 $
— $
— $
— $
— $
— $
413 $
— $
1,226
725
5,263
—
5
897
2,300
(1,900 )
134
—
(3,233 )
(1,260 )
(814 )
(7,903 )
(859 )
787
(242 )
(41,552 )
64,114
—
(5,700 )
57,793
(990 )
115,217
—
—
460
(157 )
303
73,968
14,889
88,857
84,330
4,527
88,857
3
664
115
—
1,424
22,367
114,083
2,922
84,142
650
144
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
1. Organization and Nature of the Business
Adicet Bio, Inc. (formerly resTORbio, Inc. (resTORbio)), together with its subsidiaries, (the Company) is a clinical stage biotechnology company
discovering and developing allogeneic gamma delta T cell therapies for cancer. The Company is advancing a pipeline of off-the-shelf gamma delta T cells,
engineered with chimeric antigen receptors (CARs) and T cell receptor-like antibodies to enhance selective tumor targeting, facilitate innate and adaptive
anti-tumor immune response, and improve persistence for durable activity in patients. The Company's approach to activate, engineer, and manufacture
allogeneic gamma delta T cell product candidates derived from the peripheral blood cells of unrelated donors allows it to generate new product candidates
in a rapid and cost efficient manner.
The Company was incorporated in November 2014 in Delaware. The principal executive offices are located in Boston, Massachusetts. The Company
also has another office in Menlo Park, California.
Adicet Bio, Inc. (when referred to prior to the Merger (as defined below), (Former Adicet)) was incorporated in November 2014 in Delaware and was
headquartered in Menlo Park, CA. Adicet Bio Israel Ltd. (formerly Applied Immune Technologies Ltd.) (Adicet Israel) is a wholly owned subsidiary of
Former Adicet and is located in Haifa, Israel. Adicet Israel was founded in 2006. During 2019, Former Adicet consolidated its operations, including
research and development activities, in the United States and as a result substantially reduced its operations in Israel.
Merger with resTORbio
Prior to September 15, 2020, the Company was a clinical-stage biopharmaceutical company known as resTORbio that had historically focused on
developing innovative medicines that target the biology of aging, to prevent or treat age-related diseases with the potential to extend healthy lifespans. On
April 28, 2020, resTORbio entered into a definitive Merger Agreement with Former Adicet. Under the terms of the Merger Agreement, Former Adicet
agreed to merge with a wholly owned subsidiary of resTORbio in an all-stock transaction with Former Adicet surviving as a wholly owned subsidiary of
resTORbio and changing its name to “Adicet Therapeutics, Inc.” (such transactions, the Merger). Under the exchange ratio formula in the Merger
Agreement, immediately following the Effective Time of the Merger, the securityholders of Former Adicet as of immediately prior to the Effective Time of
the Merger owned approximately 75% of the outstanding shares of the Company’s common stock on a fully-diluted basis and securityholders of resTORbio
as of immediately prior to the Effective Time of the Merger owned approximately 25% of the outstanding shares of the Company’s common stock on a
fully-diluted basis (in each case excluding equity incentives available for grant).
The Company concluded that the transaction represented a business combination pursuant to Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) Topic 805, Business Combinations. Further, Former Adicet was determined to be the accounting acquirer based
upon the terms of the Merger and other factors including: (i) Former Adicet’s securityholders own approximately 75% of the voting rights of the combined
company (on a fully-diluted basis excluding equity incentives available for grant); (ii) Former Adicet designated a majority (five of seven) of the initial
members of the Board of Directors of the combined company; and (iii) the terms of the exchange of equity interests based on the exchange ratio at the
announcement of the Merger factored in an implied premium to resTORbio’s stockholders. The composition of senior management of the combined
company was determined to be a neutral factor in the accounting acquirer determination, as the combined company will leverage the expertise of the senior
management of both companies. Accordingly, the reported operating results prior to the business combination are those of Former Adicet.
On September 15, 2020, the Company completed the Merger pursuant to the Merger Agreement (the Effective Time). In connection with the Merger,
and immediately prior to the Effective Time, resTORbio effected a reverse stock split of its common stock at a ratio of 1-for-7 (the Reverse Stock Split).
Also, in connection with the Merger, the Company changed its name from “resTORbio, Inc.” to “Adicet Bio, Inc.” (the Name Change), Former Adicet
changed its name from “Adicet Bio, Inc.” to “Adicet Therapeutics, Inc.” and the business conducted by the Company became primarily the business, which
was previously conducted by Former Adicet, which is a biotechnology company discovering and developing allogeneic gamma delta T cell therapies for
cancer and other diseases.
At the Effective Time, each outstanding share of Former Adicet capital stock was converted into the right to receive 0.1240 (the Exchange Ratio)
shares of Company’s common stock, as set forth in the Merger Agreement. The Exchange Ratio was determined based on the total number of outstanding
shares of Company’s common stock and Former Adicet capital stock, each on a fully diluted basis, and the respective valuations of Former Adicet and
resTORbio at the time of execution of the Merger Agreement. In connection with the Merger, the Company also assumed certain outstanding Former
Adicet warrants and Former Adicet stock options under Former Adicet’s 2015 Stock Incentive Plan (the 2015 Adicet Stock Incentive Plan) and Former
Adicet’s 2014 Share Option Plan (the 2014 Share Option Plan and, together with the 2015 Adicet Stock Incentive Plan, the Former Adicet Plans), with such
stock options and warrants henceforth representing the right to purchase a number of shares of Company’s common stock equal to the Exchange Ratio
multiplied by the number of shares of Former Adicet’s
F-7
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
capital stock previously represented by such stock options and warrants, as applicable, with a proportionate adjustment in exercise price.
Immediately following the Effective Time, there were approximately 19,589,828 shares of the Company’s common stock outstanding (post Reverse
Stock Split), with the former equity holders of Former Adicet holding approximately 75% of the outstanding shares of Company’s common stock on a
fully-diluted basis and the former equity holders of resTORbio holding approximately 25% of the outstanding shares of Company’s common stock on a
fully-diluted basis (in each case excluding equity incentives available for grant).
Please refer to Note 3 “Business Combinations” for further discussions of the Merger.
Liquidity
The Company has incurred significant net operating losses and negative cash flows from operations since inception and had an accumulated deficit of
$168.3 million as of December 31, 2021. The Company has historically financed its operations primarily through a collaboration and licensing
arrangement, the private placement of equity securities and debt, and cash received in the Merger. To date, none of the Company’s product candidates have
been approved for sale and therefore the Company has not generated any revenue from product sales. Management expects operating losses and negative
cash flows to continue for the foreseeable future, until such time, if ever, that it can generate significant sales of its product candidates currently in
development.
In February 2021, the Company completed an underwritten public offering of 10,575,513 shares of its common stock at a public offering price of
$13.00 per share. The Company received net proceeds from the offering, after deducting underwriting discounts and commissions and offering expenses of
approximately $128.8 million. In connection with the offering, the Company also entered into a stock purchase agreement with certain existing investors to
purchase 1,153,840 shares of its common stock for $15.0 million at a price per share equal to the public offering price, with an initial closing for certain
investors held simultaneously with the closing of the offering and a subsequent closing for certain additional investors.
In December 2021, the Company closed an underwritten public offering, or the December 2021 Follow-On Offering, of 7,187,500 shares of its
common stock at a public offering price of $14.00 per share. The Company received net proceeds from the offering, after deducting underwriting discounts
and commissions and offering expenses of approximately $94.2 million.
The Company expects that its cash and cash equivalents balances as of December 31, 2021, including the gross proceeds it received in February 2021
and December 2021 from its underwritten public offerings and the proceeds received from a stock purchase agreement with certain existing investors, will
be sufficient to fund its forecasted operating expenses, capital expenditure requirements for at least the next twelve months from the issuance of these
annual consolidated financial statements.
All of the Company’s revenue to date is generated from the Regeneron Agreement, which is a collaboration and license agreement with Regeneron.
The Company does not expect to generate any significant product revenue until it obtains regulatory approval of and commercialize any of the Company’s
product candidates or enter into additional collaborative agreements with third parties, and it does not know when, or if, either will occur. The Company
expects to continue to incur significant losses for the foreseeable future, and it expects the losses to increase as the Company continues the development of,
and seek regulatory approvals for, its product candidates and begin to commercialize any approved products. The Company is subject to all of the risks
typically related to the development of new product candidates, including, but not limited to, raising additional capital, development by its competitors of
new technological innovations, risk of failure in preclinical and clinical studies, safety and efficacy of its product candidates in clinical trials, the risk of
relying on external parties such as contract research organizations (CROs) and contract manufacturing organizations (CMOs), the regulatory approval
process, market acceptance of the Company’s products once approved, lack of marketing and sales history, dependence on key personnel and protection of
proprietary technology and it may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect
its business.
Until such time as the Company can generate significant revenue from product sales, if ever, the Company expects to finance its operations through
the sale of equity, debt financings, collaborative or other arrangements with corporate or other sources of financing. Adequate funding may not be available
to the Company on acceptable terms or at all. The Company’s failure to raise capital as and when needed could have a negative impact on its financial
condition and the Company’s ability to pursue its business strategies. Although the Company continues to pursue these plans, there is no assurance that the
Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.
F-8
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements and related disclosures have been prepared in conformity with accounting principles generally accepted in the
United States of America (United States GAAP or GAAP).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation. The United States dollar is the functional and reporting currency of the Company and its subsidiaries.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the consolidated financial statements as well as the
reported amounts of revenues and expenses during the reporting period. Such estimates include the valuation of the intangible assets acquired in business
combinations, redeemable convertible preferred stock warrant liability, redeemable convertible preferred stock tranche liability, the Technion Research and
Development Foundation liability (TRDF Liability), contingent consideration liability for contingent value right (CVR), deferred tax assets, useful lives of
property and equipment, accruals for research and development activities, revenue recognition and stock-based compensation and the Company’s
incremental borrowing rate. Actual results could differ from those estimates.
Contingent Consideration Liability (CVR)
The estimated fair value of the CVR, initially measured and recorded on the acquisition date, is considered to be a Level 3 instrument. The contingent
consideration liability is recorded at fair value at the end of each reporting period with changes in estimated fair values recorded in research and
development expenses in the consolidated statements of operations and comprehensive loss. During the second quarter of 2021, the Company performed a
re-measurement of the fair value of the CVR liability and adjusted the liability to zero. This resulted in a $1.0 million gain in research and development
expense in the statements of operations and comprehensive loss for the year ended December 31, 2021.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of net tangible and identified intangible assets acquired in a business
combination. Goodwill is not amortized but is evaluated at least annually for impairment or when a change in facts and circumstances indicate that the fair
value of the goodwill may be below the carrying value.
Goodwill is tested for impairment at the reporting unit level annually in the fourth quarter, or more frequently when events or changes in
circumstances indicate that the asset might be impaired. Examples of such events or circumstances include, but are not limited to, a significant adverse
change in legal or business climate, an adverse regulatory action or unanticipated competition. The Company has determined that it operates in a single
operating segment and has a single reporting unit.
Prior to performing the impairment test, the Company assesses qualitative factors to determine whether the existence of events or circumstances
would indicate that it is more likely than not that the fair value of the reporting unit was less than the carrying amount. If after assessing the totality of
events or circumstances, the Company were to determine that it is more likely than not that the fair value of the reporting unit is less than the carrying
amount, then the Company would perform a quantitative impairment test.
The quantitative impairment test involves comparing the fair value of the reporting unit to the carrying value. If the fair value of the reporting unit
exceeds the carrying value of the net assets, goodwill is not impaired, and no further testing is required. If the fair value of the reporting unit is less than the
carrying value, the Company measures the amount of impairment loss, if any, as the excess of the carrying value over the fair value of the reporting unit.
The Company performed an annual test for goodwill impairment in the fourth quarter of the fiscal year ended December 31, 2021 and determined that
goodwill was not impaired.
F-9
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
Intangible Assets
In connection with the Merger, the Company acquired certain IPR&D assets, which were classified as indefinite-lived intangible assets. Acquired
IPR&D represents the fair value assigned to research and development assets that the Company acquires and have not been completed at the acquisition
date. The fair value of IPR&D acquired in a business combination is recorded on the Company’s consolidated balance sheets at the acquisition-date fair
value and is determined by estimating the costs to develop the technology into commercially viable products, estimating the resulting revenue from the
products, and discounting the projected net cash flows to present value. IPR&D is not amortized, but rather is reviewed for impairment on an annual basis
or more frequently if indicators of impairment are present, until the project is completed, abandoned, or transferred to a third party. The Company
performed a review for impairment of IPR&D during the second quarter of the year ended December 31, 2021 and recognized an impairment charge of
$1.2 million, which was recorded as research and development expenses in the consolidated statement of operations and comprehensive loss.
Segments
The Company operates and manages its business as one reportable and operating segment, which is the business of research and development of
allogeneic immunotherapies for cancer and other diseases. The Company’s Chief Executive Officer, who is the chief operating decision maker, reviews
financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents, and
marketable debt securities. The Company’s cash and cash equivalents are held at two financial institutions in the United States and one financial institution
in Israel and such amounts may, at times, exceed insured limits. The Company invests its cash equivalents and marketable debt securities in money market
funds, United States government securities, commercial paper, corporate bonds, and asset-backed securities. The Company limits its credit risk associated
with cash equivalents and marketable debt securities by placing them with banks and institutions it believes are highly creditworthy and in highly rated
investments. The Company has not experienced any losses on its deposits of cash and cash equivalents and marketable debt securities to date.
The Company has one customer, Regeneron, which represents 100% of the Company’s total revenue during the years ended December 31, 2021 and
2020 and outstanding accounts receivable as of December 31, 2021 (see Note 10).
Risks and Uncertainties
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to,
development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with
government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require
significant additional research and development efforts, including extensive preclinical studies, clinical trials, and regulatory approval, prior to
commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and
reporting.
The Company’s product candidates are still in development and, to date, none of the Company’s product candidates have been approved for sale and,
therefore, the Company has not generated any revenue from product sales.
There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s
intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any
approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the
Company will generate revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition
from other pharmaceutical and biotechnology companies.
The current COVID-19 (coronavirus) pandemic, which is impacting worldwide economic activity, poses risk that the Company or its employees,
contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns
that may be requested or mandated by governmental authorities. The extent to which the coronavirus impacts the Company’s operations will depend on
future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that will
emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. COVID-19 may impact the
timing of regulatory approval of the INDs for clinical trials, the enrollment of any clinical trials that are
F-10
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
approved, the availability of clinical trial materials and regulatory approval and commercialization of our products. COVID-19 may also impact the
Company’s ability to access capital, which could negatively impact short-term and long-term liquidity.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with maturities of three months or less from the purchase date to be cash equivalents.
As of December 31, 2021 and 2020, cash and cash equivalents consist of cash deposited with banks and investments in money market funds with maturities
of three months or less from the date of purchase.
Marketable Debt Securities
Marketable debt securities are investments in marketable debt securities with maturities greater than three months at the time of purchase. The
Company determines the appropriate classification of its investments in marketable debt securities at the time of purchase and reevaluates such designation
at each balance sheet date. The Company has classified and accounted for its marketable debt securities as available-for-sale. The Company classifies
highly liquid securities with maturities beyond 12 months as long-term marketable debt securities in the consolidated balance sheet. These securities are
carried at fair value as determined based upon quoted market prices or pricing models for similar securities. Unrealized gains and losses, if any, are
excluded from earnings and are reported as a component of accumulated other comprehensive income (loss). The amortized cost of debt securities is
adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income on the consolidated statements of
operations and comprehensive loss. Realized gains and losses, if any, on available-for-sale securities are included in other income (expense), net. The cost
of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest
income. The Company did not have any outstanding marketable debt securities as of December 31, 2021 and did not identify any of its marketable debt
securities as other-than-temporarily impaired as of December 31, 2020.
Restricted Cash
Restricted cash is comprised of cash that is restricted as to withdrawal or use under the terms of certain contractual agreements. Restricted cash for
years ended December 31, 2021 and 2020 consists of collateral for letters of credit issued in connection with real estate leases (see Note 12).
Fair Value of Financial Instruments
The carrying amounts of certain financial instruments of the Company, including cash equivalents, restricted cash, accounts payable and accrued and
other current liabilities approximate fair value due to their relatively short maturities. The Company’s marketable debt securities and CVR liability are
carried at fair value (see Notes 4 and 5).
Property and Equipment, Net
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed on a straight-line basis over the
estimated useful lives of the related assets, generally three years. Leasehold improvements are amortized using the straight-line method over the shorter of
the assets’ estimated useful lives or the remaining term of the lease. Maintenance and repairs are charged to operations as incurred. When assets are retired
or otherwise disposed of, the cost and accumulated depreciation are removed from the consolidated balance sheet and any resulting gain or loss is reflected
in the consolidated statements of operations and comprehensive loss in the period realized.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or
asset group may not be recoverable. Recoverability is measured by comparison of the carrying amount of the asset or asset group to the future net cash
flows which the asset or asset group is expected to generate. If such asset or asset group is considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the asset or asset group exceeds the fair value of the asset or asset group. There has been no such
impairment of long-lived assets during the years ended December 31, 2021 and 2020.
Revenue Recognition
Under ASC 606, Revenue from Contracts with Customers (ASC 606), the Company recognizes revenue when its customer obtains control of promised
goods or services, in an amount that reflects the consideration which the Company expects to receive
F-11
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606,
the Company performs the following five steps as prescribed by ASC 606:
(i)
identify the contract(s) with a customer;
(ii)
identify the performance obligations in the contract;
(iii) determine the transaction price;
(iv) allocate the transaction price to the performance obligations in the contract; and
(v)
recognize revenue when (or as) the Company satisfies a performance obligation.
A contract with a customer exists when (i) the Company enters into a legally enforceable contract with a customer that defines each party’s rights
regarding the products or services to be transferred and identifies the payment terms related to these products or services, (ii) the contract has commercial
substance and (iii) the Company determines that collection of substantially all consideration for products or services that are transferred is probable based
on the customer’s intent and ability to pay the promised consideration.
At contract inception, once the contract is determined to be within the scope of ASC 606, the Company identifies the goods or services promised and
determines the performance obligations by assessing whether each promised good or service is distinct. Goods or services that are not distinct are bundled
with other goods or services in the contract until a bundle of goods or services that is distinct is created. The Company then recognizes as revenue the
amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
All of the Company’s revenues are derived through a license and collaboration agreement (see Note 10).
For revenue recognition purposes, the Company determines the term of its license or collaboration agreements by evaluating the period during which
present and enforceable rights and obligations exist. This determination is impacted by the existence of substantive termination penalties, among other
factors.
The Company recognizes revenue under the Company’s license or collaboration agreements that are within the scope of ASC 606. These agreements
include promises related to licenses to intellectual property and research and development services. If the license to the Company’s intellectual property is
determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, up-
front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that
are bundled with other promises, the Company utilizes judgement to assess the nature of the combined performance obligation to determine whether the
combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of
recognizing revenue from non-refundable, up-front fees. Accordingly, the transaction price is generally comprised of a fixed fee due at contract inception
and at specified future dates, variable consideration in the form of milestone payments due upon the achievement of specified events and tiered royalties
earned when customers recognize net sales of licensed products. The Company measures the transaction price based on the amount of consideration to
which it expects to be entitled in exchange for transferring the promised goods and/or services to the customer. The Company utilizes the “most likely
amount” method to estimate the amount of variable consideration to which it will be entitled for the contract. Amounts of variable consideration are
included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur
when the uncertainty associated with the variable consideration is subsequently resolved. At the inception of each arrangement that includes development
and regulatory milestone payments, the Company evaluates whether the associated event is considered most likely to be achieved and estimates the amount
to be included in the transaction price.
Payments or reimbursements for the Company’s research and development efforts where such efforts are considered part of or a single performance
obligation are recognized over time using a measure of progress that best reflects the Company’s performance in satisfying the obligation.
Upfront payments are recorded as contract liabilities upon receipt or when due and may require deferral of revenue recognition to a future period until
the Company performs its obligation under these arrangements. Amounts payable to the Company are recorded as accounts receivable when the
Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the
expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the
customer will be one year or less.
F-12
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the
predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the
performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not
recognized any royalty revenue resulting from its collaboration arrangement.
Research and Development Expenses
Research and development expenses include costs directly attributable to the conduct of research and development programs, including payroll and
related expenses, costs for CMOs, costs for CROs, materials, supplies, depreciation on and maintenance of research equipment, consulting costs, and the
allocated portions of facility costs, such as rent, utilities, insurance, repairs and maintenance, depreciation, information technology costs and general
support services. All costs associated with research and development are expensed within the consolidated statements of operations and comprehensive loss
as incurred.
Costs incurred in obtaining technology licenses are charged to research and development expense as acquired in-process research and development if
the technology licensed has not reached technological feasibility and has no alternative future use.
Accrued CRO, CMO, and Research and Development Expenses
The Company has entered into various agreements with CMOs and CROs. The Company’s research and development accruals are estimated based on
the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. The estimated costs of research
and development provided, but not yet invoiced are included in accrued and other current liabilities on the consolidated balance sheets. If the actual timing
of the performance of services or the level of effort varies from the original estimates, the Company will adjust the accrual accordingly. Payments made to
CMOs and CROs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets
on the consolidated balance sheets until the services are rendered. Through December 31, 2021 there had been no material adjustments to the Company’s
prior period estimates of accrued research and development expenses.
Leases
Effective January 1, 2020, the Company adopted ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02), using the modified retrospective approach
through a cumulative-effect adjustment as of the adoption date, with prior periods unchanged and presented in accordance with the guidance in Topic 840,
Leases (Topic 840).
Consistent with ASU 2016-02, the Company determines if an arrangement is a lease, or contains a lease, at inception. Leases with a term greater than
12 months are recognized on the balance sheet as Right-of-Use (ROU) assets and current and long-term operating lease liabilities, as applicable. The
Company has elected not to recognize on the balance sheet leases with terms of 12 months or less. The Company typically only includes an initial lease
term in its assessment of a lease arrangement. Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty
that the Company will renew. The Company monitors its plan to renew its leases no less than on a quarterly basis. In addition, the Company’s lease
agreements generally do not contain any residual value guarantees or restrictive covenants.
In accordance with ASU 2016-02, the ROU assets and lease liabilities are recognized based on the present value of the future minimum lease
payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate (IBR),
which is the estimated rate the Company would be required to pay for a fully collateralized borrowing equal to the total lease payments over the term of the
lease, to determine the present value of future minimum lease payments. Lease expense for minimum lease payments is recognized on a straight-line basis
over the lease term. For lease agreements entered into or reassessed after the adoption of ASU 2016-02, the Company does not combine lease and non-lease
components. Variable lease payments are expenses as incurred.
Assumptions made by the Company at the commencement date are re-evaluated upon occurrence of certain events, including a lease modification. A
lease modification results in a separate contract when the modification grants the lessee an additional right of use not included in the original lease and
when lease payments increase commensurate with the standalone price for the additional right of use. When a lease modification results in a separate
contract, it is accounted for in the same manner as a new lease.
Fair Value of Common Stock
Prior to the Merger the fair value of the Company’s common stock was determined by its Board of Directors with input from management and third-
party valuation specialists. The Company’s approach to estimate the fair value of the Company’s common stock is consistent with the methods outlined in
the American Institute of Certified Public Accountants Practice Aid, Valuation
F-13
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
of Privately-Held-Company Equity Securities Issued as Compensation. Determining the best estimated fair value of the Company’s common stock requires
significant judgement and management considers several factors, including the Company’s stage of development, equity market conditions affecting
comparable public companies, significant milestones and progress of research and development efforts. Subsequent to the Merger, the fair value of the
Company’s common stock is determined based on its closing market price.
Stock-Based Compensation
The Company accounts for stock-based compensation arrangements with employees and non-employees using a fair value method which requires the
recognition of compensation expense for costs related to all stock-based payments including stock options. The fair value method requires the Company to
estimate the fair value of stock-based payment awards on the date of grant using an option-pricing model. The Company uses the Black-Scholes option-
pricing model to estimate the fair value of options granted that are expensed on a straight-line basis over the requisite service period, which is generally the
vesting period. The Company accounts for forfeitures as they occur. Option valuation models, including the Black-Scholes option-pricing model, require
the input of several assumptions. Changes in the assumptions used can materially affect the grant-date fair value of an award. These assumptions include
the risk-free rate of interest, expected dividend yield, expected volatility and the expected life of the award. For awards that have a performance condition,
the Company recognizes compensation expense based on its assessment of the probability that the performance condition will be achieved, using an
accelerated attribution model, over the explicit or implicit service period.
Income Taxes
The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences attributable to differences between carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax reporting purposes and for operating loss and tax credit carryforwards. Changes in deferred tax assets and liabilities are
recorded in the provision for income taxes.
The Company’s deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which these temporary
differences are expected to be recovered or settled. A valuation allowance is recorded to reduce deferred tax assets if it is determined that it is more likely
than not that all or a portion of the deferred tax asset will not be realized. The Company considers many factors when assessing the likelihood of future
realization of deferred tax assets, including recent earnings results, expectations of future taxable income, carryforward periods available and other relevant
factors. The Company records changes in the required valuation allowance in the period that the determination is made.
The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon management’s evaluation of
the facts, circumstances and information available as of the reporting date. For those tax positions where it is more likely than not that a tax benefit will be
sustained, the Company records the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a
taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will
be sustained, the Company does not recognize a tax benefit in the consolidated financial statements. The Company records interest and penalties related to
uncertain tax positions, if applicable, as a component of income tax expense (benefit).
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as a change in equity of a business enterprise during a period, resulting from transactions from non-owner
sources. The other comprehensive loss disclosed in the Company’s consolidated statements of operations and comprehensive loss for the years ended
December 31, 2021 and 2020 consists of changes in unrealized gains and losses on marketable debt securities.
Net Loss per Share Attributable to Common Stockholders
Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of
common stock outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the
net loss attributable to common stockholders by the weighted-average number of common stock and potentially dilutive securities outstanding for the
period. The Company’s potentially dilutive shares, which include outstanding stock options, Employee Stock Purchase Plan awards, unvested restricted
stock units (RSUs), and shares issuable upon conversion of the Convertible Notes, are considered to be common stock equivalents and are only included in
the calculation of diluted net loss per share when their effect is dilutive. Basic and diluted net loss per share attributable to common stockholders is
presented in conformity with the two-class method required for participating securities. The two-class method determines net income (loss) per share for
each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The
two-class method requires income (loss) available to common
F-14
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
stockholders for the period to be allocated between common and participating securities based upon their respective rights to share in undistributed
earnings as if all income (loss) for the period had been distributed. The Company’s participating securities do not have a contractual obligation to share in
the Company’s losses. As such, the net loss is attributed entirely to common stockholders. Since the Company has reported a net loss for all periods
presented, diluted net loss per common share is the same as basic net loss per common share for those periods.
Subsequent Events Considerations
The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the consolidated financial statements
to provide additional evidence for certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated as
required. The Company has evaluated all subsequent events and determined that there are no material recognized or unrecognized subsequent events
requiring disclosure, other than as disclosed in these notes to the consolidated financial statements. See Note 21 for further information.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB under its ASC or other standard setting bodies and adopted by the
Company as of the specified effective date, unless otherwise discussed below.
Recently Adopted Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-15, Intangibles–Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s
Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (ASU 2018-15). The amendments in ASU
2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for
capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software
license). Accordingly, the update requires entities in a hosting arrangement that is a service contract to follow the guidance in ASC 350-40, Internal-Use
Software (ASC 350-40) to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. Costs
to develop or obtain internal-use software that cannot be capitalized under ASC 350-40, such as training costs and certain data conversion costs, also
cannot be capitalized for a hosting arrangement that is a service contract. Therefore, an entity in a hosting arrangement that is a service contract determines
which project stage an implementation activity relates to. Costs for implementation activities in the application development stage are capitalized
depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages are expensed as the activities are
performed. ASU 2018-15 also requires entities to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the
term of the hosting arrangement. ASU 2018-15 was effective for public entities for annual periods beginning after December 15, 2019, including interim
periods within those fiscal years. For nonpublic entities, ASU 2018-15 is effective for annual reporting periods beginning after December 15, 2020, and
interim periods within annual periods beginning after December 15, 2021. Early adoption is permitted, including adoption in any interim period. The
Company adopted ASU 2018-15 beginning January 1, 2021. The adoption of ASU 2018-15 resulted in an immaterial amount of assets recorded on the
Company's balance sheet.
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and
Topic 606 (ASU 2018-18), which is intended to clarify the circumstances under which certain transactions in collaborative arrangements should be
accounted for under the revenue recognition standard. Certain transactions between collaboration arrangement participants should be accounted for as
revenue under ASC Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. For public business entities,
this ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, this ASU is
effective for fiscal years and interim periods within those years beginning after December 15, 2020. Early adoption is permitted. The Company adopted
ASU 2018-18 beginning January 1, 2021. The adoption of this standard did not have a material impact on the Company's financial statements and related
disclosures.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes (ASU 2019-12),
which simplify various aspects related to the accounting for income taxes. This ASU removes exceptions to the general principles in Topic 740 related to
the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities
for outside basis differences. For public companies, this ASU is effective for interim and annual reporting periods beginning after December 15, 2020. For
all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after
December 15, 2022. Early adoption is permitted. The Company adopted ASU 2019-12 beginning January 1, 2021 on a prospective basis. The adoption of
this standard did not have a material impact on the Company's financial statements and related disclosures
F-15
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) (ASU 2020-04). The amendments in ASU 2020-04 provide
optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions
affected by reference rate reform if certain criteria are met. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through
December 31, 2022. An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the
beginning an interim period that includes or is subsequent to March 12, 2020, or prospectively from the date that the financial statements are available to be
issued. Once elected for a Topic or an Industry Subtopic, the amendments must be applied prospectively for all eligible contract modifications for that
Topic or Industry Subtopic. The Company may elect to apply ASU 2020-04 as its contracts referenced in London Interbank Offered Rate (LIBOR) are
impacted by reference rate reform. The Company adopted ASU 2020-04 beginning January 1, 2021. The adoption of this standard did not have a material
impact on the Company's financial statements and related disclosures.
Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments (ASU 2016-13), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. This
ASU replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment
and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the
amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. For public business entities that meet the definition of
a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, adoption is
effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For SEC filers that are eligible to be
smaller reporting companies and for all other entities, this ASU is effective for fiscal years beginning after December 15, 2022, and interim periods within
those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated
financial statements and related disclosures.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment
(ASU 2017-04). The new guidance simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The
amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying
amount. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.
The new guidance for accelerated filing companies became effective for annual periods or any interim goodwill impairment tests in fiscal years beginning
after December 15, 2019 and all other entities should adopt the amendments in this update for its annual or any interim goodwill impairment tests in fiscal
years beginning after December 15, 2022. The amendment should be applied on a prospective basis. Early adoption is permitted for interim or annual
goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact the adoption of this ASU will
have on its consolidated financial statements and related disclosures.
In July 2021, FASB issued ASU No. 2021-05, Lease (Topic 842), Lessors - Certain Leases with Variable Lease Payments (ASU 2021-05). ASU 2021-
05 amends the lease classification requirements for lessors when classifying and accounting for a lease with variable lease payments that do not depend on
a reference rate index or a rate. The update provides criteria, that if met, the lease would be classified and accounted for as an operating lease. ASU 2021-
05 is effective for reporting periods beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impact of
the adoption of this ASU on the Company's consolidated financial statements, but does not believe the adoption of this standard will have a material impact
on the Company's consolidated financial statements.
3. Business Combination
On September 15, 2020, Former Adicet completed its merger with resTORbio. Based on the Exchange Ratio of 0.1240, immediately following the
Merger, resTORbio stockholders and holders of resTORbio restricted stock units and options to acquire resTORbio common stock owned approximately
25.0% of the outstanding capital stock of the combined company on a fully diluted basis, and Former Adicet stockholders, holders of options or warrants to
acquire Former Adicet capital stock owned approximately 75.0% of the outstanding capital stock of the combined company on a fully diluted basis.
resTORbio’s stockholders continued to own and hold their existing shares of the Company’s common stock (after giving effect to the 1-for-7 reverse
stock split). Pursuant to the terms of the Merger, the vesting of all outstanding resTORbio stock options was accelerated in full as of immediately prior to
the Effective Time. All out-of-the-money resTORbio stock options were cancelled for no consideration. All in-the-money resTORbio stock options
remained outstanding after the completion of the Merger in accordance with their terms. For accounting purposes, the Company assumed 81,370 in-the-
money resTORbio stock options after giving effect to reverse stock split. In addition, 91,309 unvested resTORbio restricted stock units outstanding
F-16
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
and unsettled, after giving effect to reverse stock split, as of immediately prior to the Effective Time of the Merger, were accelerated in full and the holders
of such restricted stock units received 54,553 shares of the Company’s common stock (after reduction by the number of shares of resTORbio common
stock necessary to satisfy applicable tax withholding obligations at the maximum statutory rate). The fair value of these modified stock options and
restricted stock units attributable to pre-combination services was recorded as a component of consideration transferred and the fair value of these modified
stock options and restricted stock units attributable to post-combination services was recognized as stock compensation expense in the Company’s
consolidated statements of operations and comprehensive loss.
At the closing of the Merger, all shares of Former Adicet common stock and Former Adicet redeemable convertible preferred stock then outstanding
were converted to Former Adicet’s common stock under their original terms and were then exchanged for the Company’s common stock.
In connection with the Merger, the Company entered into a Contingent Value Rights Agreement (the CVR Agreement) with Computershare Inc. and
Computershare Trust Company, N.A. as joint rights agent. Per the terms of the Merger, each holder of resTORbio common stock as of immediately prior to
the completion of the Merger is entitled to one contractual contingent value right, subject to and in accordance with the terms and conditions of the CVR
Agreement, for each share of resTORbio common stock held by such holder as of immediately prior to the Effective Time. The CVR holders were entitled
to receive net proceeds from the commercialization, if any, from a third-party commercial partner of RTB101, resTORbio’s small molecule product
candidate that is a potent inhibitor of target of rapamycin complex 1 (TORC1), for a COVID-19 related indication.
The total purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed of resTORbio based on their fair values as
of the completion of the Merger, with the excess allocated to goodwill. The purchase price is calculated based on the fair value of resTORbio common
stock that the resTORbio stockholders owned as of the closing date of the Merger because, with no active trading market for shares of Former Adicet, the
fair value of the resTORbio’s common stock represented a more reliable measure of the fair value of consideration transferred in the Merger. The following
summarizes the purchase price in the Merger (in thousands, except share and per share amounts):
Fair value of common stock shares of the combined company
owned by resTORbio stockholders (1)
Fair value of contingent consideration liability with respect to CVR (2)
Purchase price
$
$
84,142
2,880
87,022
(1) Represents the share consideration of the combined company that the resTORbio stockholders own as of the closing of the Merger calculated as follows:
Number of shares of the combined company owned by resTORbio
stockholders (a)
Multiplied by the fair value per share of resTORbio common
stock (b)
Acquisition date fair value of resTORbio
Estimated fair value of modified stock options and restricted stock units attributable to pre-combination
services (3)
Less: portion of the fair value to be distributed as CVR (c)
Fair value of shares of the combined company owned by resTORbio
stockholders
$
$
5,207,695
16.59
86,396
626
(2,880 )
84,142
a.
b.
c.
Represents the number of shares of common stock of the combined company that the resTORbio stockholders owned as of the closing of the Merger. This
amount is calculated as 5,207,695 shares (post-reverse stock split) of resTORbio common stock outstanding as of September 15, 2020.
The fair value of shares of the combined company owned by resTORbio stockholders is based on the closing price of resTORbio common stock on
September 14, 2020.
The fair value of resTORbio common stock was further adjusted to remove the estimated fair value of the CVR embedded within the closing price, as each
holder of resTORbio stock received one contractual CVR immediately prior to the Merger.
(2) Each holder of resTORbio common stock as of immediately prior to the completion of the Merger was entitled to one CVR issued by resTORbio, subject to and in
accordance with the terms and conditions of the CVR Agreement, for each share of resTORbio common stock held by such holder as of immediately prior to the
Effective Time of the Merger.
(3) Based on the capitalization of resTORbio as of September 15, 2020, 91,309 outstanding unvested resTORbio restricted stock units were accelerated in connection with
the Merger and holders of the restricted stock units were issued approximately 54,553 shares of resTORbio
F-17
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
common stock on a net settlement basis. Similarly, in connection with the Merger, vesting of outstanding resTORbio stock options was accelerated in full and the stock
options that were not in the in-the-money on the close of the Merger were canceled, resulting in approximately 81,370 surviving stock options. The acquisition date
fair value of these modified resTORbio restricted stock units and resTORbio stock options attributable to the pre-combination services is included in the estimated
purchase price.
The Merger was accounted for as a business combination which requires that assets acquired, and liabilities assumed be recognized at their fair value
as of the acquisition date. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to value the assets
acquired and liabilities assumed on the acquisition date, its estimates and assumptions are subject to refinement. Fair value estimates are based on a
complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the
estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results of
operations.
The following summarizes the allocation of the purchase price to the net tangible and intangible assets acquired (in thousands):
Net assets acquired:
Cash and cash equivalents
Prepaid expenses and other current assets
Property and equipment
IPR&D
Restricted cash
Accounts payable
Accrued and other current liabilities
Other liabilities
Deferred tax liability
Goodwill
Purchase price
As of
December 31, 2020
Measurement Period
Adjustments
Final Purchase
Price Allocation
$
$
63,869 $
3,059
318
3,490
245
(1,316 )
(2,365 )
—
(367 )
20,089
87,022 $
— $
615
—
—
—
12
—
—
—
(627 )
— $
63,869
3,674
318
3,490
245
(1,304 )
(2,365 )
—
(367 )
19,462
87,022
The goodwill of $19.5 million is not tax deductible and represents the excess of the consideration paid over the fair value of assets acquired and
liabilities assumed. Goodwill is mainly attributable to the enhanced value of the combined company, as reflected in the increase in market value of the
resTORbio common shares following the announcement of the Merger with Former Adicet.
The fair value of acquired IPR&D is related to the research and development of RTB101 for a COVID-19 related indication and was conducted
pursuant to resTORbio's license agreement with Novartis (see Note 11). The RTB101 compound IPR&D project was valued using an income approach,
specifically a projected discounted cash flow method, adjusted for the probability of technical success (PTS). The projected discounted cash flow models
used to estimate the Company’s IPR&D reflect significant assumptions regarding the estimates a market participant would make in order to evaluate a drug
development asset, including the following:
•
•
•
•
Estimates of potential cash flows to be generated by the project and resulting asset, which was developed utilizing estimates of total patient
population, market penetration rates, demand risk adjustment factors, and product pricing;
Estimates regarding the timing of and the expected costs of goods sold, research and development expenses, selling, general and administrative
expenses to advance the clinical programs to commercialization, cash flow adjustments and partner profit split;
The projected cash flows were then adjusted using PTS factors that were selected considering both the current state of clinical development and
the nature of the proposed indication, (i.e., respiratory therapeutics); and
Finally, the resulting probability adjusted cash flows were discounted to a present value using a risk-adjusted discount rate, developed
considering the market risk present in the forecast and the size of the asset.
This IPR&D intangible asset is not amortized, but rather is reviewed for impairment on an annual basis or more frequently if indicators of impairment
are present, until the project is completed, abandoned, or transferred to a third party. Upon the review of impairment indicators of IPR&D during the second
quarter of 2021, the Company concluded that the IPR&D was fully
F-18
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
impaired and recorded an impairment charge within research and development expenses in the consolidated statement of operations and comprehensive
loss for the remaining balance of the IPR&D intangible asset June 30, 2021. The Company recognized IPR&D impairment charges of $2.3 million, $0.5
million, and $0.7 million for the quarters ended as of December 31, 2020, March 31, 2021, and June 30, 2021. On July 29, 2021, the Company sent
Novartis a termination notice. Termination will automatically take effect as of 60 days from the date of delivery of the termination notice to Novartis, but in
no event later than October 1, 2021 without any further notice or action required of either Novartis or the Company.
The contingent consideration for the CVR was valued using an income approach, leveraging the probability adjusted discounted cash flow used in the
valuation of the IPR&D and then deducting the administrative fee to be retained by the combined company and other permitted deductions in order to
arrive at the net cash expected to be paid out to the CVR holders. The probability adjusted cash flow includes significant estimates and assumptions
pertaining to commercialization events and cash consideration received by the Company for the grant of rights to commercialize RTB101 during the term
of the CVR Agreement (as discussed above). These cash flows were then discounted to present value using the same discount rate applied in the valuation
of the IPR&D.
Transaction costs for the Merger were $7.1 million for the year ended December 31, 2020 and were expensed as incurred in general and administrative
expenses in the consolidated statements of operations and comprehensive loss.
The following tables present changes in the Company's IPR&D and CVR since the Merger (in thousands):
In-process research and development
Contingent Value Rights
$
$
3,490 $
2,880 $
(2,300 ) $
(1,900 ) $
1,190 $
980 $
(1,190 ) $
(980 ) $
—
—
Acquisition Date
Fair value as of
September 15, 2020
Change in
Fair value
As of
December 31,
2020
Change in
Fair value
As of
December 31,
2021
4. Fair Value Measurements
The Company determines the fair value of financial and non-financial assets and liabilities using the fair value hierarchy which establishes three level
of inputs that may be used to measure fair value, as follows:
Level 1 — Observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not
active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 — Unobservable inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the
measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable
inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value
measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to
make judgments and consider factors specific to the asset or liability.
The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate
the level of the fair value hierarchy utilized to determine such fair values (in thousands):
Assets:
Money market funds (1)
Total fair value of assets
Level 1
Level 2
Level 3
Total
December 31, 2021
$
$
147,071 $
147,071 $
— $
— $
— $
— $
147,071
147,071
F-19
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
Assets:
Money market funds (1)
Marketable debt securities (2)
Asset-backed securities
Corporate debt securities
Commercial paper
Marketable debt securities
Total fair value of assets
Liabilities:
Contingent consideration
Total fair value of liabilities
Level 1
Level 2
Level 3
Total
December 31, 2020
$
63,817 $
— $
— $
63,817
—
—
—
—
63,817 $
7,522
1,762
1,000
10,284
10,284 $
—
—
—
—
— $
7,522
1,762
1,000
10,284
74,101
— $
— $
— $
— $
980 $
980 $
980
980
$
$
$
(1)
(2)
Included in cash and cash equivalents in the consolidated balance sheets
Included in short-term marketable debt securities in the consolidated balance sheets.
Money market funds are included within Level 1 of the fair value hierarchy because they are valued using quoted market prices. Corporate debt
securities, commercial paper and asset-backed securities are classified within Level 2 of the fair value hierarchy as they take into consideration valuations
obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income-based and market-based
approaches, for which all significant inputs are observable, either directly or indirectly, to estimate the fair value. These inputs include reported trades of
and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical
data and other observable inputs.
As part of the acquisition of resTORbio, the Company entered into a CVR Agreement and recorded the fair value of the CVR as part of consideration
transferred. The Company considers the contingent consideration liability a Level 3 instrument (one with significant unobservable inputs) in the fair value
hierarchy. In June 2021, the Company determined the possibility of any commercialization events for RTB101 was close to zero (see Note 3). As a result,
the fair value of the CVR liability was adjusted to zero. On October 27, 2021, the Company provided a Termination Notice under the CVR Agreement to
the joint rights agents to terminate its obligations under the CVR Agreement, effective immediately.
5. Marketable Debt Securities
The following tables summarize the Company’s marketable debt securities (in thousands):
Asset-backed securities
Corporate debt securities
Commercial paper
Total
Amortized
Cost
Unrealized
Losses
Unrealized
Gains
Fair
Value
December 31, 2020
$
$
7,507 $
1,754
999
10,260 $
— $
—
—
— $
15 $
8
1
24 $
7,522
1,762
1,000
10,284
The following table summarizes the classification of the Company’s marketable debt securities in the consolidated balance sheets (in thousands):
Short-term marketable debt securities
Long-term marketable debt securities
Total
F-20
December 31,
2021
2020
$
$
— $
—
— $
10,284
—
10,284
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
6. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
Prepaid Insurance
Prepayments to CRO's
Prepaid Maintenance
Prepayments to CMO's
Other current assets
Tax receivable
Interest receivable
Total
7. Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
December 31,
2021
2020
1,884 $
1,658
1,021
115
2
—
29
4,709 $
1,443
420
761
135
229
2,711
23
5,722
$
$
Laboratory equipment
Leasehold improvements
Furniture and fixtures
Construction in progress
Computer equipment
Software
Less: Accumulated depreciation and
amortization
Property and equipment, net
Useful life (years)
3
Lesser of useful life
or lease term
3
—
3
3
As of December 31,
2021
2020
$
5,502 $
1,614
303
13,014
216
320
20,969
(6,326 )
14,643 $
$
4,350
1,427
524
1,090
93
170
7,654
(4,864 )
2,790
Depreciation and amortization expense for each of the years ended December 31, 2021 and 2020 was $1.5 million and $1.2 million, respectively. All
of the Company’s property and equipment as of December 31, 2021 and 2020 is located in the U.S. Construction in progress has increased by $11.9 million
due to building construction related to the Company's leased space in Redwood City. Construction in process will continue to increase through the first half
of 2022, until completion of construction.
8. Accrued and Other Current Liabilities
Accrued and other current liabilities consisted of the following (in thousands):
Accrued compensation
Accrued CMO costs
Accrued professional services
Accrued research and development expenses
Accrued other liabilities
Accrued CRO costs
Total
December 31
2021
2020
4,020 $
1,077
546
504
503
32
6,682 $
3,833
244
363
65
272
955
5,732
$
$
9. Term Loan
On April 28, 2020, the Company entered into a Loan and Security Agreement with Pacific Western Bank (PacWest) for a term loan not exceeding
$12.0 million (the Loan Agreement) to finance leasehold improvements for the facilities in Redwood
F-21
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
City, CA and other purposes permitted under the Loan Agreement, with an interest rate equal to the greater of 0.25% above the Prime Rate (as defined in
the Loan Agreement) or 5.00%. The Loan Agreement granted to Pacific Western Bank a security interest on substantially all of the Company’s assets other
than intellectual property to secure the performance of the Company’s obligations under the Loan Agreement, and contains a variety of affirmative and
negative covenants, including required financial reporting, limitations on certain dispositions of assets or distributions, limitations on the incurrence of
additional debt or liens and other customary requirements. As of December 31, 2021, the Company was in compliance with such covenants.
Pursuant to the Loan Agreement in April 2020, the Company may request to draw upon the term loan at any time through the date eighteen months
after the date of the Loan Agreement (Availability End Date), which was October 28, 2021. No amounts were drawn under the Loan Agreement through
the Availability End Date.
On October 21, 2021, the Company amended the Loan Agreement with PacWest (the Loan Amendment) under which PacWest will provide one or
more Term Loans, as well as Non-Formula Ancillary Services which shall not exceed $5.5 million in the aggregate. Non-Formula Ancillary Services are
defined as automated clearinghouse transactions, corporate credit card services, letters of credit, or other treasury management services. The aggregate sum
of the outstanding Term Loans and Non-Formula Ancillary Services shall at no time exceed $15.0 million, which each Term Loan to be in an amount of not
less than $1.0 million. As of December 31, 2021, the Company had outstanding Non-Formula Ancillary Services of $4.4 million. Accordingly, as of
December 31, 2021, the Company has $10.6 million available under the Term Loan. Pursuant to the Loan Amendment, the interest rate for the Term Loans
shall be set at an annual rate equal to the greater of (i) 0.25% above the Prime Rate then in effect and (ii) 4.25%.
As of December 31, 2021, the deferred debt issuance costs were $0.1 million and are included in other non-current assets on the Company’s
consolidated balance sheets.
10. Regeneron License and Collaboration Arrangement
Agreement Terms
On July 29, 2016, the Company entered into a license and collaboration agreement with Regeneron, which was amended in April 2019, with such
amendment becoming effective in connection with Regeneron’s investment in the Company’s Series B redeemable convertible preferred stock private
placement transaction in July 2019 (as amended, the Regeneron Agreement).
Agreement Structure. The Regeneron Agreement has two principal components: (a) a research collaboration component under which the parties will
research, develop, and commercialize next-generation engineered gamma delta immune cell therapeutics (ICPs), namely engineered gamma delta immune
cells with CARs and TCRs directed to disease-specific cell surface antigens, which includes the grant of certain licenses to intellectual property between
the two parties, and (b) for a certain period following the effective date, a license to the Company to use certain of Regeneron’s proprietary mice to develop
and commercialize ICPs generated by the Company, with certain limitations relating to targets under the Regeneron Agreement.
Research Collaboration. Research activities under the collaboration are governed by research plans, which include the strategy, goals, activities, and
responsibilities of the parties with respect to a target. The Company is primarily responsible for generating, validating, and optimizing ICPs, developing
processes for manufacture of ICPs, and certain preclinical and clinical manufacturing activities for ICPs; Regeneron’s key responsibility is generating,
validating, and optimizing CARs and TCRs that bind to the applicable target. The parties have formed a joint research committee to monitor and govern the
research and development efforts during the research program term.
Rights to Research Targets. Under the terms of the collaboration, the parties will conduct research on mutually agreed upon targets. Regeneron may
obtain exclusive rights for the targets that it chooses in accordance with the target selection mechanism set forth in the Regeneron Agreement, and the
Company similarly may obtain exclusive rights for targets it chooses in accordance with such target selection mechanism. The Company has the right to
develop and commercialize ICPs to the first collaboration target to come out of the research program. On January 28, 2022, the Company received a
payment of $20.0 million from Regeneron for exercise of its option to license exclusive rights to ADI-002 and Regeneron potentially has additional options
to other ICP targets under the Regeneron Agreement. Pursuant to the Agreement with Regeneron, the Company had the right to elect to co-fund ADI-002's
future development costs. The Company did not elect its option. For those targets it does not have an option to license, Regeneron has a right of first
negotiation for up to two targets. Regeneron has the right to terminate the research program in its entirety (a) for convenience on six months prior written
notice given at any time after December 31, 2019, or (b) following a change of control (as defined in the Regeneron Agreement) of the Company. The
parties mutually agreed to their first product declaration criteria for collaboration ICP, CD20, in 2018.
Rights to Company-Developed Targets. Regeneron has an exclusive license to use targeting moieties generated by the Company by its use of
Regeneron’s proprietary mice to develop and commercialize non-ICPs.
F-22
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
Exclusivity. During the five-year target selection period that expired in July 2021, the Company may not directly or indirectly research, develop,
manufacture or commercialize an ICP, or grant a license to do the foregoing, except pursuant to the agreement. For so long as either party is researching or
developing an ICP to a target under the research program, neither party may research, develop, manufacture or commercialize any other ICP to such target,
or grant a license to do the foregoing. And for so long as a party is researching, developing or commercializing an ICP to target that is licensed to it (and
royalty bearing) under the agreement, neither party may research, develop, manufacture or commercialize any other ICP to such target, or grant a license to
permit another party to do the foregoing. These exclusivity obligations are limited to engineered gamma delta immune cells to targets reasonably
considered to have therapeutic relevance in oncology. The Regeneron Agreement includes certain exceptions to the exclusivity obligations of the parties,
including with respect to targets that are rejected by one party in the target selection process, as well as protections in the event of a change of control of a
party where the acquirer has a competing program.
Co-Funding and Profit Sharing. The Company has an option to co-fund specified portions of the future development costs for, and to co-promote,
ICPs to a target for which Regeneron has exercised an option, and to participate in the profits for such target. The Company has the right to exercise this
right in various geographic regions, including on a worldwide basis. In the event the Company exercises such right, the parties will share further
development costs and profits proportionally to their co-funding percentages.
Financial Terms. The Company received a non-refundable upfront payment of $25.0 million from Regeneron upon execution of the Regeneron
Agreement and has received an aggregate of $20.0 million of additional payments for research funding from Regeneron as of December 31, 2021. In
addition, Regeneron may have to pay the Company additional amounts in the future consisting of up to an aggregate of $80.0 million of option exercise
fees for a certain number of collaboration ICPs, as specified in the Regeneron Agreement. Regeneron must also pay the Company high single digit royalties
as a percentage of net sales for ICPs to targets for which it has exclusive rights, and low single digit royalties as a percentage of net sales on any non-ICP
product comprising a targeting moiety generated by the Company through the use of Regeneron’s proprietary mice. The Company must pay Regeneron
mid-single to low double digit, but less than teens, of royalties as a percentage of net sales of ICPs to targets for which the Company has exercised
exclusive rights, and low to mid-single digit of royalties as a percentage of net sales of targeting moieties generated from the Company’s license to use
Regeneron’s proprietary mice. Royalties are payable until the longer of the expiration or invalidity of the licensed patent rights or twelve (12) years from
first commercial sale.
Other Terms. The Regeneron Agreement contains customary representations, warranties and covenants by the Company and Regeneron and includes
(i) an obligation of the Company to use commercially reasonable efforts to develop and commercialize at least one product based on a collaboration ICP
that is not an optioned collaboration ICP for each collaboration target and (ii) an obligation of Regeneron to use commercially reasonable efforts to develop
and commercialize at least one product based on an optioned collaboration ICP for each collaboration target. The Company and Regeneron are required to
indemnify the other party against all losses and expenses related to breaches of its representations, warranties and covenants under the Regeneron
Agreement.
Term and Termination. The term of the Regeneron Agreement expires, on a product-by-product basis, on the expiration of the obligation to pay
royalties for such product. The Regeneron Agreement is subject to early termination by either party upon uncured material breach by the other party. The
licenses to develop and commercialize an ICP to a target that one party has exclusively licensed may be terminated by such party for convenience.
Equity Investments. In connection with its collaboration, Regeneron and the Company entered into a side letter pursuant to which, among other
matters, Regeneron was granted certain stockholder rights and investment rights in connection with the Company’s next equity financing that met certain
criteria and in connection with an initial public offering by the Company. Regeneron exercised its investment right and purchased approximately $10.0
million of the Company’s Series B redeemable convertible preferred stock in a private placement transaction in July 2019. The remaining obligations under
the side letter agreement terminated immediately prior to the Effective Time of the Merger.
Revenue Recognition
The Company identified the following material promises under the Regeneron Agreement: (1) a research license, (2) a collaboration invention license,
(3) a trademark license, (4) research and development services during the research term, (5) manufacturing services to manufacture collaboration ICPs for
the research programs, (6) participation in the joint research committee, and (7) information sharing during the research term. The Company considered
that the licenses granted under the Regeneron Agreement are not capable of being distinct and are not distinct from the research and development and
manufacturing services within the context of the Regeneron Agreement, because 1) such licenses are for the research and development effort during the
research term, unless Regeneron exercises its option under the Regeneron Agreement, 2) the research and development services significantly increase the
utility of such licenses, and 3) research and development services require collaboration ICPs being manufactured. Specifically, the Company’s granted
licenses can only provide benefit to Regeneron in combination with the Company’s research and development and manufacturing services to discover the
collaboration ICPs. Similarly, the participation in the joint research committee and information sharing are not capable of being distinct and are not distinct
from
F-23
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
the research and development and manufacturing services within the context of the agreement, because the participation in the joint research committee is
for monitoring and governing of the research and development efforts and the information sharing is for sharing results of such research and development
efforts. Therefore, all of the promises above are combined into a single performance obligation.
The Company also evaluated whether the option provided to Regeneron represents a material right that would require separate deferral and
recognition. The option exercise will provide Regeneron with a development and commercial license to develop and commercialize the optioned
collaboration ICPs. The Company concluded that the $25.0 million upfront payment to the Company was not negotiated to provide incremental discount
for the future option fees payable upon Regeneron’s exercise of the option.
Regeneron could decide not to exercise the option at its own discretion. The exercise of the option by Regeneron is not certain and is dependent on
many factors, such as progress made on the specific option-eligible collaboration ICP, Regeneron’s overall assessment of commercial feasibility of the
further research, development and commercialization of the Option products, availability and cost of alternative programs and products. The option
provides Regeneron with a license for intellectual property that will be improved from the inception of the Regeneron Agreement. In addition, the option
fee is significant compared to the sum total of the upfront payment and research funding fees in the original Regeneron Agreement. Therefore, the
Company determined that the option provided to Regeneron does not represent a material right and that any potential exercise of the option should be
accounted as a separate contract. Hence, upon the option exercise by Regeneron the option fee would be allocated to the development and commercial
license which would be the only performance obligation in that separate contract and recognized as revenue when control of the license rights is transferred
to Regeneron.
For revenue recognition purposes, the Company determined that the duration of the contract is the same as the research term of five years beginning
on the execution of the Regeneron Agreement on July 29, 2016. The contract duration is defined as the period during which parties to the contract have
present and enforceable rights and obligations. For revenue recognition purposes, the five-year term has been extended to the first quarter of 2022 due to
additional time required to complete the performance obligation under the Regeneron Agreement. The Company determined that Regeneron faces
significant in-substance penalties were it to terminate the Regeneron Agreement prior to the end of the research term.
At contract inception, the Company determined the transaction price of the Regeneron Agreement to be $55.0 million, consisting of the $25.0 million
upfront payment and the aggregate research funding fees of $30.0 million payable over the research term. In order to determine the transaction price, the
Company evaluated all the payments to be received during the duration of the contract. Per the terms of the original Regeneron Agreement prior to the
amendment effective from July 2019, the research funding fees of $30.0 million were payable merely due to the passage of time and therefore did not
represent a variable consideration. After the amendment became effective in July 2019, $20.0 million of these fees became contingent upon meeting certain
development and regulatory milestones. Therefore, the Company concluded that after the amendment such potential payments became variable
consideration. The receipt of the variable consideration was subject to substantial uncertainty and was therefore excluded from the transaction price upon
the effective date of the amendment. Accordingly, the transaction price was reduced to $35.0 million in July 2019. The Company re-evaluates the
transaction price if there is a significant change in facts and circumstances at least at the end of each reporting period. The Company increased the
transaction price by $10.0 million in June 2020 to $45.0 million when it achieved the milestone for the selection of a clinical candidate to the second
collaboration target under the Regeneron Agreement, resulting in the recognition of an additional $5.0 million in revenue during the three months ended
June 30, 2020.
The Company also considered the existence of any significant financing component within the Regeneron Agreement given its upfront payment
structure. Based upon this assessment, the Company concluded that the up-front payment was provided for valid business reasons and not for the purpose
of providing financing. The reason for the initial advance payment at the beginning of the contract is not to provide financing to the Company, but to ensure
Regeneron’s commitment to the contract and to provide assurance that the customer will perform its obligations under the contract. Accordingly, the
Company has concluded that the upfront payment structure of the Regeneron Agreement does not result in the existence of a significant financing
component.
The royalty payments will be recognized when the related sales occur as they were determined to relate predominantly to the intellectual property
licenses granted to Regeneron and therefore have also been excluded from the transaction price.
The Company has determined that the combined performance obligation is satisfied over time. ASC 606 requires the Company to select a single
revenue recognition method for the performance obligation that depicts the Company’s performance in transferring control of the services. Accordingly, the
Company utilizes a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize. The
Company believes this is the best measure of progress because it reflects how the Company transfers its performance obligation to Regeneron. In applying
the cost-based input method of revenue recognition, the Company uses actual costs incurred relative to budgeted costs to fulfill the combined performance
obligation. These costs consist primarily of internal full-time equivalent effort and third-party contract costs. Revenue is recognized based on actual costs
incurred as a percentage of total budgeted costs as the Company completes its
F-24
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
performance obligations over the research term of five years. A cost-based input method of revenue recognition requires management to make estimates of
costs to complete the Company’s performance obligations. In making such estimates, significant judgment is required to evaluate assumptions related to
cost estimates. The cumulative effect of revisions to estimated costs to complete the Company’s performance obligations will be recorded in the period in
which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material
impact on the timing and amount of revenue recognized in future periods.
The following table presents changes in the Company’s contract liabilities (in thousands):
Contract liability
Year ended December 31, 2021
Year ended December 31, 2020
Contract asset
Contract liability
Balance at
beginning
of period
Additions
Additions
(Deductions)
(1)
Balance at
end of
period
$
13,980 $
— $
(9,175 ) $
4,805
Balance at
beginning
of period
Additions
Additions
(Deductions)
(1)
Balance at
end of
period
$
$
— $
21,883 $
10,000 $
10,000 $
(10,000 ) $
(17,903 ) $
—
13,980
(1) Deductions to contract liabilities relate to deferred revenue recognized as revenue during the reporting period.
As of December 31, 2021, contract liabilities related to the Regeneron Agreement of $4.8 million was comprised of the $25.0 million upfront
payment, $10.0 million in total research funding fees for fiscal years 2017 and 2018, and $10.0 million for achievement of the milestone for the selection of
a clinical candidate for the second collaboration target in June 2020, less $40.2 million of cumulative license and collaboration revenue recognized from the
inception of the Regeneron Agreement as of December 31, 2021 and will be recognized as the combined performance obligation is satisfied.
As of December 31, 2020, contract liabilities related to the Regeneron Agreement of $14.0 million was comprised of the $25.0 million upfront
payment, $10.0 million in total research funding fees for fiscal years 2017 and 2018, and $10 million for achievement of the milestone for the selection of a
clinical candidate to the second collaboration target in June 2020, less $31.0 million of cumulative license and collaboration revenue recognized from the
inception of the Regeneron Agreement as of December 31, 2020.
For the years ended December 31, 2021 and 2020, the Company recognized $9.2 million and $17.9 million of license and collaboration revenue,
respectively, from amounts included in the contract liability balances at the beginning of the period. There were no costs to obtain or fulfill the contract that
meet the criteria to be capitalized.
11. License, Funding and Other Agreements Related to the CVR
Contingent Value Rights Agreement
As discussed in Note 3, in connection with the Merger, the Company entered into the CVR Agreement with Computershare Inc. and Computershare
Trust Company, N.A. as joint rights agent. The CVR holders are entitled to receive net proceeds from the commercialization, if any, received from a third-
party commercial partner of RTB101 for a COVID-19 related indication. The total fees and expenses of the Company’s clinical trials for a COVID-19
related indication of RTB101 is limited to $3.0 million under the CVR Agreement. Through October 31, 2020, the Company’s total accumulated spend was
$1.1 million of expenses. In November 2020, management terminated the nursing home study due to slow enrollment and as a consequence lowered the
probability of finding a partner due to the delay in time to commercialization of RTB101. In February 2021, management terminated the National Institute
on Aging study of RTB101 for COVID-19 post-exposure prophylaxis in adults age 65 years and older due to poor enrollment. In March 2021, management
estimated that the probability of finding a partner should be further reduced. As a result, the fair value of the CVR liability was decreased by $0.4 million to
$0.6 million. In June 2021, the Company determined the possibility of any commercialization events for RTB101 was close to zero (see Note 3). As a
result, the fair value of the CVR liability was adjusted to zero.
On October 27, 2021, the Company provided a Termination Notice under the CVR Agreement to the joint rights agent to terminate its obligations
under the CVR Agreement, effective immediately.
Novartis License Agreement
On March 23, 2017, resTORbio entered into an exclusive license agreement with Novartis International Pharmaceutical Ltd. (Novartis). Under the
agreement, Novartis granted resTORbio an exclusive, field-restricted, worldwide license, to certain
F-25
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
intellectual property rights owned or controlled by Novartis, to develop, commercialize and sell one or more therapeutic products comprising RTB101 or
RTB101 in combination with everolimus in a fixed dose combination. The exclusive field under the license agreement is for the treatment, prevention and
diagnosis of disease and other conditions in all indications in humans and animals.
The agreement may be terminated by either party upon a material breach of obligation by the other party that is not cured with 60 days after written
notice. resTORbio may terminate the agreement in its entirety or on a product-by-product or country-by-country basis with or without cause with 60 days’
prior written notice.
As consideration for the license, resTORbio is required to pay up to an aggregate of $4.3 million upon the satisfaction of clinical milestones, up to an
aggregate of $24 million upon the satisfaction of regulatory milestones for the first indication approved, and up to an aggregate of $18 million upon the
satisfaction of regulatory milestones for the second indication approved. In addition, resTORbio is required to pay up to an aggregate of $125 million upon
the satisfaction of commercial milestones, based on the amount of annual net sales. resTORbio is also required to pay tiered royalties ranging from a mid-
single digit percentage to a low-teen digit percentage on annual net sales of products. These royalty obligations last on a product-by-product and country-
by-country basis until the latest of (i) the expiration of the last valid claim of a Novartis patent covering a subject product, (ii) the expiration of any
regulatory exclusivity for the subject product in a country, or (iii) the 10th anniversary of the first commercial sale in the country, and are subject to a
reduction after the expiration of the last valid claim of a Novartis patent or the introduction of a generic equivalent of a product in a country.
On July 27, 2021, the Company sent Novartis a termination notice. Termination automatically took effect on September 25, 2021, 60 days from the
date of delivery of the termination notice to Novartis, without further notice of action required of either Novartis or the Company.
National Institute of Health
In May 2019, resTORbio was awarded a 5-year grant for up to $1.5 million from the NIH to study RTB101 and the regulation of antiviral immunity in
the elderly. resTORbio is entitled to use the award solely to conduct the research and is solely responsible for commencing and conducting the research and
will furnish periodic progress updates to the NIH throughout the term of the award. After completing the research, resTORbio must provide the NIH with a
formal report describing the work performed and the results of the research.
For funds received under the NIH funding agreement, resTORbio recognizes a reduction in research and development expenses in an amount equal to
the qualifying expenses incurred in each period up to the amount funded by the NIH. Qualifying expenses incurred by resTORbio in advance of funding by
the NIH are recorded in the consolidated balance sheets as other current assets. For the year ended December 31, 2021, $0.4 million qualifying expenses
have been incurred and $0.5 million have been funded by the NIH. The difference in the amount incurred by the Company and funded by the NIH was due
to timing of requesting reimbursements from the NIH. On a cumulative basis as of December 31, 2021, $1.3 million has been incurred and $1.3 million has
been funded by the NIH.
12. Commitments and Contingencies
Operating Leases
The Company leases office and laboratory space in Menlo Park, CA, Redwood City, CA, and Boston, MA. As of December 31, 2021, except as
described below, there have been no material changes in lease obligation from those disclosed in Note 12 to consolidated financial statements included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
On June 25, 2021, the Company entered into an amendment to the Menlo Park lease to extend the term of the lease from March 31, 2022 to June 30,
2022 and replace the previously leased premises (known as 173 and 175-177 Jefferson Drive) with another nearby premises (known as 235 Constitution
Drive). The lease commenced on July 15, 2021 and expires on June 30, 2022. In connection with these changes, the Company will incur monthly rent
payments ranging from $87,286 to $89,904, increasing over the remaining term of the lease. Given the lease is short-term in nature, the Company is using
the practical expedient for the lease and has not recorded a right of use asset or lease liability. Therefore, the Company will recognize rent expense on a
straight-line basis over the lease term.
On July 19, 2021, the Company entered into a Sublease (the Sublease Agreement) with RFS OPCO LLC (Sublessee), whereby the Company agreed
to sublease to Sublessee all of the 9,501 rentable square feet of office space in Boston, MA, currently leased by the Company pursuant to the Company’s
lease with 500 Boylston & 222 Berkeley Owner (DE) LLC, dated January 8, 2018, as amended (the Master Lease). The term of the sublease started on
September 1, 2021 and ends on July 30,
F-26
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
2026. The aggregate base rent due to the Company under the Sublease is approximately $3.5 million starting October 1, 2021. The Company records
sublease income as a reduction of lease expense. Upon execution of the Sublease Agreement, the Company received a cash security deposit of $0.1 million
from the Subleasee which is recorded as other non-current liabilities in the consolidated balance sheets. The expected undiscounted cash flows to be
received from the sublease as of December 31, 2021 is as follows (in thousands):
2022
2023
2024
2025
2026
Total
657
671
685
699
416
3,128
$
The Company recognized rent expense, net of sublease income, of $4.3 million and $0.9 million for the years ended December 31, 2021 and 2020,
respectively.
The IBR and the remaining lease terms of our facilities and their weighted average IBR and remaining terms are as follows as of December 31, 2021:
Lease Locations
Redwood City, CA
Boston, MA
Menlo Park, CA
Weighted Average
IBR
6.90%
9.30%
6.80%
7.20%
Remaining Terms
(in years)
8.2
4.6
0.5
7.7
The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating
leases for the years ended December 31, 2021 and 2020:
Lease Cost
Operating lease cost
Short-term lease cost
Variable lease cost
Sublease Income
Total lease cost
Other Information
Operating cash flows used for lease liabilities
Operating lease right of use asset obtained in exchange of operating
lease liability
$
$
$
$
December 31
2021
(in thousands)
2020
(in thousands)
4,282 $
235
—
(223 )
4,294 $
511 $
— $
894
56
—
—
950
859
22,367
As of December 31, 2021, operating right-of-use assets were $20.4 million and operating lease liabilities were $20.9 million. The Company has no
material finance leases. The maturities of the operating lease liabilities as of December 31, 2021 were as follows (in thousands):
2022
2023
2024
2025
2026 and thereafter
Total undiscounted lease payments
Less: imputed interest
Total operating lease liability
Less: current portion
Operating lease liability, net of current maturities
$
F-27
2,933
3,428
3,525
3,625
13,747
27,258
6,314
20,944
1,567
19,377
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
The Company maintains letters of credit of $4.1 million, $0.2 million, and $0.2 million in connection with the Company’s office leases in Redwood
City, CA, Menlo Park, CA, and Boston, MA, respectively. As of December 31, 2021, the cash amount associated with the Menlo Park Lease is recorded as
restricted cash on the consolidated balance sheet. As of December 31, 2020, all cash amounts are recorded as restricted cash on the consolidated balance
sheet.
Indemnification Agreements
In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the
Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party. Some of the provisions
will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The
maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. The Company has
never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company has also entered into
indemnification agreements with its directors and officers that require the Company, among other things, to indemnify them against certain liabilities that
may arise by reason of their status or service as directors or officers to the fullest extent permitted by Delaware corporate law. The Company currently has
directors’ and officers’ liability insurance.
Legal Proceedings
In connection with the Merger, seven lawsuits were filed against the Company, its directors, Former Adicet, and/or Merger Sub. which were either
dismissed or settled for of $0.2 million in the fourth quarter of 2020.
13. Stockholders' Equity
Common Stock
Common stockholders are entitled to dividends if and when declared by the Board of Directors subject to the prior rights of the preferred stockholders.
As of December 31, 2021 and 2020, no dividends on common stock had been declared by the Board of Directors.
In February 2021, the Company completed an underwritten public offering of 10,575,513 shares of its common stock at a public offering price of
$13.00 per share. The Company received net proceeds from the offering, after deducting underwriting discounts and commissions and offering expenses of
approximately $128.8 million.
In connection with the February 2021 offering, the Company also entered into a stock purchase agreement with certain existing investors to purchase
1,153,840 shares of our common stock for $15.0 million at a price per share equal to the public offering price, with an initial closing for investors held
simultaneously with the closing of the offering and a subsequent closing for certain additional investors.
In December 2021, the Company closed an underwritten public offering, or the December 2021 Follow-On Offering, of 7,187,500 shares of its
common stock at a public offering price of $14.00 per share. The Company received net proceeds from the offering, after deducting underwriting discounts
and commissions and offering expenses of approximately $94.2 million.
The Company has the following shares of common stock reserved for future issuance:
Stock options available for future grant
Stock options issued and outstanding
Unvested restricted stock units
Common stock warrants issued and outstanding
Total common stock reserved
Warrants to Purchase Shares of Common Stock
December 31,
2021
2020
1,961,338
3,875,317
771,660
220,890
6,829,205
1,739,621
3,706,945
—
226,191
5,672,757
In February 2021, PacWest exercised 5,301 warrants, which resulted in the net issuance was 1,806 shares of common stock.
The following provides a roll forward of outstanding warrants:
F-28
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
Outstanding and exercisable warrants to purchase
preferred shares as of December 31, 2020
Issued
Exercised
Outstanding and exercisable warrants to purchase
common stock as of December 31, 2021
Number of
Warrants
Weighted
Average
Exercise
Price
Weighted
Average
Contractual
Term (Years)
226,191 $
—
(5,301 )
220,890 $
11.3177
11.3177
5.66
4.66
As of December 31, 2021, the Company's outstanding warrants to purchase shares of common stock consisted of the following:
Issuance Date
September 15, 2020
September 15, 2020
September 15, 2020
September 15, 2020
14. At-the-Market (ATM) Offering
Number of
Shares of
Common
Stock Issuable
101,610 $
30,924 $
77,312 $
11,044 $
220,890
Exercise
Price
11.3177
11.3177
11.3177
11.3177
Classification
Equity
Equity
Equity
Equity
Expiration Date
July 25, 2026
August 21, 2026
September 19, 2026
September 26, 2026
On December 1, 2020, the Company entered into a Sales Agreement (the 2020 Sales Agreement) with Evercore Group L.L.C. and H.C. Wainwright &
Co., LLC (collectively, the Agents), pursuant to which the Company may sell, from time to time, at its option, up to an aggregate of $50.0 million of shares
of the Company’s common stock, through the Agents, as its sales agents. No sales of Shares have been made under the 2020 Sales Agreement. The ATM
offering was terminated in February 2021.
On March 12, 2021, the Company entered into a Sales Agreement (the 2021 Sales Agreement) with JonesTrading Institutional Services (the Agent),
pursuant to which the Company could sell, from time to time, at its option, up to an aggregate of $75.0 million of shares of its common stock, through the
Agent, as its sales agent. No shares were sold under the 2021 Sales Agreement as of December 31, 2021.
15. Stock-Based Compensation
Stock-based Compensation Expense
The following table presents stock-based compensation expense as reflected in the Company's consolidated statements of operations and
comprehensive loss (in thousands):
Research and development
General and administrative
Total stock-based compensation
Year Ended December 31,
2021
2020
$
$
4,759 $
7,752
12,511 $
1,674
3,589
5,263
F-29
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
Summary of Plans
The Plans are administered by the Board of Directors or, at the discretion of the Board of Directors, by a committee of the Board of Directors. The
exercise prices, vesting and other restrictions are determined at the discretion of the Board of Directors, or its committee if so delegated, except that the
exercise price per share of stock options may not be less than 100% of the fair market value of the share of common stock on the date of grant and the term
of the stock option may not be greater than ten years. Incentive stock options granted to employees and restricted stock awards granted to employees,
officers, members of the Board of Directors, advisors, and consultants of the Company typically vest over four years. Non-statutory options granted to
employees, officers, members of the Board of Directors, advisors, and consultants of the Company typically vest over three or four years. Shares that are
expired, terminated, surrendered or canceled under the Plans without having been fully exercised will be available for future awards. In addition, shares of
common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for the
grant of awards.
The 2017 Plan and 2018 Plan
In 2017, resTORbio adopted the 2017 Plan. In connection with resTORbio’s initial public offering completed in January 2018, the resTORbio Board
adopted and resTORbio’s stockholders approved the 2018 Plan. The 2018 Plan provides that the number of shares reserved and available for issuance under
the plan will automatically increase each January 1, beginning on January 1, 2019, by 4% of the outstanding number of shares of resTORbio’s common
stock on the immediately preceding December 31 or such lesser number of shares as determined by the Board. On April 27, 2021, the stockholders
approved an amendment and restatement of the 2018 Stock Option and Incentive Plan, to, among other things, increase the aggregate number of shares
authorized for issuance under the 2018 Plan by 1,500,000 shares, plus on January 1, 2022 and each January 1, thereafter, the number of shares authorized
for issuance shall be increased by the lesser of 5% of the number of shares of Common Stock issued and outstanding on the immediately preceding
December 31, or such lesser number as determined by the compensation committee. On January 1, 2022, the number of shares reserved and available for
issuance under the 2018 Plan automatically increased by 1,986,845 shares of Common Stock equal to 5% of the number of shares of Common Stock issued
and outstanding on December 31, 2021.
Since the date of effectiveness of the 2018 Plan, resTORbio has not and the Company will not grant any further awards under the 2017 Plan.
However, any shares of common stock subject to awards under the 2017 Plan that expire, terminate, or otherwise are surrendered, canceled, forfeited or
repurchased without having been fully exercised or resulting in any common stock being issued will become available for issuance under the 2018 Plan. As
of December 31, 2021, there are no outstanding options under the 2017 Plan.
As of December 31, 2021, the number of shares of common stock available for grant under the 2017 and 2018 Plan is 1,683,999. As of December 31,
2021, an aggregate of 2,574,170 shares of common stock were issuable upon the exercise of outstanding stock options under the 2017 Plan and 2018 Plans
at a weighted average exercise price of $15.10 per share. In addition to this amount, as of December 31, 2021, 771,660 shares of common stock were
issuable upon the vesting of 6,410 performance stock units (PSUs) granted in May 2021, 205,250 RSUs granted in August 2021, and 560,000 RSUs and
PSUs granted in October 2021.
The 2014 Plan and 2015 Plan
As of December 31, 2021, the number of shares of common stock available for grant under the 2014 and 2015 Plan is 277,339. As of December 31,
2021, an aggregate of 915,657 shares of common stock were issuable upon the exercise of outstanding stock options under the 2015 plan at a weighted
average exercise price of $11.46 per share and an aggregate of 22,987 shares of common stock were issuable upon the exercise of outstanding stock options
under the 2014 Plan at a weighted average exercise price of $1.61 per share.
Since the date of effectiveness of the Merger, the Company has not and will not grant any further awards under the 2014 Plan.
2018 Employee Stock Purchase Plan
The 2018 ESPP provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on
January 1, 2019 and increasing each January 1 thereafter through January 1, 2028, by the least of (i) 1% of the outstanding number of shares of the
Company’s common stock on the immediately preceding December 31; (ii) 77,703 shares or (iii) such number of shares as determined by the ESPP
administrator.
On January 1, 2020, as a result of the foregoing evergreen provision, the number of shares of common stock available for issuance under the 2018
ESPP automatically increased from 79,369 to 131,432 shares. On January 1, 2021, as a result of the
F-30
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
foregoing evergreen provision, the number of shares of common stock available for issuance under the 2018 ESPP automatically increased from 131,432 to
524,775. During the 2021 Annual Meeting of the stockholders held on April 27, 2021, the stockholders approved an amendment and restatement of the
Company's 2018 ESPP. As a result, the Company increased the shares available for issuance under the 2018 ESPP to 524,775 shares.
For the year ended December 31, 2021 the Company issued a total of 15,667 shares under the 2018 ESPP. Expense related to the issuance of such
shares was less than $0.1 million. No shares were issued under the 2018 ESPP during the year ended December 31, 2020.
Stock Options
A summary of stock option activity is set forth below (in thousands, except share and per share data):
Outstanding, December 31, 2020
Options authorized
Options granted
Options exercised
Options forfeited or cancelled
Outstanding, December 31, 2021
Options exercisable December 31, 2021
Vested and expected to vest, December 31, 2021
Outstanding Awards
Number of
Shares
Underlying
Outstanding
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term (in years)
Aggregate
Intrinsic
Value
3,706,945 $
—
2,161,472 $
(1,125,339 ) $
(867,761 ) $
3,875,317 $
991,847 $
3,875,317 $
10.90
14.37
4.17
14.06
14.08
13.42
14.08
7.98 $
15,126
8.85 $
8.46 $
8.85 $
13,212
4,033
13,212
The fair value of each stock option was estimated at the date of grant using a Black-Scholes option-pricing model using the following assumptions:
Expected volatility
Risk-free interest rate
Dividend yield
Expected term
The assumptions are as follows:
Year Ended December 31,
2021
77.2% - 79.8%
0.1% - 1.4%
2020
72.6% - 96.3%
0.1% - 1.7%
0.90 - 6.08 years
1.00 - 6.08 years
—
—
•
•
•
•
Expected volatility. The Company has limited trading history. As such, the expected volatility was determined by examining the historical
volatilities for comparable publicly traded companies within the biotechnology and pharmaceutical industry using an average of historical
volatilities of the Company’s industry peers.
Risk-free interest rate. The risk-free interest rate is based on the United States Treasury yield with a maturity equal to the expected term of the
option in effect at the time of grant.
Dividend yield. The expected dividend is assumed to be zero as dividends have never been paid and there are no current plans to pay dividends
on common stock.
Expected term. The expected term represents the period that the stock-based awards are expected to be outstanding. The expected term is
calculated using the simplified method which is used when there is insufficient historical data about exercise patterns and post-vesting
employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant, or for each
vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the maximum contractual expiration date is used as
the expected term under this method. For awards with multiple vesting-tranches, the times from grant until the mid-points for each of the
tranches may be averaged to provide an overall expected term.
The Company will continue to use judgment in evaluating the expected volatility, risk-free interest rates, dividend yield and expected term, utilized for
stock-based compensation on a prospective basis.
F-31
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the
Company’s common stock for stock options that were in-the-money at December 31, 2021 and 2020. The aggregate intrinsic value of stock options
exercised during the years ended on December 31, 2021 and 2020 was $10.1 million and $2.5 million, respectively.
The total fair value of options that vested during the years ended December 31, 2021 and 2020 was $2.3 million and $2.4 million, respectively. The
options granted during the years ended December 31, 2021 and 2020 had a weighted-average per share grant-date fair value of $9.68 per share and $9.96
per share, respectively.
As of December 31, 2021, the total unrecognized stock-based compensation expense related to unvested stock options was $24.8 million, which is
expected to be recognized over the remaining weighted-average vesting period of 2.8 years.
Restricted Stock Units
The following table presents a summary of the Company's RSU activity and related information:
Outstanding, December 31, 2020
RSUs granted (including performance-based RSUs)
RSUs Vested
RSUs forfeited
Outstanding, December 31, 2021
Number of Units Outstanding
Weighted-
Average
Grant Date Fair Value
—
777,160
—
(5,500 )
771,660
$
$
$
7.84
7.12
7.85
In May 2021, the Company granted 6,410 RSUs with service and performance conditions to an employee, none of which vested during the year
ending December 31, 2021. Vesting of these awards is contingent on the occurrence of certain milestone events and fulfilment of any remaining service
condition. As a result, the related compensation cost is recognized as an expense when achievement of the milestone is considered probable. The expense
recognized for these awards is based on the grant date fair value of the Company's common stock multiplied by the number of units granted. The Company
recognized less than $0.1 million of related expense during the year ended December 31, 2021.
In October 2021, the Company granted 560,000 RSUs with service and performance conditions to certain employees, none of which vested during the
year ended December 31, 2021. Vesting of these awards is contingent on the occurrence of certain milestone events and fulfilment of any remaining service
condition. As a result, the related compensation cost is recognized as an expense when achievement of the milestone is considered probable. The expense
recognized for these awards is based on the grant date fair value of the Company's common stock multiplied by the number of units granted. The Company
recognized $1.6 million of related expense during the year ended December 31, 2021.
The weighted-average grant date fair value of RSUs granted during the year ended December 31, 2021 was $7.84. There was no RSU activity during
the year ended December 31, 2020. Additionally, no RSUs vested during the year ended December 31, 2021.
As of December 31, 2021, there was approximately $4.1 million of unrecognized compensation cost related to unvested RSUs that the Company
expects to recognize over a remaining weighted-average period of approximately 1.3 years.
The following table presents stock-based compensation expense by type of award (in thousands):
Stock Options
Restricted stock units (including performance-based RSUs)
Employee Stock Purchase Plan
Total
F-32
Year Ended December 31,
2021
2020
10,511
1,944
56
12,511 $
5,263
—
—
5,263
$
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
16. Net Loss Per Share
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share
and per share data):
Numerator:
Net loss attributable to common stockholders
Denominator:
Weighted-average shares used in computing net loss
per share attributable to common stockholders,
basic and diluted
Net loss per share attributable to common stockholders,
basic and diluted
Year Ended December 31,
2021
2020
$
(61,999 ) $
(36,678 )
30,952,152
7,319,977
$
(2.00 ) $
(5.01 )
The Company's potentially dilutive shares, which include outstanding stock options, unvested RSUs, and unexercised warrants to purchase common
stock, are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.
The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to
common stockholders for the period presented because including them would have been antidilutive:
Options to purchase common stock
Unvested Restricted Stock Awards
Common stock warrants
Total
17. Income Taxes
The components of the provision for (benefit from) income taxes are as follows (in thousands):
December 31,
2021
2020
3,875,317
771,660
220,890
4,867,867
3,706,945
—
226,191
3,933,136
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferred
Provision for (benefit from) income taxes
Years Ended December 31,
2021
2020
— $
—
—
—
(125 )
—
—
(125 )
(125 ) $
(2,678 )
105
—
(2,573 )
(242 )
—
—
(242 )
(2,815 )
$
$
Income tax benefit of $0.1 million for the year ended December 31, 2021 is primarily due to the adjustment in deferred tax liability arising from the
impairment charge of $1.2 million of acquired IPR&D. In contrast, the income tax benefit of $2.8 million for the year ended December 31, 2020 was
primarily due to a the recognition of a net operating loss carryback under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) which
was enacted on March 27, 2020 in response to the COVID-19 pandemic.
For the rate table below the (provision for) benefit from income taxes differ from the amount expected by applying the federal statutory rate to the loss
before taxes as follows:
F-33
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
Federal statutory income tax rate
Other permanent differences
State income taxes
Federal benefit from NOL carryback
Change in valuation allowance
Change in fair value of redeemable convertible preferred stock tranche liability and TRDF
liability
Stock-based compensation
Provision for income taxes
Year Ended December 31,
2021
2020
21.0 %
(1.9 )%
6.9 %
0.0 %
(24.8 )%
0.0 %
(1.0 )%
0.2 %
21.0 %
(0.5 )%
6.1 %
6.7 %
(25.8 )%
(0.5 )%
0.1 %
7.1 %
The tax effects of temporary differences and carryforwards of the deferred tax assets are presented below (in thousands):
Deferred Tax Assets:
Net operating loss carryforwards
Operating lease right-of-use asset liability
Deferred revenue
Stock-based compensation
Intangible assets
Fixed assets
Accruals and reserves
Research and development credit carryforwards
Gross deferred tax assets
Less: Valuation allowance
Deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Fixed assets
Basis Difference IPR&D
Operating lease right-of-use asset
Net deferred tax assets
December 31,
2021
2020
67,675 $
5,504
1,263
1,726
1,081
196
1,042
26
78,513
(73,163 )
5,350
—
—
(5,350 )
— $
51,796
5,686
2,857
1,750
1,195
—
654
26
63,964
(57,715 )
6,249
—
(313 )
(6,061 )
(125 )
$
$
On September 15, 2020 Adicet Bio and resTORbio completed the Merger upon which Adicet Bio became the parent company of the consolidated
group. The Merger did not create a step up in basis for tax basis of the asset as it was considered a tax-free merger. The above deferred tax table includes
deferred related to resTORbio.
The Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.
ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that
management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate
sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating losses, management believes that
recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has
provided a valuation allowance.
The valuation allowance increased by $15.5 million during 2021 and $37.9 million during 2020.
As of December 31, 2021, the Company had net operating loss carryforwards of $271.6 million, $143.5 million, and $17.1 million to reduce future
taxable income, if any, for federal, state and foreign income tax purposes, respectively. Of the federal net operating loss carryforwards, $7.6 million will
begin to expire in 2036 if not utilized, and $264.0 million can be carried forward indefinitely. The state carryforwards will begin to expire in 2035.
F-34
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
The Company also had approximately $1.8 million of federal and $1.5 million of California research and development tax credit carryforwards
available to offset future taxable income as of December 31, 2021. The federal credits begin to expire in 2041 and the California research credits can be
carried forward indefinitely.
Utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to an annual limitation under
Section 382 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or
that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income.
In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in
the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has
occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If
the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards
or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying
the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional
adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit
carryforwards before utilization. Further, until a study is completed and any limitation is known, no liability related to uncertain tax positions is recorded in
the consolidated financial statements. The Company does not expect its unrecognized tax benefit balance to change materially over the next 12 months.
The Company files income tax returns in the United States federal jurisdiction, California, Massachusetts, New York and Israel. The tax years 2015 to
2021 remains open to United States federal and state examination to the extent of the utilization of net operating loss and credit carryovers.
As of December 31, 2021, the Company had unrecognized tax benefits of $0.8 million related to the transfer of certain intellectual property from its
Israeli subsidiary. In addition, as of December 31, 2021, the Company had unrecognized tax benefits of $3.2 million related to the federal and state research
and development credits as a result of no formal research credit study performed.
A reconciliation of the beginning and ending unrecognized tax benefit amount is as follows (in thousands):
Balance at the beginning of the year
Adjustment based on tax positions related to current year
Balance at the end of the year
Year Ended December 31,
2021
2020
$
$
797 $
3,243
4,040 $
797
—
797
The Company recognizes interest expense and penalties related to the above unrecognized tax benefits within income tax expense (benefit).
Management determined that no accrual for interest and penalties was required as of December 31, 2021.
18. Defined Contribution Plan
The Company maintains a defined contribution plan under Section 401(k) of the Internal Revenue Code covering substantially all full-time United
States employees. Employee contributions are voluntary and are determined on an individual basis subject to the maximum allowable under federal tax
regulations. During the year ended December 31, 2021 the Company made aggregate matching contributions of $0.3 million. The Company did not make
contributions to the 401(k) plan during 2020.
19. Related Party Transactions
As of December 31, 2021, Regeneron owned 883,568 shares of the Company's common stock. Regeneron became a related party in July 2019 as a
result of Series B redeemable convertible preferred stock financing. Upon closing the Merger, 7,125,552 shares of the redeemable convertible preferred
stock converted into 883,568 shares of the Company’s common stock. For the years ended December 31, 2021 and 2020, the Company recorded revenue
related to the Regeneron Agreement of $9.7 million and $17.9 million, respectively. As of December 31, 2021, the Company recorded less than $0.2
million in accounts receivable and has deferred revenue of $4.8 million related to the Regeneron Agreement (See Note 10).
20. Subsequent Events
Regeneron Option
F-35
Adicet Bio, Inc.
Notes to Consolidated Financial Statements
On January 28, 2022, Regeneron exercised its option to license the exclusive, worldwide rights to ADI-002, an allogeneic gamma delta chimeric
antigen receptor (CAR) T cell therapy directed against Glypican-3, pursuant to the Regeneron Agreement.
In conjunction with the exercise of the Option, Regeneron paid an exercise fee of $20.0 million to the Company on January 28, 2022.
Pursuant to the Regeneron Agreement, upon Regeneron’s exercise of the option, the Company had a specified period of time to elect to co-fund ADI-
002’s future development costs, and to participate in any potential profits with Regeneron up to a specified co-funding percentage in various geographic
regions, including on a worldwide basis (Co-Funding Option). Adicet elected not to exercise its Co-Funding Option for ADI-002. Accordingly, Regeneron
is responsible, at its sole cost, for all development, manufacturing and commercialization of ADI-002 and must pay the Company high single digit royalties
as a percentage of any net sales of ADI-002 for a period commencing on the first commercial sale until the longer of (i) the expiration or invalidity of the
licensed patent rights or (ii) a low double digit amount of years from first commercial sale.
F-36
Exhibit
Number
3.1
3.2
3.3
3.4
4.1
4.2
4.3*
10.1
10.2
10.3
10.4
10.5
10.6+
10.7
10.8
10.9
EXHIBIT INDEX
Description of Exhibit
Third Amended and Restated Certificate of Incorporation of the Registrant (as currently in effect) (incorporated by reference to Exhibit 3.1
to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed with the SEC on January 30, 2018).
Certificate of Amendment of Third Amended and Restated Certificate of Incorporation of resTORbio, Inc. related to the Reverse Stock
Split, dated September 15, 2020 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-
38359) filed with the SEC on September 16, 2020).
Certificate of Amendment of Third Amended and Restated Certificate of Incorporation of resTORbio, Inc. related to the Name Change,
dated September 15, 2020 (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (File No. 001-38359)
filed with the SEC on September 16, 2020).
Amended and Restated Bylaws of the Registrant (as currently in effect) (incorporated by reference to Exhibit 3.2 to the Registrant’s Current
Report on Form 8-K (File No. 001-38359) filed with the SEC on January 30, 2018).
Description of Securities (incorporated by reference to Exhibit 4.3 to the Registrant’s Annual Report on Form 10-K (File No. 001-38359)
filed with the SEC on March 12, 2020).
Amended and Restated Investors’ Rights Agreement, dated as of November 29, 2017, among the Registrant and the other parties thereto
(incorporated by reference to Exhibit 4.2 to our Registration Statement on Form S-1 (File No. 333-222373) filed with the SEC on
December 29, 2017).
Specimen Common Stock Certificate
Stock Purchase Agreement, dated February 12, 2021, by and among the Registrant and the Investors named therein (incorporated by
reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form 8-K, as amended (File No. 001-38359) filed with the SEC on
February 16, 2021).
Loan and Security Agreement, dated as of April 28, 2020, by and between Pacific West Bank and Adicet Therapeutics, Inc. (incorporated
by reference to Exhibit 10.26 to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed with the SEC on September 16,
2020).
First Amendment to Loan and Security Agreement, dated as of July 8, 2020, by and between Pacific West Bank and Adicet Therapeutics,
Inc. (incorporated by reference to Exhibit 10.32 to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed with the SEC on
September 16, 2020).
Second Amendment to Loan and Security Agreement, dated as of September 14, 2020, by and between Pacific West Bank and Adicet
Therapeutics, Inc. (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed
with the SEC on September 16, 2020).
Third Amendment to Loan and Security Agreement, dated as of September 15, 2020, by and between Pacific West Bank and Adicet
Therapeutics, Inc. (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed
with the SEC on September 16, 2020).
Fourth Amendment to Loan and Security Agreement, dated as of October 21, 2021, between Adicet Therapeutics, Inc. and Pacific Western
Bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed with the SEC
on October 25, 2021).
Form of Warrant to Purchase Common Stock issued to Beech Hill Securities, dated September 15, 2020 (incorporated by reference to
Exhibit 10.5 to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed with the SEC on September 16, 2020).
Warrant to Purchase Common Stock issued to PacWest Bancorp, dated September 15, 2020 (incorporated by reference to Exhibit 10.6 to
the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed with the SEC on September 16, 2020).
Unconditional Secured Guaranty, dated September 15, 2020 (incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report
on Form 8-K (File No. 001-38359) filed with the SEC on September 16, 2020).
105
10.10+
Affirmation and Amendment of Guaranty, dated as of October 21, 2021, between the Registrant and Pacific Western Bank (incorporated by
reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed with the SEC on October 25, 2021).
10.11*#
Amended and Restated 2018 Stock Option and Incentive Plan and forms of award agreements thereunder.
10.12#
10.13#
2017 Stock Incentive Plan and forms of award agreements thereunder (incorporated by reference to Exhibit 10.1 to the Registrant’s
Registration Statement on Form S-1, as amended, (File No. 333-222373) filed with the SEC on January 16, 2018).
Adicet Therapeutics, Inc. 2015 Stock Incentive Plan and forms of award agreements thereunder (incorporated by reference to Exhibit 10.13
to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed with the SEC on September 16, 2020).
10.14*#
Amended and Restated 2018 Employee Stock Purchase Plan.
10.15*#
Adicet Bio, Inc. 2022 Inducement Plan and forms of award agreements thereunder.
10.16*#
Form of Employment Agreement.
10.17*
Form of Indemnification Agreement between the Registrant and each of its directors and executive officers.
10.18*#
Amended and Restated Non-Employee Director Compensation Policy.
10.19*#
Amended and Restated Senior Executive Cash Incentive Bonus Plan.
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
Lease Agreement, dated as of October 31, 2018, by and between Adicet Therapeutics, Inc. as Tenant, and Westport Office Park, LLC as
Landlord (incorporated by reference to Exhibit 10.23 to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed with the
SEC on September 16, 2020).
First Amendment to Lease, dated as of December 30, 2020, by and between Adicet Therapeutics, Inc. as Tenant, and Westport Office Park,
LLC as Landlord (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed
with the SEC on January 5, 2021).
Office Lease Agreement, dated as of January 8, 2018, by and between the Registrant and 500 Boylston and 222 Berkeley Owner (DE) LLC
(incorporated by reference to Exhibit 10.15 to the Registrant’s Registration Statement on Form S-1, as amended, (File No. 333-222373)
filed with the SEC on January 16, 2018).
First Amendment to Office Lease, dated as of April 1, 2019, by and between the Registrant and 500 Boylston and 222 Berkeley Owner
(DE) LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-38359) filed with
the SEC on May 15, 2019).
Sublease Agreement, dated as of July 19, 2021, between the Registrant and RFS Opco LLC (incorporated by reference to Exhibit 10.1 to
the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed with the SEC on July 26, 2021).
Third Amendment to Business Park Lease, dated as of June 25, 2021, between the Registrant and Facebook, Inc. (incorporated by reference
to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed with the SEC on July 1, 2021).
Second Amendment to Business Park Lease, dated as of October 19, 2020, between the Registrant and Facebook, Inc. (incorporated by
reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed with the SEC on July 1, 2021).
Amendment to Business Park Lease, dated as of September 2019, between Adicet Therapeutics, Inc. and David D. Bohannon Organization
(incorporated by reference to Exhibit 10.25 to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed with the SEC on
September 16, 2020).
Business Park Lease, dated as of September 30, 2015, by and between Adicet Therapeutics, Inc. and David D. Bohannon Organization
(incorporated by reference to Exhibit 10.24 to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed with the SEC on
September 16, 2020).
Standard Form of Agreement between Owner and Contractor Where the Basis for Payment is a Stipulated Sum, effective as of April 2,
2021, by and between Adicet Therapeutics, Inc., as Owner, and CP Enterprises, Inc. d/b/a CP Construction, as Contractor (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed with the SEC on April 9, 2021).
106
10.30+
10.31+
10.32+
10.33+
10.34+
21.1
23.1*
31.1*
31.2*
32.1**
Amended and Restated License Agreement, dated as of May 21, 2014, by and between Technion Research and Development Foundation
Ltd., acting on behalf of itself and the Technion-Israel Institute of Technology, and Adicet Therapeutics, Inc. as successor in interest to
Applied Immune Technology, Ltd. (incorporated by reference to Exhibit 10.27 to the Registrant’s Current Report on Form 8-K (File No.
001-38359) filed with the SEC on September 16, 2020).
Amendment No. 1 to Amended and Restated License Agreement, dated as of June 30, 2015, by and between Technion Research and
Development Foundation Ltd., acting on behalf of itself and the Technion-Israel Institute of Technology, and Applied Immune Technology,
Ltd. (incorporated by reference to Exhibit 10.28 to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed with the SEC
on September 16, 2020).
Amendment No. 2 to Amended and Restated License Agreement, dated as of January 13, 2016, by and between Technion Research and
Development Foundation Ltd., Applied Immune Technology, Ltd., and Adicet Therapeutics, Inc. (incorporated by reference to Exhibit
10.29 to the Registrant’s Current Report on Form 8-K (File No. 001-38359) filed with the SEC on September 16, 2020).
License and Collaboration Agreement, dated as of July 29, 2016, by and between Adicet Therapeutics, Inc. and Regeneron
Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.30 to the Registrant’s Current Report on Form 8-K (File No. 001-38359)
filed with the SEC on September 16, 2020).
Amendment No. 1 to License and Collaboration Agreement, dated as of April 24, 2019, by and between Adicet Therapeutics, Inc. and
Regeneron Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.31 to the Registrant’s Current Report on Form 8-K (File No. 001-
38359) filed with the SEC on September 16, 2020).
Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to the Registrant’s Annual Report on Form 10-K (File No. 001-
38359) filed with the SEC on March 12, 2021).
Consent of KPMG LLP, independent registered public accounting firm.
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
101.INS*
Inline XBRL Instance Document
101.SCH*
Inline XBRL Taxonomy Extension Schema Document
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*
Cover Page Interactive Data File
* Filed herewith.
+ Portions of this exhibit (indicated by asterisks) have been omitted pursuant to Item 601(b)(10) of Regulation S-K.
# Indicates a management contract or any compensatory plan, contract or arrangement.
** The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed” for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Such certifications will not be deemed to be incorporated by reference into any
filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant
specifically incorporates it by reference.
107
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 15, 2022
Adicet Bio, Inc.
By:
/s/ Chen Schor
Chen Schor
President, Chief Executive Officer and Director
(Principal Executive Officer)
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and appoints Chen Schor and Nick Harvey, and each of them, with full
power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her
name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all
amendments to this annual report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each
and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may
lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1934, this Annual Report on Form 10-K has been signed by the following persons in the
capacities and on the dates indicated.
Signature
Title
Date
President, Chief Executive Officer and Director (principal executive officer)
March 15, 2022
Chief Financial Officer (principal financial officer and principal accounting officer)
March 15, 2022
/s/ Chen Schor
Chen Schor
/s/ Nick Harvey
Nick Harvey
/s/ Jeffrey Chodakewitz
Jeffrey Chodakewitz, M.D.
/s/ Steve Dubin
Steve Dubin
/s/ Carl L. Gordon
Carl L. Gordon, Ph.D.
/s/ Aya Jakobovits
Aya Jakobovits, Ph.D.
Director
Director
Director
Director
/s/ Michael Kauffman
Michael Kauffman, M.D., Ph.D Director
/s/ Bastiano Sanna
Bastiano Sanna, Ph.D.
Director
/s/ Andrew Sinclair
Andrew Sinclair, Ph.D.
Director
108
March 15, 2022
March 15, 2022
March 15, 2022
March 15, 2022
March 15, 2022
March 15, 2022
March 15, 2022
Exhibit 4.3
ZQ|CERT#|COY|CLS|RGSTRY|ACCT#|TRANSTYPE|RUN#|TRANS# COMMON STOCK PAR VALUE $0.0001 COMMON STOCK Certificate Number ZQ00000000 Adicet Bio Shares **000000 ****************** ***000000 ***************** **** 000000 **************** ***** 000000 *************** ****** 000000 ************** Adicet Bio, Inc. INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE THIS CERTIFIES THAT ** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr.
Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Sample **** Mr. Sample SEE REVERSE FOR CERTAIN DEFINITIONS CUSIP 007002 10 8 is the owner of **000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares*** *000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares**** 000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****0
00000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****00 0000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000 000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****0000 00**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****00000 0**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000 **Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000* *Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000** Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**S THIS CERTIFICATE IS TRANSFERABLE IN CITIES DESIGNATED BY THE TRANSFER AGENT, AVAILABLE ONLINE AT www.computershare.com
FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF Adicet Bio, Inc. (hereinafter called the “Company”), transferable on the books of the Company in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby, are issued and shall be held subject to all of the provisions of the Articles of Incorporation, as amended, and the By-Laws, as amended, of the Company (copies of which are on file with the Company and with the Transfer Agent), to all of which each holder, by acceptance hereof, assents. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. Witness the facsimile seal of the Company and the facsimile signatures of its duly authorized officers. DATED DD-MMM-YYYY FACSIMILE SIGNATURE TO COME COUNTERSIGNED AND REGISTERED: COMPUTERSHARE TRUST COMPANY, N.A. TRANSFER AGENT AND REGISTRAR, Ad ci et Bio, Inc INCORPORATED SEAL July 5, 2016 DELAWARE FACSIMILE SIGNATURE TO COM Chief Financial Officer By AUTHORIZED SIGNATURE Adicet Bio CUSIP/IDENTIFIER XXXXXX XX X Holder ID XXXXXXXXXX Insurance Value 1,000,000.00 Number of Shares 123456 DTC 12345678 123456789012345 PO BOX 43004, Providence, RI 02940-3004 Certificate Numbers 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890
1234567890/1234567890 Transaction Num/No. 1 2 3 4 5 6 Denom. 1 2 3 4 5 6 Total 1 2 3 4 5 6 7MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 1234567
Adicet Bio, Inc. THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS, A SUMMARY OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OF THE COMPANY AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND RIGHTS, AND THE VARIATIONS IN RIGHTS, PREFERENCES AND LIMITATIONS DETERMINED FOR EACH SERIES, WHICH ARE FIXED BY THE ARTICLES OF INCORPORATION OF THE COMPANY, AS AMENDED, AND THE RESOLUTIONS OF THE BOARD OF DIRECTORS OF THE COMPANY, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE VARIATIONS FOR FUTURE SERIES. SUCH REQUEST MAY BE MADE TO THE OFFICE OF THE SECRETARY OF THE COMPANY OR TO THE TRANSFER AGENT. THE BOARD OF DIRECTORS MAY REQUIRE THE OWNER OF A LOST OR DESTROYED STOCK CERTIFICATE, OR HIS LEGAL REPRESENTATIVES, TO GIVE THE COMPANY A BOND TO INDEMNIFY IT AND ITS TRANSFER AGENTS AND REGISTRARS AGAINST ANY CLAIM THAT MAY BE MADE AGAINST THEM ON ACCOUNT OF THE ALLEGED LOSS OR DESTRUCTION OF ANY SUCH CERTIFICATE. The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT -............................................Custodian ................................................ (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act ........................................................ (State) JT TEN - as joint tenants with right of survivorship UNIF TRF MIN ACT -............................................Custodian (until age ................................) and not as tenants in common (Cust) .............................under Uniform Transfers to Minors Act ................... (Minor) (State) Additional abbreviations may also be used though not in the above list. PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE For value received, hereby sell, assign and transfer unto (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE) Shares of the common stock represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said stock on the books of the within-named Company with full power of substitution in the premises Dated: 20 Signature(s) Guaranteed: Medallion Guarantee Stamp THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15. Signature: Signature: Notice: The signature to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement, or any change whatever The IRS requires that the named transfer agent (“we”) report the cost basis of certain shares or units acquired after January 1, 2011. If your shares or units are covered by the legislation, and you requested to sell or transfer the shares or units using a specific cost basis calculation method, then we have processed as you requested. If you did not specify a cost basis calculation method, then we have defaulted to the first in, first out (FIFO) method. Please consult your tax advisor if you need additional information about cost basis. If you do not keep in contact with the issuer or do not have any activity in your account for the time period specified by state law, your property may become subject to state unclaimed property laws and transferred to the appropriate state 1234567 SECURITY INSTRUCTIONS THIS IS WATERMARKED PAPER DO NOT ACCEPT WITHOUT NOTHING WATERMARK HOLD TO LIGHT TO VERIFY WATERMARK
ADICET BIO, INC.
Exhibit 10.11
AMENDED AND RESTATED 2018 STOCK OPTION AND INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Adicet Bio, Inc. Amended and Restated 2018 Stock Option and Incentive Plan (the “Plan”). The purpose of the Plan is to
encourage and enable the officers, employees, Non-Employee Directors and Consultants of Adicet Bio, Inc. (the “Company”) and its Affiliates upon whose
judgment, initiative and efforts the Company largely depends for the successful conduct of its businesses to acquire a proprietary interest in the Company. It
is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer identification of their interests with those of the
Company and its stockholders, thereby stimulating their efforts on the Company’s behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
“2017 Plan” means the Adicet Bio, Inc. 2017 Stock Incentive Plan, as amended.
“Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
“Administrator” means either the Board or the compensation committee of the Board or a similar committee performing the functions of the compensation
committee and which is comprised of not less than two Non-Employee Directors who are independent.
“Affiliates” means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Act. The Board
will have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.
“Award” or “Awards,” except where referring to a particular category of grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Stock Appreciation Rights, Restricted Stock Units, Restricted Stock Awards, Unrestricted Stock Awards, Cash-Based Awards and Dividend
Equivalent Rights.
“Award Certificate” means a written or electronic document setting forth the terms and provisions applicable to an Award granted under the Plan. Each
Award Certificate is subject to the terms and conditions of the Plan.
“Board” means the Board of Directors of the Company.
“Cash-Based Award” means an Award entitling the recipient to receive a cash-denominated payment.
“Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.
“Consultant” means a consultant or adviser who provides bona fide services to the Company or an Affiliate as an independent contractor and who qualifies
as a consultant or advisor under Instruction A.1.(a)(1) of Form S-8 under the Act.
“Continuous Service” means that a Service Relationship is not interrupted or terminated. For this purpose, a Service Relationship shall be deemed to
continue without interruption in the event an individual’s status changes from full-time employee to part-time employee or Consultant.
“Dividend Equivalent Right” means an Award entitling the grantee to receive credits based on cash dividends that would have been paid on the shares of
Stock specified in the Dividend Equivalent Right (or other award to which it relates) if such shares had been issued to and held by the grantee.
“Effective Date” means the date on which the Plan becomes effective as set forth in Section 19.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
“Fair Market Value” of the Stock on any given date means the fair market value of the Stock determined in good faith by the Administrator; provided,
however, that if the Stock is admitted to quotation on the National Association of Securities Dealers
ACTIVE/115808348.2
Automated Quotation System (“Nasdaq”), Nasdaq Global Market or another national securities exchange, the determination shall be made by reference to
market quotations. If there are no market quotations for such date, the determination shall be made by reference to the last date preceding such date for
which there are market quotations.
“Incentive Stock Option” means any Stock Option designated and qualified as an “incentive stock option” as defined in Section 422 of the Code.
“Non-Employee Director” means a member of the Board who is not also an employee of the Company or any Subsidiary.
“Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option.
“Option” or “Stock Option” means any option to purchase shares of Stock granted pursuant to Section 5.
“Restricted Shares” means the shares of Stock underlying a Restricted Stock Award that remain subject to a risk of forfeiture or the Company’s right of
repurchase.
“Restricted Stock Award” means an Award of Restricted Shares subject to such restrictions and conditions as the Administrator may determine at the time
of grant.
“Restricted Stock Units” means an Award of stock units subject to such restrictions and conditions as the Administrator may determine at the time of grant.
“Sale Event” shall mean (i) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (ii) a
merger, reorganization or consolidation pursuant to which the holders of the Company’s outstanding voting power and outstanding stock immediately prior
to such transaction do not own a majority of the outstanding voting power and outstanding stock or other equity interests of the resulting or successor entity
(or its ultimate parent, if applicable) immediately upon completion of such transaction, (iii) the sale of all of the Stock of the Company to an unrelated
person, entity or group thereof acting in concert, or (iv) any other transaction in which the owners of the Company’s outstanding voting power immediately
prior to such transaction do not own at least a majority of the outstanding voting power of the Company or any successor entity immediately upon
completion of the transaction other than as a result of the acquisition of securities directly from the Company.
“Sale Price” means the value as determined by the Administrator of the consideration payable, or otherwise to be received by stockholders, per share of
Stock pursuant to a Sale Event.
“Section 409A” means Section 409A of the Code and the regulations and other guidance promulgated thereunder.
“Service Relationship” means any relationship as an employee, Non-Employee Director or Consultant of the Company or any Affiliate.
“Stock” means the Common Stock, par value $0.0001 per share, of the Company, subject to adjustments pursuant to Section 3.
“Stock Appreciation Right” means an Award entitling the recipient to receive shares of Stock (or cash, to the extent explicitly provided for in the applicable
Award Certificate) having a value equal to the excess of the Fair Market Value of the Stock on the date of exercise over the exercise price of the Stock
Appreciation Right multiplied by the number of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised.
“Subsidiary” means any corporation or other entity (other than the Company) in which the Company has at least a 50 percent interest, either directly or
indirectly.
“Ten Percent Owner” means an employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10
percent of the combined voting power of all classes of stock of the Company or any parent or subsidiary corporation.
“Unrestricted Stock Award” means an Award of shares of Stock free of any restrictions.
ACTIVE/115808348.2
SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS
(a) Administration of Plan. The Plan shall be administered by the Administrator.
(b) Powers of Administrator. The Administrator shall have the power and authority to grant Awards consistent with the terms of the Plan, including the
power and authority:
(i) to select the individuals to whom Awards may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if any, of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock Awards, Restricted Stock Units, Unrestricted Stock Awards, Cash-Based Awards and Dividend Equivalent Rights, or any combination of
the foregoing, granted to any one or more grantees;
(iii) to determine the number of shares of Stock to be covered by any Award;
(iv) to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award,
which terms and conditions may differ among individual Awards and grantees, and to approve the forms of Award Certificates;
(v) to accelerate at any time the exercisability or vesting of all or any portion of any Award;
(vi) subject to the provisions of Section 5(c), to extend at any time the period in which Stock Options may be exercised; and
(vii) at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall
deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it
deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration
of the Plan.
All decisions and interpretations of the Administrator shall be binding on all persons, including the Company and Plan grantees.
(c) Delegation of Authority to Grant Awards. Subject to applicable law, the Administrator, in its discretion, may delegate to a committee consisting of one
or more officers of the Company, including the Chief Executive Officer of the Company, all or part of the Administrator’s authority and duties with respect
to the granting of Awards to individuals who are (i) not subject to the reporting and other provisions of Section 16 of the Exchange Act and (ii) not
members of the delegated committee. Any such delegation by the Administrator shall include a limitation as to the amount of Stock underlying Awards that
may be granted during the period of the delegation and shall contain guidelines as to the determination of the exercise price and the vesting criteria. The
Administrator may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Administrator’s
delegate or delegates that were consistent with the terms of the Plan.
(d) Award Certificate. Awards under the Plan shall be evidenced by Award Certificates that set forth the terms, conditions and limitations for each Award
which may include, without limitation, the term of an Award and the provisions applicable in the event employment or service terminates.
(e) Indemnification. Neither the Board nor the Administrator, nor any member of either or any delegate thereof, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection with the Plan, and the members of the Board and the Administrator (and any
delegate thereof) shall be entitled in all cases to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense
(including, without limitation, reasonable attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under the Company’s
articles or bylaws or any directors’ and officers’ liability insurance coverage which may be in effect from time to time and/or any indemnification
agreement between such individual and the Company.
(f) Foreign Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the
Company and its Subsidiaries operate or have employees or other individuals eligible for Awards, the Administrator, in its sole discretion, shall have the
power and authority to: (i) determine which Subsidiaries shall be covered by the Plan; (ii) determine which individuals outside the United States are
eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to individuals outside the United States to comply with
applicable foreign laws; (iv) establish
ACTIVE/115808348.2
subplans and modify exercise procedures and other terms and procedures, to the extent the Administrator determines such actions to be necessary or
advisable (and such subplans and/or modifications shall be attached to this Plan as appendices); provided, however, that no such subplans and/or
modifications shall increase the share limitations contained in Section 3(a) hereof; and (v) take any action, before or after an Award is made, that the
Administrator determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals.
Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would violate the Exchange Act
or any other applicable United States securities law, the Code, or any other applicable United States governing statute or law.
SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a) Stock Issuable. The maximum number of shares of Stock reserved and available for issuance under the Plan shall be 5,136,003 shares of Stock (the
“Initial Limit”), subject to adjustment as provided in Section 3(c), plus on January 1, 2022 and each January 1 thereafter, the number of shares of Stock
reserved and available for issuance under the Plan shall be cumulatively increased by 5% of the number of shares of Stock issued and outstanding on the
immediately preceding December 31 (the “Annual Increase”). Subject to such overall limitation, the maximum aggregate number of shares of Stock that
may be issued in the form of Incentive Stock Options shall not exceed the Initial Limit cumulatively increased on January 1, 2022 and on each January 1
thereafter by the lesser of the Annual Increase for such year or 3,150,000 shares of Stock, subject in all cases to adjustment as provided in Section 3(c). For
purposes of this limitation, the shares of Stock underlying any Awards that are forfeited, canceled, held back upon exercise of an Option or settlement of an
Award to cover the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of Stock or otherwise
terminated (other than by exercise) under each of the Plan and the 2017 Plan shall be added back to the shares of Stock available for issuance under the
Plan. In the event the Company repurchases shares of Stock on the open market, such shares shall not be added to the shares of Stock available for issuance
under the Plan. Subject to such overall limitations, shares of Stock may be issued up to such maximum number pursuant to any type or types of Award. The
shares available for issuance under the Plan may be authorized but unissued shares of Stock or shares of Stock reacquired by the Company.
(b) Maximum Awards to Non-Employee Directors. Notwithstanding anything to the contrary in this Plan, the value of all Awards awarded under this Plan
and all other cash compensation paid by the Company to any Non-Employee Director in any calendar year shall not exceed $1,000,000. For the purpose of
this limitation, the value of any Award shall be its grant date fair value, as determined in accordance with ASC 718 or successor provision but excluding the
impact of estimated forfeitures related to service-based vesting provisions.
(c) Changes in Stock. Subject to Section 3(d) hereof, if, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar change in the Company’s capital stock, the outstanding shares of Stock are increased or decreased or are exchanged for a
different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities of the Company or
other non-cash assets are distributed with respect to such shares of Stock or other securities, or, if, as a result of any merger or consolidation, sale of all or
substantially all of the assets of the Company, the outstanding shares of Stock are converted into or exchanged for securities of the Company or any
successor entity (or a parent or subsidiary thereof), the Administrator shall make an appropriate or proportionate adjustment in (i) the maximum number of
shares reserved for issuance under the Plan, including the maximum number of shares that may be issued in the form of Incentive Stock Options, (ii) the
number and kind of shares or other securities subject to any then outstanding Awards under the Plan, (iii) the repurchase price, if any, per share subject to
each outstanding Restricted Stock Award, and (iv) the exercise price for each share subject to any then outstanding Stock Options and Stock Appreciation
Rights under the Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of shares subject to Stock Options
and Stock Appreciation Rights) as to which such Stock Options and Stock Appreciation Rights remain exercisable. The Administrator shall also make
equitable or proportionate adjustments in the number of shares subject to outstanding Awards and the exercise price and the terms of outstanding Awards to
take into consideration cash dividends paid other than in the ordinary course or any other extraordinary corporate event. The adjustment by the
Administrator shall be final, binding and conclusive. No fractional shares of Stock shall be issued under the Plan resulting from any such adjustment, but
the Administrator in its discretion may make a cash payment in lieu of fractional shares.
(d) Mergers and Other Transactions. In the case of and subject to the consummation of a Sale Event, the parties thereto may cause the assumption or
continuation of Awards theretofore granted by the successor entity, or the substitution of such Awards with new Awards of the successor entity or parent
thereof, with appropriate adjustment as to the number and kind of shares and, if appropriate, the per share exercise prices, as such parties shall agree. To the
extent the parties to such Sale Event do not provide for the assumption, continuation or substitution of Awards, upon the effective time of the Sale Event,
the Plan and all outstanding Awards granted hereunder shall terminate. In such case, except as may be otherwise provided in the relevant Award Certificate,
all Options and Stock Appreciation Rights with time-based vesting conditions or restrictions that are not vested and/or exercisable immediately prior to the
effective time of the Sale Event shall become fully vested and exercisable as of the effective time of the Sale Event, all other Awards with time-based
vesting, conditions or restrictions shall become fully vested and nonforfeitable as of the effective time of the Sale Event, and all Awards with conditions
and restrictions relating to the attainment of performance goals may become vested
ACTIVE/115808348.2
and nonforfeitable in connection with a Sale Event in the Administrator’s discretion or to the extent specified in the relevant Award Certificate. In the event
of such termination, (i) the Company shall have the option (in its sole discretion) to make or provide for a payment, in cash or in kind, to the grantees
holding Options and Stock Appreciation Rights, in exchange for the cancellation thereof, in an amount equal to the difference between (A) the Sale Price
multiplied by the number of shares of Stock subject to outstanding Options and Stock Appreciation Rights (to the extent then exercisable at prices not in
excess of the Sale Price) and (B) the aggregate exercise price of all such outstanding Options and Stock Appreciation Rights (provided that, in the case of
an Option or Stock Appreciation Right with an exercise price equal to or greater than the Sale Price, such Option or Stock Appreciation Right shall be
cancelled for no consideration); or (ii) each grantee shall be permitted, within a specified period of time prior to the consummation of the Sale Event as
determined by the Administrator, to exercise all outstanding Options and Stock Appreciation Rights (to the extent then exercisable) held by such grantee.
The Company shall also have the option (in its sole discretion) to make or provide for a payment, in cash or in kind, to the grantees holding other Awards in
an amount equal to the Sale Price multiplied by the number of vested shares of Stock under such Awards.
SECTION 4. ELIGIBILITY
Grantees under the Plan will be such employees, Non-Employee Directors or Consultants of the Company and its Affiliates as are selected from time to
time by the Administrator in its sole discretion; provided that Awards may not be granted to employees, Non-Employee Directors or Consultants who are
providing services only to any “parent” of the Company, as such term is defined in Rule 405 of the Act, unless (i) the stock underlying the Awards is
treated as “service recipient stock” under Section 409A or (ii) the Company has determined that such Awards are exempt from or otherwise comply with
Section 409A.
SECTION 5. STOCK OPTIONS
(a) Award of Stock Options. The Administrator may grant Stock Options under the Plan. Any Stock Option granted under the Plan shall be in such form as
the Administrator may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options. Incentive Stock Options may be granted only
to employees of the Company or any Subsidiary that is a “subsidiary corporation” within the meaning of Section 424(f) of the Code. To the extent that any
Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock Option.
Stock Options granted pursuant to this Section 5 shall be subject to the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable. If the Administrator so determines, Stock Options may be
granted in lieu of cash compensation at the optionee’s election, subject to such terms and conditions as the Administrator may establish.
(b) Exercise Price. The exercise price per share for the Stock covered by a Stock Option granted pursuant to this Section 5 shall be determined by the
Administrator at the time of grant but shall not be less than 100 percent of the Fair Market Value on the date of grant. In the case of an Incentive Stock
Option that is granted to a Ten Percent Owner, the exercise price of such Incentive Stock Option shall be not less than 110 percent of the Fair Market Value
on the grant date. Notwithstanding the foregoing, Stock Options may be granted with an exercise price per share that is less than 100 percent of the Fair
Market Value on the date of grant (i) pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code, (ii) to individuals
who are not subject to U.S. income tax on the date of grant or (iii) the Stock Option is otherwise compliant with Section 409A.
(c) Option Term. The term of each Stock Option shall be fixed by the Administrator, but no Stock Option shall be exercisable more than ten years after the
date the Stock Option is granted. In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the term of such Stock Option shall be no
more than five years from the date of grant.
(d) Exercisability; Rights of a Stockholder. Stock Options shall become exercisable at such time or times, whether or not in installments, as shall be
determined by the Administrator at or after the grant date. The Administrator may at any time accelerate the exercisability of all or any portion of any Stock
Option. An optionee shall have the rights of a stockholder only as to shares acquired upon the exercise of a Stock Option and not as to unexercised Stock
Options.
(e) Method of Exercise. Stock Options may be exercised in whole or in part, by giving written or electronic notice of exercise to the Company, specifying
the number of shares to be purchased. Payment of the purchase price may be made by one or more of the following methods except to the extent otherwise
provided in the Award Certificate:
ACTIVE/115808348.2
(i) In cash, by certified or bank check or other instrument acceptable to the Administrator;
(ii) Through the delivery (or attestation to the ownership following such procedures as the Company may prescribe) of shares of Stock that are not then
subject to restrictions under any Company plan. Such surrendered shares shall be valued at Fair Market Value on the exercise date;
(iii) By the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to
the Company cash or a check payable and acceptable to the Company for the purchase price; provided that in the event the optionee chooses to pay the
purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other
agreements as the Company shall prescribe as a condition of such payment procedure; or
(iv) With respect to Stock Options that are not Incentive Stock Options, by a “net exercise” arrangement pursuant to which the Company will reduce the
number of shares of Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate
exercise price.
Payment instruments will be received subject to collection. The transfer to the optionee on the records of the Company or of the transfer agent of the shares
of Stock to be purchased pursuant to the exercise of a Stock Option will be contingent upon receipt from the optionee (or a purchaser acting in his stead in
accordance with the provisions of the Stock Option) by the Company of the full purchase price for such shares and the fulfillment of any other
requirements contained in the Award Certificate or applicable provisions of laws (including the satisfaction of any withholding taxes that the Company is
obligated to withhold with respect to the optionee). In the event an optionee chooses to pay the purchase price by previously-owned shares of Stock through
the attestation method, the number of shares of Stock transferred to the optionee upon the exercise of the Stock Option shall be net of the number of
attested shares. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the exercise of Stock
Options, such as a system using an internet website or interactive voice response, then the paperless exercise of Stock Options may be permitted through
the use of such an automated system.
(f) Annual Limit on Incentive Stock Options. To the extent required for “incentive stock option” treatment under Section 422 of the Code, the aggregate
Fair Market Value (determined as of the time of grant) of the shares of Stock with respect to which Incentive Stock Options granted under this Plan and any
other plan of the Company or its parent and subsidiary corporations become exercisable for the first time by an optionee during any calendar year shall not
exceed $100,000. To the extent that any Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock Option.
SECTION 6. STOCK APPRECIATION RIGHTS
(a) Award of Stock Appreciation Rights. The Administrator may grant Stock Appreciation Rights under the Plan. A Stock Appreciation Right is an Award
entitling the recipient to receive shares of Stock (or csh, to the extent explicitly provided for in the applicable Award Certificate) having a value equal to the
excess of the Fair Market Value of a share of Stock on the date of exercise over the exercise price of the Stock Appreciation Right multiplied by the number
of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised.
(b) Exercise Price of Stock Appreciation Rights. The exercise price of a Stock Appreciation Right shall not be less than 100 percent of the Fair Market
Value of the Stock on the date of grant.
(c) Grant and Exercise of Stock Appreciation Rights. Stock Appreciation Rights may be granted by the Administrator independently of any Stock Option
granted pursuant to Section 5 of the Plan.
(d) Terms and Conditions of Stock Appreciation Rights. Stock Appreciation Rights shall be subject to such terms and conditions as shall be determined on
the date of grant by the Administrator. The term of a Stock Appreciation Right may not exceed ten years. The terms and conditions of each such Award
shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and grantees.
SECTION 7. RESTRICTED STOCK AWARDS
(a) Nature of Restricted Stock Awards. The Administrator may grant Restricted Stock Awards under the Plan. A Restricted Stock Award is any Award of
Restricted Shares subject to such restrictions and conditions as the Administrator may determine at the time of
ACTIVE/115808348.2
grant. Conditions may be based on continuing employment (or other Service Relationship) and/or achievement of pre-established performance goals and
objectives.
(b) Rights as a Stockholder. Upon the grant of the Restricted Stock Award and payment of any applicable purchase price, a grantee shall have the rights of a
stockholder with respect to the voting of the Restricted Shares and receipt of dividends; provided that if the lapse of restrictions with respect to the
Restricted Stock Award is tied to the attainment of performance goals, any dividends paid by the Company during the performance period shall accrue and
shall not be paid to the grantee until and to the extent the performance goals are met with respect to the Restricted Stock Award. Unless the Administrator
shall otherwise determine, (i) uncertificated Restricted Shares shall be accompanied by a notation on the records of the Company or the transfer agent to the
effect that they are subject to forfeiture until such Restricted Shares are vested as provided in Section 7(d) below, and (ii) certificated Restricted Shares
shall remain in the possession of the Company until such Restricted Shares are vested as provided in Section 7(d) below, and the grantee shall be required,
as a condition of the grant, to deliver to the Company such instruments of transfer as the Administrator may prescribe.
(c) Restrictions. Restricted Shares may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided
herein or in the Restricted Stock Award Certificate. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to
Section 16 below, in writing after the Award is issued, if a grantee’s employment (or other Service Relationship) with the Company and its Subsidiaries
terminates for any reason, any Restricted Shares that have not vested at the time of termination shall automatically and without any requirement of notice to
such grantee from or other action by or on behalf of, the Company be deemed to have been reacquired by the Company at its original purchase price (if
any) from such grantee or such grantee’s legal representative simultaneously with such termination of employment (or other Service Relationship), and
thereafter shall cease to represent any ownership of the Company by the grantee or rights of the grantee as a stockholder. Following such deemed
reacquisition of Restricted Shares that are represented by physical certificates, a grantee shall surrender such certificates to the Company upon request
without consideration.
(d) Vesting of Restricted Shares. The Administrator at the time of grant shall specify the date or dates and/or the attainment of pre-established performance
goals, objectives and other conditions on which the non-transferability of the Restricted Shares and the Company’s right of repurchase or forfeiture shall
lapse. Subsequent to such date or dates and/or the attainment of such pre-established performance goals, objectives and other conditions, the shares on
which all restrictions have lapsed shall no longer be Restricted Shares and shall be deemed “vested.”
SECTION 8. RESTRICTED STOCK UNITS
(a) Nature of Restricted Stock Units. The Administrator may grant Restricted Stock Units under the Plan. A Restricted Stock Unit is an Award of stock
units that may be settled in shares of Stock (or cash, to the extent explicitly provided for in the applicable Award Certificate) upon the satisfaction of such
restrictions and conditions at the time of grant. Conditions may be based on continuing employment (or other Service Relationship) and/or achievement of
pre-established performance goals and objectives. The terms and conditions of each such Award shall be determined by the Administrator, and such terms
and conditions may differ among individual Awards and grantees. Except in the case of Restricted Stock Units with a deferred settlement date that complies
with Section 409A, at the end of the vesting period, the Restricted Stock Units, to the extent vested, shall be settled in the form of shares of Stock.
Restricted Stock Units with deferred settlement dates are subject to Section 409A and shall contain such additional terms and conditions as the
Administrator shall determine in its sole discretion in order to comply with the requirements of Section 409A.
(b) Election to Receive Restricted Stock Units in Lieu of Compensation. The Administrator may, in its sole discretion, permit a grantee to elect to receive a
portion of future cash compensation otherwise due to such grantee in the form of an award of Restricted Stock Units. Any such election shall be made in
writing and shall be delivered to the Company no later than the date specified by the Administrator and in accordance with Section 409A and such other
rules and procedures established by the Administrator. Any such future cash compensation that the grantee elects to defer shall be converted to a fixed
number of Restricted Stock Units based on the Fair Market Value of Stock on the date the compensation would otherwise have been paid to the grantee if
such payment had not been deferred as provided herein. The Administrator shall have the sole right to determine whether and under what circumstances to
permit such elections and to impose such limitations and other terms and conditions thereon as the Administrator deems appropriate. Any Restricted Stock
Units that are elected to be received in lieu of cash compensation shall be fully vested, unless otherwise provided in the Award Certificate.
(c) Rights as a Stockholder. A grantee shall have the rights as a stockholder only as to shares of Stock acquired by the grantee upon settlement of Restricted
Stock Units; provided, however, that the grantee may be credited with Dividend Equivalent Rights with respect to the stock units underlying his Restricted
Stock Units, subject to the provisions of Section 11 and such terms and conditions as the Administrator may determine.
ACTIVE/115808348.2
(d) Termination. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to Section 18 below, in writing after
the Award is issued, a grantee’s right in all Restricted Stock Units that have not vested shall automatically terminate upon the grantee’s termination of
employment (or cessation of Service Relationship) with the Company and its Subsidiaries for any reason.
SECTION 9. UNRESTRICTED STOCK AWARDS
Grant or Sale of Unrestricted Stock. The Administrator may grant (or sell at par value or such higher purchase price determined by the Administrator) an
Unrestricted Stock Award under the Plan. An Unrestricted Stock Award is an Award pursuant to which the grantee may receive shares of Stock free of any
restrictions under the Plan. Unrestricted Stock Awards may be granted in respect of past services or other valid consideration, or in lieu of cash
compensation due to such grantee.
SECTION 10. CASH-BASED AWARDS
Grant of Cash-Based Awards. The Administrator may grant Cash-Based Awards under the Plan. A Cash-Based Award is an Award that entitles the grantee
to a payment in cash upon the attainment of specified performance goals. The Administrator shall determine the maximum duration of the Cash-Based
Award, the amount of cash to which the Cash-Based Award pertains, the conditions upon which the Cash-Based Award shall become vested or payable, and
such other provisions as the Administrator shall determine. Each Cash-Based Award shall specify a cash-denominated payment amount, formula or
payment ranges as determined by the Administrator. Payment, if any, with respect to a Cash-Based Award shall be made in accordance with the terms of
the Award and may be made in cash.
SECTION 11. DIVIDEND EQUIVALENT RIGHTS
(a) Dividend Equivalent Rights. The Administrator may grant Dividend Equivalent Rights under the Plan. A Dividend Equivalent Right is an Award
entitling the grantee to receive credits based on cash dividends that would have been paid on the shares of Stock specified in the Dividend Equivalent Right
(or other Award to which it relates) if such shares had been issued to the grantee. A Dividend Equivalent Right may be granted hereunder to any grantee as
a component of an award of Restricted Stock Units or as a freestanding award. The terms and conditions of Dividend Equivalent Rights shall be specified
in the Award Certificate. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be
reinvested in additional shares of Stock, which may thereafter accrue additional equivalents. Any such reinvestment shall be at Fair Market Value on the
date of reinvestment or such other price as may then apply under a dividend reinvestment plan sponsored by the Company, if any. Dividend Equivalent
Rights may be settled in cash or shares of Stock or a combination thereof, in a single installment or installments. A Dividend Equivalent Right granted as a
component of an Award of Restricted Stock Units shall provide that such Dividend Equivalent Right shall be settled only upon settlement or payment of, or
lapse of restrictions on, such other Award, and that such Dividend Equivalent Right shall expire or be forfeited or annulled under the same conditions as
such other Award.
(b) Termination. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to Section 16 below, in writing after
the Award is issued, a grantee’s rights in all Dividend Equivalent Rights shall automatically terminate upon the grantee’s termination of employment (or
cessation of Service Relationship) with the Company and its Subsidiaries for any reason.
SECTION 12. TRANSFERABILITY OF AWARDS
(a) Transferability. Except as provided in Section 12(b) below, during a grantee’s lifetime, his or her Awards shall be exercisable only by the grantee, or by
the grantee’s legal representative or guardian in the event of the grantee’s incapacity. No Awards shall be sold, assigned, transferred or otherwise
encumbered or disposed of by a grantee other than by will or by the laws of descent and distribution or pursuant to a domestic relations order. No Awards
shall be subject, in whole or in part, to attachment, execution, or levy of any kind, and any purported transfer in violation hereof shall be null and void.
(b) Administrator Action. Notwithstanding Section 12(a), the Administrator, in its discretion, may provide either in the Award Certificate regarding a given
Award or by subsequent written approval that the grantee (who is an employee or director) may transfer his or her Non-Qualified Stock Options to his or
her immediate family members, to trusts for the benefit of such family members, or to partnerships in which such family members are the only partners,
provided that the transferee agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and the applicable Award. In no
event may an Award be transferred by a grantee for value.
ACTIVE/115808348.2
(c) Family Member. For purposes of Section 12(b), “family member” shall mean a grantee’s child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, any person sharing the grantee’s household (other than a tenant of the grantee), a trust in which these persons (or the grantee) have more than
50 percent of the beneficial interest, a foundation in which these persons (or the grantee) control the management of assets, and any other entity in which
these persons (or the grantee) own more than 50 percent of the voting interests.
(d) Designation of Beneficiary. To the extent permitted by the Company, each grantee to whom an Award has been made under the Plan may designate a
beneficiary or beneficiaries to exercise any Award or receive any payment under any Award payable on or after the grantee’s death. Any such designation
shall be on a form provided for that purpose by the Administrator and shall not be effective until received by the Administrator. If no beneficiary has been
designated by a deceased grantee, or if the designated beneficiaries have predeceased the grantee, the beneficiary shall be the grantee’s estate.
SECTION 13. TAX WITHHOLDING
(a) Payment by Grantee. Each grantee shall, no later than the date as of which the value of an Award or of any Stock or other amounts received thereunder
first becomes includable in the gross income of the grantee for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the
Administrator regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld by the Company with respect to such
income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the grantee. The Company’s obligation to deliver evidence of book entry (or stock certificates) to any grantee is subject to and conditioned
on tax withholding obligations being satisfied by the grantee.
(b) Payment in Stock. The Administrator may require the Company’s tax withholding obligation to be satisfied, in whole or in part, by the Company
withholding from shares of Stock to be issued pursuant to any Award a number of shares with an aggregate Fair Market Value (as of the date the
withholding is effected) that would satisfy the withholding amount due; provided, however, that the amount withheld does not exceed the maximum
statutory tax rate or such lesser amount as is necessary to avoid liability accounting treatment. For purposes of share withholding, the Fair Market Value of
withheld shares shall be determined in the same manner as the value of Stock includible in income of the grantees. The Administrator may also require the
Company’s tax withholding obligation to be satisfied, in whole or in part, by an arrangement whereby a certain number of shares of Stock issued pursuant
to any Award are immediately sold and proceeds from such sale are remitted to the Company in an amount that would satisfy the withholding amount due.
SECTION 14. SECTION 409A AWARDS
Awards are intended to be exempt from Section 409A to the greatest extent possible and to otherwise comply with Section 409A. The Plan and all Awards
shall be interpreted in accordance with such intent. To the extent that any Award is determined to constitute “nonqualified deferred compensation” within
the meaning of Section 409A (a “409A Award”), the Award shall be subject to such additional rules and requirements as specified by the Administrator
from time to time in order to comply with Section 409A. In this regard, if any amount under a 409A Award is payable upon a “separation from service”
(within the meaning of Section 409A) to a grantee who is then considered a “specified employee” (within the meaning of Section 409A), then no such
payment shall be made prior to the date that is the earlier of (i) six months and one day after the grantee’s separation from service, or (ii) the grantee’s
death, but only to the extent such delay is necessary to prevent such payment from being subject to interest, penalties and/or additional tax imposed
pursuant to Section 409A. Further, the settlement of any such Award may not be accelerated except to the extent permitted by Section 409A.
SECTION 15. TERMINATION OF SERVICE RELATIONSHIP, TRANSFER, LEAVE OF ABSENCE, ETC.
(a) Termination of Service Relationship. If the grantee’s Service Relationship is with an Affiliate and such Affiliate ceases to be an Affiliate, the grantee
shall be deemed to have terminated his or her Service Relationship for purposes of the Plan.
(b) For purposes of the Plan, the following events shall not be deemed a termination of a Service Relationship:
(i) a transfer to the employment of the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to another; or
ACTIVE/115808348.2
(ii) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employee’s right to re-
employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Administrator
otherwise so provides in writing.
SECTION 16. AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no such action shall materially and adversely affect rights under any outstanding
Award without the holder’s consent. Except as provided in Section 3(c) or 3(d), without prior stockholder approval, in no event may the Administrator
exercise its discretion to reduce the exercise price of outstanding Stock Options or Stock Appreciation Rights or effect repricing through cancellation and
re-grants or cancellation of Stock Options or Stock Appreciation Rights in exchange for cash or other Awards. To the extent required under the rules of any
securities exchange or market system on which the Stock is listed, to the extent determined by the Administrator to be required by the Code to ensure that
Incentive Stock Options granted under the Plan are qualified under Section 422 of the Code, Plan amendments shall be subject to approval by the
Company’s stockholders. Nothing in this Section 16 shall limit the Administrator’s authority to take any action permitted pursuant to Section 3(c) or 3(d).
SECTION 17. STATUS OF PLAN
With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or other consideration not received by a grantee, a
grantee shall have no rights greater than those of a general creditor of the Company unless the Administrator shall otherwise expressly determine in
connection with any Award or Awards. In its sole discretion, the Administrator may authorize the creation of trusts or other arrangements to meet the
Company’s obligations to deliver Stock or make payments with respect to Awards hereunder, provided that the existence of such trusts or other
arrangements is consistent with the foregoing sentence.
SECTION 18. GENERAL PROVISIONS
(a) No Distribution. The Administrator may require each person acquiring Stock pursuant to an Award to represent to and agree with the Company in
writing that such person is acquiring the shares without a view to distribution thereof.
(b) Issuance. To the extent certificated, stock certificates to grantees under this Plan shall be deemed delivered for all purposes when the Company or a
stock transfer agent of the Company shall have mailed such certificates in the United States mail, addressed to the grantee, at the grantee’s last known
address on file with the Company. Uncertificated Stock shall be deemed delivered for all purposes when the Company or a Stock transfer agent of the
Company shall have given to the grantee by electronic mail (with proof of receipt) or by United States mail, addressed to the grantee, at the grantee’s last
known address on file with the Company, notice of issuance and recorded the issuance in its records (which may include electronic “book entry” records).
Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any evidence of book entry or certificates evidencing
shares of Stock pursuant to the exercise or settlement of any Award, unless and until the Administrator has determined, with advice of counsel (to the extent
the Administrator deems such advice necessary or advisable), that the issuance and delivery is in compliance with all applicable laws, regulations of
governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed, quoted or traded. Any Stock issued
pursuant to the Plan shall be subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with
federal, state or foreign jurisdiction, securities or other laws, rules and quotation system on which the Stock is listed, quoted or traded. The Administrator
may place legends on any Stock certificate or notations on any book entry to reference restrictions applicable to the Stock. In addition to the terms and
conditions provided herein, the Administrator may require that an individual make such reasonable covenants, agreements, and representations as the
Administrator, in its discretion, deems necessary or advisable in order to comply with any such laws, regulations, or requirements. The Administrator shall
have the right to require any individual to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a
window-period limitation, as may be imposed in the discretion of the Administrator.
(c) Stockholder Rights. Until Stock is deemed delivered in accordance with Section 18(b), no right to vote or receive dividends or any other rights of a
stockholder will exist with respect to shares of Stock to be issued in connection with an Award, notwithstanding the exercise of a Stock Option or any other
action by the grantee with respect to an Award.
(d) Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases. The adoption
of this Plan and the grant of Awards do not confer upon any employee any right to continued employment with the Company or any Subsidiary.
ACTIVE/115808348.2
(e) Trading Policy Restrictions. Option exercises and other Awards under the Plan shall be subject to the Company’s insider trading policies and
procedures, as in effect from time to time.
(f) Clawback Policy. Awards under the Plan shall be subject to the Company’s clawback policy, as in effect from time to time.
SECTION 19. EFFECTIVE DATE OF PLAN
This Plan, as amended and restated, shall become effective upon approval by the holders of a majority of the votes cast at a meeting of stockholders at
which a quorum is present. No grants of Stock Options and other Awards may be made hereunder after the tenth anniversary of the Effective Date and no
grants of Incentive Stock Options may be made hereunder after the tenth anniversary of the date the Plan, as amended and restated, is approved by the
Board.
SECTION 20. GOVERNING LAW
This Plan and all Awards and actions taken thereunder shall be governed by, and construed in accordance with, the laws of the State of Delaware, applied
without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS: December 21, 2017
DATE APPROVED BY STOCKHOLDERS: January 12, 2018
AMENDED AND RESTATED BY THE BOARD OF DIRECTORS: March 2, 2021
DATE STOCKHOLDERS APPROVED AMENDED AND RESTATED PLAN: April 27, 2021
ACTIVE/115808348.2
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE ADICET BIO, INC.
AMENDED AND RESTATED 2018 STOCK OPTION AND INCENTIVE PLAN
Name of Optionee:
No. of Option Shares:
Option Exercise Price per Share:
Grant Date:
Expiration Date:
$
Pursuant to the Adicet Bio, Inc. Amended and Restated 2018 Stock Option and Incentive Plan as amended through the date hereof (the “Plan”), Adicet Bio,
Inc. (the “Company”) hereby grants to the Optionee named above an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified
above all or part of the number of shares of Common Stock, par value $0.0001 per share (the “Stock”), of the Company specified above at the Option
Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan.
1. Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below,
and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability schedule hereunder, this Stock Option
shall be exercisable with respect to the following number of Option Shares on the dates indicated so long as the Optionee remains an employee of the
Company or a Subsidiary on such dates:
Incremental Number of
Option Shares Exercisable*
Exercisability Date
( %)
( %)
( %)
( %)
( %)
* Max. of $100,000 per yr.
Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the
provisions hereof and of the Plan.
2. Manner of Exercise.
(a) The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this Stock Option,
the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of
such notice. This notice shall specify the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other
instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the
Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that
otherwise satisfy any holding periods as may be required by the Administrator; or (iii) by the Optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the
Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee
and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as
a condition of such payment procedure; or (iv) a combination of (i), (ii) and (iii) above. Payment instruments will be received subject to collection.
ACTIVE/115808348.2
The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s receipt
from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in
the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the
Company may require to satisfy itself that the issuance of Stock to be purchased pursuant to the exercise of Stock Options under the Plan and any
subsequent resale of the shares of Stock will be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase
price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of
the Stock Option shall be net of the Shares attested to.
(b) The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company or of the transfer
agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer
and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee.
The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock
Option unless and until this Stock Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred
the shares to the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon, the
Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.
(c) The minimum number of shares with respect to which this Stock Option may be exercised at any one time shall be 100 shares, unless the number of
shares with respect to which this Stock Option is being exercised is the total number of shares subject to exercise under this Stock Option at the time.
(d) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.
3. Termination of Employment. If the Optionee’s employment by the Company or a Subsidiary (as defined in the Plan) is terminated, the period within
which to exercise the Stock Option may be subject to earlier termination as set forth below.
(a) Termination Due to Death. If the Optionee’s employment terminates by reason of the Optionee’s death, any portion of this Stock Option outstanding on
such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionee’s legal representative or legatee for a period of 12
months from the date of death or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of death shall
terminate immediately and be of no further force or effect.
(b) Termination Due to Disability. If the Optionee’s employment terminates by reason of the Optionee’s disability (as determined by the Administrator),
any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of such termination of employment, may thereafter be
exercised by the Optionee for a period of 12 months from the date of disability or until the Expiration Date, if earlier. Any portion of this Stock Option that
is not exercisable on the date of disability shall terminate immediately and be of no further force or effect.
(c) Termination for Cause. If the Optionee’s employment terminates for Cause, any portion of this Stock Option outstanding on such date shall terminate
immediately and be of no further force and effect. For purposes hereof, “Cause” shall mean, unless otherwise provided in an employment agreement
between the Company and the Optionee, a determination by the Administrator that the Optionee shall be dismissed as a result of (i) any material breach by
the Optionee of any agreement between the Optionee and the Company; (ii) the conviction of, indictment for or plea of nolo contendere by the Optionee to
a felony or a crime involving moral turpitude; or (iii) any material misconduct or willful and deliberate non-performance (other than by reason of disability)
by the Optionee of the Optionee’s duties to the Company.
(d) Other Termination. If the Optionee’s employment terminates for any reason other than the Optionee’s death, the Optionee’s disability, or Cause, and
unless otherwise determined by the Administrator, any portion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on
the date of termination, for a period of three months from the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Option
that is not exercisable on the date of termination shall terminate immediately and be of no further force or effect. The Administrator’s determination of the
reason for termination of the Optionee’s employment shall be conclusive and binding on the Optionee and his or her representatives or legatees.
4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions
of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning
specified in the Plan, unless a different meaning is specified herein.
ACTIVE/115808348.2
5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise,
other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and
thereafter, only by the Optionee’s legal representative or legatee.
6. Status of the Stock Option. This Stock Option is intended to qualify as an “incentive stock option” under Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”), but the Company does not represent or warrant that this Stock Option qualifies as such. The Optionee should consult with
his or her own tax advisors regarding the tax effects of this Stock Option and the requirements necessary to obtain favorable income tax treatment under
Section 422 of the Code, including, but not limited to, holding period requirements. To the extent any portion of this Stock Option does not so qualify as an
“incentive stock option,” such portion shall be deemed to be a non-qualified stock option. If the Optionee intends to dispose or does dispose (whether by
sale, gift, transfer or otherwise) of any Option Shares within the one-year period beginning on the date after the transfer of such shares to him or her, or
within the two-year period beginning on the day after the grant of this Stock Option, he or she will so notify the Company within 30 days after such
disposition.
7. Tax Withholding. The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes a taxable event for Federal income
tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law
to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in
whole or in part, by withholding from shares of Stock to be issued to the Optionee a number of shares of Stock with an aggregate Fair Market Value that
would satisfy the withholding amount due; provided, however, that the amount withheld does not exceed the maximum statutory tax rate or such lesser
amount as is necessary to avoid adverse accounting treatment or as determined by the Administrator.
8. No Obligation to Continue Employment. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue
the Optionee in employment and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to
terminate the employment of the Optionee at any time.
9. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements
and discussions between the parties concerning such subject matter.
10. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its
subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including
but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary
or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i)
authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the
Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic
form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee
shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
11. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the
Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in
writing.
ADICET BIO, NC.
By:
Name:
Title:
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this
Agreement pursuant to the Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.
ACTIVE/115808348.2
Dated:
ACTIVE/115808348.2
Optionee’s Signature
Optionee’s name and address:
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR NON-EMPLOYEE DIRECTORS
UNDER THE ADICET BIO, INC.
2018 STOCK OPTION AND INCENTIVE PLAN
Name of Optionee:
No. of Option Shares:
Option Exercise Price per Share:
Grant Date:
Expiration Date:
$
Pursuant to the Adicet Bio, Inc. Amended and Restated 2018 Stock Option and Incentive Plan as amended through the date hereof (the “Plan”), Adicet Bio,
Inc. (the “Company”) hereby grants to the Optionee named above, who is a Director of the Company but is not an employee of the Company, an option (the
“Stock Option”) to purchase on or prior to the Expiration Date specified above all or part of the number of shares of Common Stock, par value $0.0001 per
share (the “Stock”), of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth
herein and in the Plan. This Stock Option is not intended to be an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as
amended.
1. Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below,
and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability schedule hereunder, this Stock Option
shall be exercisable with respect to the following number of Option Shares on the dates indicated so long as the Optionee remains in service as a member of
the Board on such dates:
Incremental Number of
Option Shares Exercisable
Exercisability Date
( %)
( %)
( %)
( %)
( %)
Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the
provisions hereof and of the Plan.
2. Manner of Exercise.
(a) The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this Stock Option,
the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of
such notice. This notice shall specify the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other
instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the
Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that
otherwise satisfy any holding periods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the
Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee
and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as
a condition of such payment procedure; (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock
issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; or (v) a
combination of (i), (ii), (iii) and (iv) above. Payment instruments will be received subject to collection.
The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s receipt
from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in
the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the
Company may require to satisfy itself that the issuance of Stock to be
ACTIVE/115808348.2
purchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be in compliance with applicable
laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the
number of shares of Stock transferred to the Optionee upon the exercise of the Stock Option shall be net of the Shares attested to.
(b) The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company or of the transfer
agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer
and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee.
The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock
Option unless and until this Stock Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred
the shares to the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon, the
Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.
(c) The minimum number of shares with respect to which this Stock Option may be exercised at any one time shall be 100 shares, unless the number of
shares with respect to which this Stock Option is being exercised is the total number of shares subject to exercise under this Stock Option at the time.
(d) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.
3. Termination as Director. If the Optionee ceases to be a Director of the Company, the period within which to exercise the Stock Option may be subject to
earlier termination as set forth below.
(a) Termination Due to Death. If the Optionee’s service as a Director terminates by reason of the Optionee’s death, any portion of this Stock Option
outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionee’s legal representative or legatee for a
period of 12 months from the date of death or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of
death shall terminate immediately and be of no further force or effect.
(b) Other Termination. If the Optionee ceases to be a Director for any reason other than the Optionee’s death, any portion of this Stock Option outstanding
on such date may be exercised, to the extent exercisable on the date the Optionee ceased to be a Director, for a period of six months from the date the
Optionee ceased to be a Director or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date the Optionee
ceases to be a Director shall terminate immediately and be of no further force or effect.
4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions
of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning
specified in the Plan, unless a different meaning is specified herein.
5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise,
other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and
thereafter, only by the Optionee’s legal representative or legatee.
6. No Obligation to Continue as a Director. Neither the Plan nor this Stock Option confers upon the Optionee any rights with respect to continuance as a
Director.
7. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements
and discussions between the parties concerning such subject matter.
8. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its
subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including
but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary
or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i)
authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the
Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic
form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee
shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
ACTIVE/115808348.2
9. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee
at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this
Agreement pursuant to the Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.
ADICET BIO, NC.
By:
Name:
Title:
Dated:
ACTIVE/115808348.2
Optionee’s Signature
Optionee’s name and address:
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR COMPANY EMPLOYEES
UNDER THE ADICET BIO, INC.
2018 STOCK OPTION AND INCENTIVE PLAN
Name of Optionee:
No. of Option Shares:
Option Exercise Price per Share:
Grant Date:
Expiration Date:
$
Pursuant to the Adicet Bio, Inc. Amended and Restated 2018 Stock Option and Incentive Plan as amended through the date hereof (the “Plan”), Adicet Bio,
Inc. (the “Company”) hereby grants to the Optionee named above an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified
above all or part of the number of shares of Common Stock, par value $0.0001 per share (the “Stock”) of the Company specified above at the Option
Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan. This Stock Option is not intended to be an
“incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended.
1. Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below,
and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability schedule hereunder, this Stock Option
shall be exercisable with respect to the following number of Option Shares on the dates indicated so long as Optionee remains an employee of the
Company or a Subsidiary on such dates:
Incremental Number of
Option Shares Exercisable
Exercisability Date
( %)
( %)
( %)
( %)
( %)
Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the
provisions hereof and of the Plan.
2. Manner of Exercise.
(a) The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this Stock Option,
the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of
such notice. This notice shall specify the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other
instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the
Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that
otherwise satisfy any holding periods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the
Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee
and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as
a condition of such payment procedure; (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock
issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; or (v) a
combination of (i), (ii), (iii) and (iv) above. Payment instruments will be received subject to collection.
The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s receipt
from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in
the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the
Company may require to satisfy itself that the issuance of Stock to be purchased pursuant to the exercise of Stock Options under the Plan and any
subsequent resale of the shares of Stock will be in
ACTIVE/115808348.2
compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned shares of Stock through
the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of the Stock Option shall be net of the Shares attested
to.
(b) The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company or of the transfer
agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer
and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee.
The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock
Option unless and until this Stock Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred
the shares to the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon, the
Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.
(c) The minimum number of shares with respect to which this Stock Option may be exercised at any one time shall be 100 shares, unless the number of
shares with respect to which this Stock Option is being exercised is the total number of shares subject to exercise under this Stock Option at the time.
(d) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.
3. Termination of Employment. If the Optionee’s employment by the Company or a Subsidiary (as defined in the Plan) is terminated, the period within
which to exercise the Stock Option may be subject to earlier termination as set forth below.
(a) Termination Due to Death. If the Optionee’s employment terminates by reason of the Optionee’s death, any portion of this Stock Option outstanding on
such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionee’s legal representative or legatee for a period of 12
months from the date of death or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of death shall
terminate immediately and be of no further force or effect.
(b) Termination Due to Disability. If the Optionee’s employment terminates by reason of the Optionee’s disability (as determined by the Administrator),
any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of such termination of employment, may thereafter be
exercised by the Optionee for a period of 12 months from the date of disability or until the Expiration Date, if earlier. Any portion of this Stock Option that
is not exercisable on the date of disability shall terminate immediately and be of no further force or effect.
(c) Termination for Cause. If the Optionee’s employment terminates for Cause, any portion of this Stock Option outstanding on such date shall terminate
immediately and be of no further force and effect. For purposes hereof, “Cause” shall mean, unless otherwise provided in an employment agreement
between the Company and the Optionee, a determination by the Administrator that the Optionee shall be dismissed as a result of (i) any material breach by
the Optionee of any agreement between the Optionee and the Company; (ii) the conviction of, indictment for or plea of nolo contendere by the Optionee to
a felony or a crime involving moral turpitude; or (iii) any material misconduct or willful and deliberate non-performance (other than by reason of disability)
by the Optionee of the Optionee’s duties to the Company.
(d) Other Termination. If the Optionee’s employment terminates for any reason other than the Optionee’s death, the Optionee’s disability or Cause, and
unless otherwise determined by the Administrator, any portion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on
the date of termination, for a period of three months from the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Option
that is not exercisable on the date of termination shall terminate immediately and be of no further force or effect.
The Administrator’s determination of the reason for termination of the Optionee’s employment shall be conclusive and binding on the Optionee and his or
her representatives or legatees.
4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions
of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning
specified in the Plan, unless a different meaning is specified herein.
5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise,
other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and
thereafter, only by the Optionee’s legal representative or legatee.
ACTIVE/115808348.2
6. Tax Withholding. The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes a taxable event for Federal income
tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law
to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in
whole or in part, by withholding from shares of Stock to be issued to the Optionee a number of shares of Stock with an aggregate Fair Market Value that
would satisfy the withholding amount due; provided, however, that the amount withheld does not exceed the maximum statutory tax rate or such lesser
amount as is necessary to avoid adverse accounting treatment or as determined by the Administrator.
7. No Obligation to Continue Employment. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue
the Optionee in employment and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to
terminate the employment of the Optionee at any time.
8. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements
and discussions between the parties concerning such subject matter.
9. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its
subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including
but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary
or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i)
authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the
Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic
form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant
Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be
used in accordance with applicable law.
10. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the
Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in
writing.
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this
Agreement pursuant to the Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.
ADICET BIO, NC.
By:
Name:
Title:
Dated:
ACTIVE/115808348.2
Optionee’s Signature
Optionee’s name and address:
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR NON-EMPLOYEE CONSULTANTS
UNDER THE ADICET BIO, INC.
2018 STOCK OPTION AND INCENTIVE PLAN
Name of Optionee:
No. of Option Shares:
Option Exercise Price per Share:
Grant Date:
Expiration Date:
$
Pursuant to the Adicet Bio, Inc. Amended and Restated 2018 Stock Option and Incentive Plan as amended through the date hereof (the “Plan”), Adicet Bio,
Inc. (the “Company”) hereby grants to the Optionee named above, who is a Consultant of the Company, an option (the “Stock Option”) to purchase on or
prior to the Expiration Date specified above all or part of the number of shares of Common Stock, par value $0.0001 per share (the “Stock”), of the
Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan. This
Stock Option is not intended to be an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended.
1. Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below,
and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability schedule hereunder, this Stock Option
shall be exercisable with respect to the following number of Option Shares on the dates indicated so long as the Optionee remains in service to the
Company or a Subsidiary as a Consultant on such dates:
Incremental Number of
Option Shares Exercisable
Exercisability Date
( %)
( %)
( %)
( %)
( %)
Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the
provisions hereof and of the Plan.
2. Manner of Exercise.
(a) The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this Stock Option,
the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of
such notice. This notice shall specify the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other
instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the
Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that
otherwise satisfy any holding periods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the
Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee
and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as
a condition of such payment procedure; (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock
issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; or (v) a
combination of (i), (ii), (iii) and (iv) above. Payment instruments will be received subject to collection.
The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s receipt
from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in
the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the
Company may require to satisfy itself that the issuance of Stock to be purchased pursuant to the exercise of Stock Options under the Plan and any
subsequent resale of the shares of Stock will be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase
price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of
the Stock Option shall be net of the Shares attested to.
ACTIVE/115808348.2
(b) The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company or of the transfer
agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer
and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee.
The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock
Option unless and until this Stock Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred
the shares to the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon, the
Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.
(c) The minimum number of shares with respect to which this Stock Option may be exercised at any one time shall be 100 shares, unless the number of
shares with respect to which this Stock Option is being exercised is the total number of shares subject to exercise under this Stock Option at the time.
(d) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.
3. Termination as Consultant. If the Optionee ceases to be a Consultant to the Company or a Subsidiary for any reason, any portion of this Stock Option
outstanding on such date may be exercised, to the extent exercisable on the date the Optionee ceased to provide services, for a period of three months from
the date the Optionee ceased to provide services or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date
the Optionee ceases to be a Consultant to the Company or a Subsidiary shall terminate immediately and be of no further force or effect.
4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions
of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning
specified in the Plan, unless a different meaning is specified herein.
5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise,
other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and
thereafter, only by the Optionee’s legal representative or legatee.
6. No Obligation to Continue as a Consultant or Service Provider. Neither the Plan nor this Stock Option confers upon the Optionee any rights with respect
to continuance as a Consultant or other service provider to the Company or a Subsidiary.
7. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements
and discussions between the parties concerning such subject matter.
8. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its
subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including
but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary
or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i)
authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the
Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic
form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee
shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
9. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee
at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
ACTIVE/115808348.2
ADICET BIO, NC.
By:
Name:
Title:
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this
Agreement pursuant to the Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.
Dated:
ACTIVE/115808348.2
Optionee’s Signature
Optionee’s name and address:
RESTRICTED STOCK AWARD AGREEMENT
UNDER THE ADICET BIO, INC.
2018 STOCK OPTION AND INCENTIVE PLAN
Name of Grantee:
No. of Shares:
Grant Date:
Pursuant to the Adicet Bio, Inc. Amended and Restated 2018 Stock Option and Incentive Plan as amended through the date hereof (the “Plan”), Adicet Bio,
Inc. (the “Company”) hereby grants a Restricted Stock Award (an “Award”) to the Grantee named above. Upon acceptance of this Award, the Grantee shall
receive the number of shares of Common Stock, par value $0.0001 per share (the “Stock”) of the Company specified above, subject to the restrictions and
conditions set forth herein and in the Plan. The Company acknowledges the receipt from the Grantee of consideration with respect to the par value of the
Stock in the form of cash, past or future services rendered to the Company by the Grantee or such other form of consideration as is acceptable to the
Administrator.
1. Award. The shares of Restricted Stock awarded hereunder shall be issued and held by the Company’s transfer agent in book entry form, and the
Grantee’s name shall be entered as the stockholder of record on the books of the Company. Thereupon, the Grantee shall have all the rights of a stockholder
with respect to such shares, including voting and dividend rights, subject, however, to the restrictions and conditions specified in Paragraph 2 below. The
Grantee shall (i) sign and deliver to the Company a copy of this Award Agreement and (ii) deliver to the Company a stock power endorsed in blank.
2. Restrictions and Conditions.
(a) Any book entries for the shares of Restricted Stock granted herein shall bear an appropriate legend, as determined by the Administrator in its sole
discretion, to the effect that such shares are subject to restrictions as set forth herein and in the Plan.
(b) Shares of Restricted Stock granted herein may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of by the Grantee prior
to vesting.
(c) If the Grantee’s employment with the Company and its Subsidiaries is voluntarily or involuntarily terminated for any reason (including death) prior to
vesting of shares of Restricted Stock granted herein, all shares of Restricted Stock shall immediately and automatically be forfeited and returned to the
Company.
3. Vesting of Restricted Stock. The restrictions and conditions in Paragraph 2 of this Agreement shall lapse on the Vesting Date or Dates specified in the
following schedule so long as the Grantee remains an employee of the Company or a Subsidiary on such Dates. If a series of Vesting Dates is specified,
then the restrictions and conditions in Paragraph 2 shall lapse only with respect to the number of shares of Restricted Stock specified as vested on such
date.
Incremental Number
of Shares Vested
Vesting Date
( %)
( %)
( %)
( %)
( %)
Subsequent to such Vesting Date or Dates, the shares of Stock on which all restrictions and conditions have lapsed shall no longer be deemed Restricted
Stock. The Administrator may at any time accelerate the vesting schedule specified in this Paragraph 3.
4. Dividends. Dividends on shares of Restricted Stock shall be paid currently to the Grantee.
5. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Award shall be subject to and governed by all the terms and conditions of the
Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified
in the Plan, unless a different meaning is specified herein.
ACTIVE/115808348.2
6. Transferability. This Agreement is personal to the Grantee, is non-assignable and is not transferable in any manner, by operation of law or otherwise,
other than by will or the laws of descent and distribution.
7. Tax Withholding. The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal income tax
purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to
be withheld on account of such taxable event. Except in the case where an election is made pursuant to Paragraph 8 below, the Company shall have the
authority to cause the required tax withholding obligation to be satisfied, in whole or in part, by withholding from shares of Stock to be issued or released
by the transfer agent a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due; provided, however,
that the amount withheld does not exceed the maximum statutory tax rate or such lesser amount as is necessary to avoid adverse accounting treatment or as
determined by the Administrator.
8. Election Under Section 83(b). The Grantee and the Company hereby agree that the Grantee may, within 30 days following the Grant Date of this Award,
file with the Internal Revenue Service and the Company an election under Section 83(b) of the Internal Revenue Code. In the event the Grantee makes such
an election, he or she agrees to provide a copy of the election to the Company. The Grantee acknowledges that he or she is responsible for obtaining the
advice of his or her tax advisors with regard to the Section 83(b) election and that he or she is relying solely on such advisors and not on any statements or
representations of the Company or any of its agents with regard to such election.
9. No Obligation to Continue Employment. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue
the Grantee in employment and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate
the employment of the Grantee at any time.
10. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements and
discussions between the parties concerning such subject matter.
11. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its
subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including
but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary
or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i)
authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the
Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic
form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Grantee
shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
12. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee
at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this
Agreement pursuant to the Company’s instructions to the Grantee (including through an online acceptance process) is acceptable.
ACTIVE/115808348.2
ADICET BIO, NC.
By:
Name:
Title:
Dated:
ACTIVE/115808348.2
Grantee’s Signature
Grantee’s name and address:
RESTRICTED STOCK UNIT AWARD AGREEMENT
FOR NON-EMPLOYEE DIRECTORS
UNDER THE ADICET BIO, INC.
2018 STOCK OPTION AND INCENTIVE PLAN
Name of Grantee:
No. of Restricted Stock Units:
Grant Date:
Pursuant to the Adicet Bio, Inc. Amended and Restated 2018 Stock Option and Incentive Plan as amended through the date hereof (the “Plan”), Adicet Bio,
Inc. (the “Company”) hereby grants an award of the number of Restricted Stock Units listed above (an “Award”) to the Grantee named above. Each
Restricted Stock Unit shall relate to one share of Common Stock, par value $0.0001 per share (the “Stock”) of the Company.
1. Restrictions on Transfer of Award. This Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by the Grantee,
and any shares of Stock issuable with respect to the Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of until (i)
the Restricted Stock Units have vested as provided in Paragraph 2 of this Agreement and (ii) shares of Stock have been issued to the Grantee in accordance
with the terms of the Plan and this Agreement.
2. Vesting of Restricted Stock Units. The restrictions and conditions of Paragraph 1 of this Agreement shall lapse on the Vesting Date or Dates specified in
the following schedule so long as the Grantee remains in service as a member of the Board on such Dates. If a series of Vesting Dates is specified, then the
restrictions and conditions in Paragraph 1 shall lapse only with respect to the number of Restricted Stock Units specified as vested on such date.
Incremental Number of
Restricted Stock Units Vested
Vesting Date
( %)
( %)
( %)
( %)
The Administrator may at any time accelerate the vesting schedule specified in this Paragraph 2.
3. Termination of Service. If the Grantee’s service with the Company and its Subsidiaries terminates for any reason (including death or disability) prior to
the satisfaction of the vesting conditions set forth in Paragraph 2 above, any Restricted Stock Units that have not vested as of such date shall automatically
and without notice terminate and be forfeited, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives will
thereafter have any further rights or interests in such unvested Restricted Stock Units.
4. Issuance of Shares of Stock. As soon as practicable following each Vesting Date (but in no event later than two and one-half months after the end of the
year in which the Vesting Date occurs), the Company shall issue to the Grantee the number of shares of Stock equal to the aggregate number of Restricted
Stock Units that have vested pursuant to Paragraph 2 of this Agreement on such date and the Grantee shall thereafter have all the rights of a stockholder of
the Company with respect to such shares.
5. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions
of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning
specified in the Plan, unless a different meaning is specified herein.
6. Section 409A of the Code. This Agreement shall be interpreted in such a manner that all provisions relating to the settlement of the Award are exempt
from the requirements of Section 409A of the Code as “short-term deferrals” as described in Section 409A of the Code.
7. No Obligation to Continue as a Director. Neither the Plan nor this Award confers upon the Grantee any rights with respect to continuance as a Director.
8. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements and
discussions between the parties concerning such subject matter.
ACTIVE/115808348.2
9. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its
subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including
but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary
or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i)
authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the
Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic
form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Grantee
shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
10. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee
at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this
Agreement pursuant to the Company’s instructions to the Grantee (including through an online acceptance process) is acceptable.
ADICET BIO, INC.
By:
Name:
Title:
Dated:
ACTIVE/115808348.2
Grantee’s Signature
Grantee’s name and address:
RESTRICTED STOCK UNIT AWARD AGREEMENT
FOR COMPANY EMPLOYEES
UNDER THE ADICET BIO, INC.
2018 STOCK OPTION AND INCENTIVE PLAN
Name of Grantee:
No. of Restricted Stock Units:
Grant Date:
Pursuant to the Adicet Bio, Inc. Amended and Restated 2018 Stock Option and Incentive Plan as amended through the date hereof (the “Plan”), Adicet Bio,
Inc. (the “Company”) hereby grants an award of the number of Restricted Stock Units listed above (an “Award”) to the Grantee named above. Each
Restricted Stock Unit shall relate to one share of Common Stock, par value $0.0001 per share (the “Stock”) of the Company.
1. Restrictions on Transfer of Award. This Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by the Grantee,
and any shares of Stock issuable with respect to the Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of until (i)
the Restricted Stock Units have vested as provided in Paragraph 2 of this Agreement and (ii) shares of Stock have been issued to the Grantee in accordance
with the terms of the Plan and this Agreement.
2. Vesting of Restricted Stock Units. The restrictions and conditions of Paragraph 1 of this Agreement shall lapse on the Vesting Date or Dates specified in
the following schedule so long as the Grantee remains an employee of the Company or a Subsidiary on such Dates. If a series of Vesting Dates is specified,
then the restrictions and conditions in Paragraph 1 shall lapse only with respect to the number of Restricted Stock Units specified as vested on such date.
Incremental Number of
Restricted Stock Units Vested
Vesting Date
( %)
( %)
( %)
( %)
The Administrator may at any time accelerate the vesting schedule specified in this Paragraph 2.
3. Termination of Employment. If the Grantee’s employment with the Company and its Subsidiaries terminates for any reason (including death or
disability) prior to the satisfaction of the vesting conditions set forth in Paragraph 2 above, any Restricted Stock Units that have not vested as of such date
shall automatically and without notice terminate and be forfeited, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal
representatives will thereafter have any further rights or interests in such unvested Restricted Stock Units.
4. Issuance of Shares of Stock. As soon as practicable following each Vesting Date (but in no event later than two and one-half months after the end of the
year in which the Vesting Date occurs), the Company shall issue to the Grantee the number of shares of Stock equal to the aggregate number of Restricted
Stock Units that have vested pursuant to Paragraph 2 of this Agreement on such date and the Grantee shall thereafter have all the rights of a stockholder of
the Company with respect to such shares.
5. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions
of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning
specified in the Plan, unless a different meaning is specified herein.
6. Tax Withholding. The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal income tax
purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to
be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in
whole or in part, by withholding from shares of Stock to be issued to the Grantee a number of shares of Stock with an aggregate Fair Market Value that
would satisfy the withholding amount due; provided, however, that the amount withheld does not exceed the maximum statutory tax rate or such lesser
amount as is necessary to avoid adverse accounting treatment or as determined by the Administrator.
ACTIVE/115808348.2
7. Section 409A of the Code. This Agreement shall be interpreted in such a manner that all provisions relating to the settlement of the Award are exempt
from the requirements of Section 409A of the Code as “short-term deferrals” as described in Section 409A of the Code.
8. No Obligation to Continue Employment. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue
the Grantee in employment and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate
the employment of the Grantee at any time.
9. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements and
discussions between the parties concerning such subject matter.
10. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its
subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including
but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary
or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i)
authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the
Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic
form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Grantee
shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
11. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee
at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this
Agreement pursuant to the Company’s instructions to the Grantee (including through an online acceptance process) is acceptable.
ADICET BIO, INC.
By:
Name:
Title:
Dated:
ADICET BIO, INC. 500 BOYLSTON STREET, 13TH FLOOR BOSTON, MASSACHUSETTS 02116 VOTE BY
ACTIVE/115808348.2
Grantee’s Signature
Grantee’s name and address:
ADICET BIO, INC.
AMENDED AND RESTATED 2018 EMPLOYEE STOCK PURCHASE PLAN
Exhibit 10.14
The purpose of the Adicet Bio, Inc. Amended and Restated 2018 Employee Stock Purchase Plan (“the Plan”) is to provide eligible employees of Adicet
Bio, Inc. (the “Company”) and each Designated Subsidiary (as defined in Section 11) with opportunities to purchase shares of the Company’s common
stock, par value $0.0001 per share (the “Common Stock”). 524,775 shares of Common Stock have been approved and reserved for this purpose, plus on
January 1, 2022, and each January 1 thereafter through January 1, 2031, the number of shares of Common Stock reserved and available for issuance under
the Plan shall be cumulatively increased by the least of (i) 1,262,560 shares of Common Stock, (ii) one percent (1%) of the number of shares of Common
Stock issued and outstanding on the immediately preceding December 31st, or (iii) such lesser number of shares of Common Stock as determined by the
Administrator. The Plan is intended to constitute an “employee stock purchase plan” within the meaning of Section 423(b) of the Internal Revenue Code of
1986, as amended (the “Code”), and shall be interpreted in accordance with that intent.
1. Administration. The Plan will be administered by the person or persons (the “Administrator”) appointed by the Company’s Board of Directors (the
“Board”) for such purpose. The Administrator has authority at any time to: (i) adopt, alter and repeal such rules, guidelines and practices for the
administration of the Plan and for its own acts and proceedings as it shall deem advisable; (ii) interpret the terms and provisions of the Plan; (iii) make all
determinations it deems advisable for the administration of the Plan; (iv) decide all disputes arising in connection with the Plan; and (v) otherwise supervise
the administration of the Plan. All interpretations and decisions of the Administrator shall be binding on all persons, including the Company and the
Participants. No member of the Board or individual exercising administrative authority with respect to the Plan shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted hereunder.
2. Offerings. The Company will make one or more offerings to eligible employees to purchase Common Stock under the Plan (“Offerings”). Unless
otherwise determined by the Administrator, an Offering will begin on the first business day occurring on or after each January 1 and July 1 and will end on
the last business day occurring on or before the following June 30 and December 31, respectively. The Administrator may, in its discretion, designate a
different period for any Offering, provided that no Offering shall exceed one year in duration or overlap any other Offering.
3. Eligibility. All individuals classified as employees on the payroll records of the Company and each Designated Subsidiary are eligible to participate in
any one or more of the Offerings under the Plan, provided that as of the first day of the applicable Offering (the “Offering Date”) they are customarily
employed by the Company or a Designated Subsidiary for more than 20 hours a week and have completed at least three months of employment.
Notwithstanding any other provision herein, individuals who are not contemporaneously classified as employees of the Company or a Designated
Subsidiary for purposes of the Company’s or applicable Designated Subsidiary’s payroll system are not considered to be eligible employees of the
Company or any Designated Subsidiary and shall not be eligible to participate in the Plan. In the event any such individuals are reclassified as employees
of the Company or a Designated Subsidiary for any purpose, including, without limitation, common law or statutory employees, by any action of any third
party, including, without limitation, any government agency, or as a result of any private lawsuit, action or administrative proceeding, such individuals
shall, notwithstanding such reclassification, remain ineligible for participation. Notwithstanding the foregoing, the exclusive means for individuals who are
not contemporaneously classified as employees of the Company or a Designated Subsidiary on the Company’s or Designated Subsidiary’s payroll system
to become eligible to participate in this Plan is through an amendment to this Plan, duly executed by the Company, which specifically renders such
individuals eligible to participate herein.
4. Participation.
(a) Participants. An eligible employee who is not a Participant in any prior Offering may participate in a subsequent Offering by submitting an enrollment
form to his or her appropriate payroll location at least 15 business days before the Offering Date (or by such other deadline as shall be established by the
Administrator for the Offering).
(b) Enrollment. The enrollment form will (a) state a whole percentage to be deducted from an eligible employee’s Compensation (as defined in Section 11)
per pay period, (b) authorize the purchase of Common Stock in each Offering in accordance with the terms of the Plan and (c) specify the exact name or
names in which shares of Common Stock purchased for such individual are to be issued pursuant to Section 10. An employee who does not enroll in
accordance with these procedures will be deemed to have waived the right to participate. Unless a Participant files a new enrollment form or withdraws
from the Plan, such Participant’s deductions and purchases will continue at the same percentage of Compensation for future Offerings, provided he or she
remains eligible.
ACTIVE/115808347.2
(c) Notwithstanding the foregoing, participation in the Plan will neither be permitted nor be denied contrary to the requirements of the Code.
5. Employee Contributions. Each eligible employee may authorize payroll deductions up to a maximum of fifteen percent of such employee’s
Compensation for each pay period. The Company will maintain book accounts showing the amount of payroll deductions made by each Participant for
each Offering. No interest will accrue or be paid on payroll deductions.
6. Deduction Changes. Except as may be determined by the Administrator in advance of an Offering, a Participant may not increase or decrease his or her
payroll deduction during any Offering, but may increase or decrease his or her payroll deduction with respect to the next Offering (subject to the limitations
of Section 5) by filing a new enrollment form at least 15 business days before the next Offering Date (or by such other deadline as shall be established by
the Administrator for the Offering). The Administrator may, in advance of any Offering, establish rules permitting a Participant to increase, decrease or
terminate his or her payroll deduction during an Offering.
7. Withdrawal. A Participant may withdraw from participation in the Plan by delivering a written notice of withdrawal to his or her appropriate payroll
location. The Participant’s withdrawal will be effective as of the next business day. Following a Participant’s withdrawal, the Company will promptly
refund such individual’s entire account balance under the Plan to him or her (after payment for any Common Stock purchased before the effective date of
withdrawal). Partial withdrawals are not permitted. Such an employee may not begin participation again during the remainder of the Offering, but may
enroll in a subsequent Offering in accordance with Section 4.
8. Grant of Options. On each Offering Date, the Company will grant to each eligible employee who is then a Participant in the Plan an option (“Option”) to
purchase on the last day of such Offering (the “Exercise Date”), at the Option Price hereinafter provided for, the lowest of (a) a number of shares of
Common Stock determined by dividing such Participant’s accumulated payroll deductions on such Exercise Date by the lower of (i) 85 percent of the Fair
Market Value of the Common Stock on the Offering Date, or (ii) 85 percent of the Fair Market Value of the Common Stock on the Exercise Date, (b) a
number of shares determined by dividing $25,000 by the Fair Market of the Common Stock on the Offering Date of such Offering ; or (c) such other lesser
maximum number of shares as shall have been established by the Administrator in advance of the Offering; provided, however, that such Option shall be
subject to the limitations set forth below. Each Participant’s Option shall be exercisable only to the extent of such Participant’s accumulated payroll
deductions on the Exercise Date. The purchase price for each share purchased under each Option (the “Option Price”) will be 85 percent of the Fair Market
Value of the Common Stock on the Offering Date or the Exercise Date, whichever is less.
Notwithstanding the foregoing, no Participant may be granted an option hereunder if such Participant, immediately after the option was granted, would be
treated as owning stock possessing 5 percent or more of the total combined voting power or value of all classes of stock of the Company or any Parent or
Subsidiary (as defined in Section 11). For purposes of the preceding sentence, the attribution rules of Section 424(d) of the Code shall apply in determining
the stock ownership of a Participant, and all stock which the Participant has a contractual right to purchase shall be treated as stock owned by the
Participant. In addition, no Participant may be granted an Option which permits his or her rights to purchase stock under the Plan, and any other employee
stock purchase plan of the Company and its Parents and Subsidiaries, to accrue at a rate which exceeds $25,000 of the fair market value of such stock
(determined on the option grant date or dates) for each calendar year in which the Option is outstanding at any time. The purpose of the limitation in the
preceding sentence is to comply with Section 423(b)(8) of the Code and shall be applied taking Options into account in the order in which they were
granted.
9. Exercise of Option and Purchase of Shares. Each employee who continues to be a Participant in the Plan on the Exercise Date shall be deemed to have
exercised his or her Option on such date and shall acquire from the Company such number of whole shares of Common Stock reserved for the purpose of
the Plan as his or her accumulated payroll deductions on such date will purchase at the Option Price, subject to any other limitations contained in the Plan.
Any amount remaining in a Participant’s account at the end of an Offering solely by reason of the inability to purchase a fractional share will be carried
forward to the next Offering; any other balance remaining in a Participant’s account at the end of an Offering will be refunded to the Participant promptly.
10. Issuance of Certificates. Certificates representing shares of Common Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants with rights of survivorship, or in the name of a broker authorized by the
employee to be his, her or their, nominee for such purpose.
11. Definitions.
The term “Compensation” means the amount of base pay, prior to salary reduction pursuant to Sections 125, 132(f) or 401(k) of the Code, but excluding
overtime, commissions, incentive or bonus awards, allowances and reimbursements for expenses such as relocation allowances or travel expenses, income
or gains on the exercise of Company stock options, and similar items
ACTIVE/115808347.2
The term “Designated Subsidiary” means any present or future Subsidiary (as defined below) that has been designated by the Board to participate in the
Plan. The Board may so designate any Subsidiary, or revoke any such designation, at any time and from time to time, either before or after the Plan is
approved by the stockholders. The current list of Designated Companies is attached hereto as Appendix A.
The term “Fair Market Value of the Common Stock” on any given date means the fair market value of the Common Stock determined in good faith by the
Administrator; provided, however, that if the Common Stock is admitted to quotation on the National Association of Securities Dealers Automated
Quotation System (“Nasdaq”), Nasdaq Global Market or another national securities exchange, the determination shall be made by reference to the closing
price on such date. If there is no closing price for such date, the determination shall be made by reference to the last date preceding such date for which
there is a closing price.
The term “Initial Public Offering” means the first underwritten, firm commitment public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale by the Company of its Common Stock.
The term “Parent” means a “parent corporation” with respect to the Company, as defined in Section 424(e) of the Code.
The term “Participant” means an individual who is eligible as determined in Section 3 and who has complied with the provisions of Section 4.
The term “Subsidiary” means a “subsidiary corporation” with respect to the Company, as defined in Section 424(f) of the Code.
12. Rights on Termination of Employment. If a Participant’s employment terminates for any reason before the Exercise Date for any Offering, no payroll
deduction will be taken from any pay due and owing to the Participant and the balance in the Participant’s account will be paid to such Participant or, in the
case of such Participant’s death, to his or her designated beneficiary as if such Participant had withdrawn from the Plan under Section 7. An employee will
be deemed to have terminated employment, for this purpose, if the corporation that employs him or her, having been a Designated Subsidiary, ceases to be
a Subsidiary, or if the employee is transferred to any corporation other than the Company or a Designated Subsidiary. An employee will not be deemed to
have terminated employment for this purpose, if the employee is on an approved leave of absence for military service or sickness or for any other purpose
approved by the Company, if the employee’s right to reemployment is guaranteed either by a statute or by contract or under the policy pursuant to which
the leave of absence was granted or if the Administrator otherwise provides in writing.
13. Special Rules. Notwithstanding anything herein to the contrary, the Administrator may adopt special rules applicable to the employees of a particular
Designated Subsidiary, whenever the Administrator determines that such rules are necessary or appropriate for the implementation of the Plan in a
jurisdiction where such Designated Subsidiary has employees; provided that such rules are consistent with the requirements of Section 423(b) of the Code.
Any special rules established pursuant to this Section 13 shall, to the extent possible, result in the employees subject to such rules having substantially the
same rights as other Participants in the Plan.
14. Optionees Not Stockholders. Neither the granting of an Option to a Participant nor the deductions from his or her pay shall constitute such Participant a
holder of the shares of Common Stock covered by an Option under the Plan until such shares have been purchased by and issued to him or her.
15. Rights Not Transferable. Rights under the Plan are not transferable by a Participant other than by will or the laws of descent and distribution, and are
exercisable during the Participant’s lifetime only by the Participant.
16. Application of Funds. All funds received or held by the Company under the Plan may be combined with other corporate funds and may be used for any
corporate purpose.
17. Adjustment in Case of Changes Affecting Common Stock. In the event of a subdivision of outstanding shares of Common Stock, the payment of a
dividend in Common Stock or any other change affecting the Common Stock, the number of shares approved for the Plan and the share limitation set forth
in Section 8 shall be equitably or proportionately adjusted to give proper effect to such event.
18. Amendment of the Plan. The Board may at any time and from time to time amend the Plan in any respect, except that without the approval within 12
months of such Board action by the stockholders, no amendment shall be made increasing the number of shares approved for the Plan or making any other
change that would require stockholder approval in order for the Plan, as amended, to qualify as an “employee stock purchase plan” under Section 423(b) of
the Code.
19. Insufficient Shares. If the total number of shares of Common Stock that would otherwise be purchased on any Exercise Date plus the number of shares
purchased under previous Offerings under the Plan exceeds the maximum number of shares issuable under the
ACTIVE/115808347.2
Plan, the shares then available shall be apportioned among Participants in proportion to the amount of payroll deductions accumulated on behalf of each
Participant that would otherwise be used to purchase Common Stock on such Exercise Date.
20. Termination of the Plan. The Plan may be terminated at any time by the Board. Upon termination of the Plan, all amounts in the accounts of
Participants shall be promptly refunded.
21. Governmental Regulations. The Company’s obligation to sell and deliver Common Stock under the Plan is subject to obtaining all governmental
approvals required in connection with the authorization, issuance, or sale of such stock.
22. Governing Law. This Plan and all Options and actions taken thereunder shall be governed by, and construed in accordance with, the laws of the State of
Delaware, applied without regard to conflict of law principles.
23. Issuance of Shares. Shares may be issued upon exercise of an Option from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
24. Tax Withholding. Participation in the Plan is subject to any minimum required tax withholding on income of the Participant in connection with the Plan.
Each Participant agrees, by entering the Plan, that the Company and its Subsidiaries shall have the right to deduct any such taxes from any payment of any
kind otherwise due to the Participant, including shares issuable under the Plan.
25. Notification Upon Sale of Shares. Each Participant agrees, by entering the Plan, to give the Company prompt notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after the date of grant of the Option pursuant to which such shares were
purchased or within one year after the date such shares were purchased.
26. Effective Date and Approval of Shareholders. The Plan shall take effect on the date immediately preceding the date on which the Company’s
registration statement on Form S-1 becomes effective following approval by the holders of a majority of the votes cast at a meeting of stockholders at
which a quorum is present or by written consent of the stockholders.
DATE APPROVED BY BOARD OF DIRECTORS: December 21, 2017
DATE APPROVED BY STOCKHOLDERS: January 12, 2018
AMENDED AND RESTATED BY THE BOARD OF DIRECTORS: March 2, 2021
DATE STOCKHOLDERS APPROVED AMENDED AND RESTATED PLAN: April 27, 2021
ACTIVE/115808347.2
APPENDIX A
Designated Subsidiaries
Adicet Therapeutics, Inc.
ACTIVE/115808347.2
ADICET BIO, INC.
2022 INDUCEMENT PLAN
Exhibit 10.15
SECTION 1.
GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Adicet Bio, Inc. 2022 Inducement Plan (the “Plan”). The purpose of the Plan is to encourage and enable Adicet Bio, Inc. (the
“Company”) to grant equity awards to induce highly-qualified prospective officers and employees to accept employment and provide them with a
proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer
identification of their interests with those of the Company and its stockholders, thereby stimulating their efforts on the Company’s behalf and strengthening
their desire to remain with the Company. The Company intends that the Plan be reserved for persons to whom the Company may issue securities without
stockholder approval as an inducement pursuant to Rule 5635(c) of the Marketplace Rules of the NASDAQ Stock Market, Inc.
The following terms shall be defined as set forth below:
“Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
“Administrator” means either the Board or the compensation committee of the Board or a similar committee performing the functions of the compensation
committee and which is comprised of not less than two Non-Employee Directors who are independent.
“Award” or “Awards,” except where referring to a particular category of grant under the Plan, shall include Non-Qualified Stock Options, Stock
Appreciation Rights, Restricted Stock Units, Restricted Stock Awards, Unrestricted Stock Awards, and Dividend Equivalent Rights.
“Award Certificate” means a written or electronic document setting forth the terms and provisions applicable to an Award granted under the Plan. Each
Award Certificate is subject to the terms and conditions of the Plan.
“Board” means the Board of Directors of the Company.
“Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.
“Continuous Service” means that a Service Relationship is not interrupted or terminated. For this purpose, a Service Relationship shall be deemed to
continue without interruption in the event an individual’s status changes from full-time employee to part-time employee or consultant.
“Dividend Equivalent Right” means an Award entitling the grantee to receive credits based on cash dividends that would have been paid on the shares of
Stock specified in the Dividend Equivalent Right (or other award to which it relates) if such shares had been issued to and held by the grantee.
“Effective Date” means the date on which the Plan is approved by the Board as set forth in Section 19.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
“Fair Market Value” of the Stock on any given date means the fair market value of the Stock determined in good faith by the Administrator; provided,
however, that if the Stock is admitted to quotation on the National Association of Securities Dealers Automated Quotation System (“Nasdaq”), Nasdaq
Global Market or another national securities exchange, the determination shall be made by reference to market quotations. If there are no market quotations
for such date, the determination shall be made by reference to the last date preceding such date for which there are market quotations.
“Non-Employee Director” means a member of the Board who is not also an employee of the Company or any Subsidiary.
“Non-Qualified Stock Option” means any Stock Option that is not an “incentive stock option” under Section 422 of the Code.
“Option” or “Stock Option” means any option to purchase shares of Stock granted pursuant to Section 5.
“Restricted Shares” means the shares of Stock underlying a Restricted Stock Award that remain subject to a risk of forfeiture or the Company’s right of
repurchase.
“Restricted Stock Award” means an Award of Restricted Shares subject to such restrictions and conditions as the Administrator may determine at the time
of grant.
“Restricted Stock Units” means an Award of stock units subject to such restrictions and conditions as the Administrator may determine at the time of grant.
“Sale Event” shall mean (i) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (ii) a
merger, reorganization or consolidation pursuant to which the holders of the Company’s outstanding voting power and outstanding stock immediately prior
to such transaction do not own a majority of the outstanding voting power and outstanding stock or other equity interests of the resulting or successor entity
(or its ultimate parent, if applicable) immediately upon completion of such transaction, (iii) the sale of all of the Stock of the Company to an unrelated
person, entity or group thereof acting in concert, or (iv) any other transaction in which the owners of the Company’s outstanding voting power immediately
prior to such transaction do not own at least a majority of the outstanding voting power of the Company or any successor entity immediately upon
completion of the transaction other than as a result of the acquisition of securities directly from the Company.
“Sale Price” means the value as determined by the Administrator of the consideration payable, or otherwise to be received by stockholders, per share of
Stock pursuant to a Sale Event.
“Section 409A” means Section 409A of the Code and the regulations and other guidance promulgated thereunder.
“Service Relationship” means any relationship as an employee, Non-Employee Director or consultant of the Company or any Affiliate.
“Stock” means the Common Stock, par value $0.0001 per share, of the Company, subject to adjustments pursuant to Section 3.
“Stock Appreciation Right” means an Award entitling the recipient to receive shares of Stock (or cash, to the extent explicitly provided for in the applicable
Award Certificate) having a value equal to the excess of the Fair Market Value of the Stock on the date of exercise over the exercise price of the Stock
Appreciation Right multiplied by the number of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised.
“Subsidiary” means any corporation or other entity (other than the Company) in which the Company has at least a 50 percent interest, either directly or
indirectly.
“Unrestricted Stock Award” means an Award of shares of Stock free of any restrictions.
SECTION 2.
ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS
(a) Administration of Plan. The Plan shall be administered by the Administrator.
(b) Powers of Administrator. The Administrator shall have the power and authority to grant Awards consistent with the terms of the Plan, including the
power and authority:
(i) to select the individuals to whom Awards may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if any, of Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards,
Restricted Stock Units, Unrestricted Stock Awards, and Dividend Equivalent Rights, or any combination of the foregoing, granted to any one or more
grantees;
(iii) to determine the number of shares of Stock to be covered by any Award;
(iv) to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award,
which terms and conditions may differ among individual Awards and grantees, and to approve the forms of Award Certificates;
(v) to accelerate at any time the exercisability or vesting of all or any portion of any Award;
(vi) subject to the provisions of Section 5(c), to extend at any time the period in which Stock Options may be exercised; and
(vii) at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall
deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it
deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration
of the Plan.
All decisions and interpretations of the Administrator shall be binding on all persons, including the Company and Plan grantees.
(c) Reserved.
(d) Award Certificate. Awards under the Plan shall be evidenced by Award Certificates that set forth the terms, conditions and limitations for each Award
which may include, without limitation, the term of an Award and the provisions applicable in the event employment or service terminates.
(e) Indemnification. Neither the Board nor the Administrator, nor any member of either or any delegate thereof, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection with the Plan, and the members of the Board and the Administrator (and any
delegate thereof) shall be entitled in all cases to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense
(including, without limitation, reasonable attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under the Company’s
articles or bylaws or any directors’ and officers’ liability insurance coverage which may be in effect from time to time and/or any indemnification
agreement between such individual and the Company.
(f) Foreign Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the
Company and its Subsidiaries operate or have employees or other individuals eligible for Awards, the Administrator, in its sole discretion, shall have the
power and authority to: (i) determine which Subsidiaries shall be covered by the Plan; (ii) determine which individuals outside the United States are
eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to individuals outside the United States to comply with
applicable foreign laws; (iv) establish subplans and modify exercise procedures and other terms and procedures, to the extent the Administrator determines
such actions to be necessary or advisable (and such subplans and/or modifications shall be attached to this Plan as appendices); provided, however, that no
such subplans and/or modifications shall increase the share limitations contained in Section 3(a) hereof; and (v) take any action, before or after an Award is
made, that the Administrator determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or
approvals. Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would violate the
Exchange Act or any other applicable United States securities law, the Code, or any other applicable United States governing statute or law.
SECTION 3.
STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a) Stock Issuable. The maximum number of shares of Stock reserved and available for issuance under the Plan shall be 1,000,000 shares of Stock, subject
to adjustment as provided in Section 3(c). For purposes of this limitation, the shares of Stock underlying any Awards that are forfeited, canceled, held back
upon exercise of an Option or settlement of an Award to cover the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied
without the issuance of Stock or otherwise terminated (other than by exercise) under the Plan shall be added back to the shares of Stock available for
issuance under the Plan. In the event the Company repurchases shares of Stock on the open market, such shares shall not be added to the shares of Stock
available for issuance under the Plan. Subject to such overall limitations, shares of Stock may be issued up to such maximum number pursuant to any type
or types of Award. The shares available for issuance under the Plan may be authorized but unissued shares of Stock or shares of Stock reacquired by the
Company.
(b) Reserved.
(c) Changes in Stock. Subject to Section 3(d) hereof, if, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar change in the Company’s capital stock, the outstanding shares of Stock are increased or decreased or are exchanged for a
different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities of the Company or
other non-cash assets are distributed with respect to such shares of Stock or other securities, or, if, as a result of any merger or consolidation, sale of all or
substantially all of the assets of the Company, the outstanding shares of Stock are converted into or exchanged for securities of the Company or any
successor entity (or a parent or subsidiary thereof), the Administrator shall make an appropriate or proportionate adjustment in (i) the maximum number of
shares reserved for issuance under the Plan, (ii) the number and kind of shares or other securities subject to any then outstanding Awards under the Plan,
(iii) the repurchase price, if any, per share subject to each outstanding Restricted Stock Award, and (iv) the exercise price for each share subject to any then
outstanding Stock Options and Stock Appreciation Rights under the Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied
by the number of shares subject to Stock Options and Stock
Appreciation Rights) as to which such Stock Options and Stock Appreciation Rights remain exercisable. The Administrator shall also make equitable or
proportionate adjustments in the number of shares subject to outstanding Awards and the exercise price and the terms of outstanding Awards to take into
consideration cash dividends paid other than in the ordinary course or any other extraordinary corporate event. The adjustment by the Administrator shall
be final, binding and conclusive. No fractional shares of Stock shall be issued under the Plan resulting from any such adjustment, but the Administrator in
its discretion may make a cash payment in lieu of fractional shares.
(d) Mergers and Other Transactions. In the case of and subject to the consummation of a Sale Event, the parties thereto may cause the assumption or
continuation of Awards theretofore granted by the successor entity, or the substitution of such Awards with new Awards of the successor entity or parent
thereof, with appropriate adjustment as to the number and kind of shares and, if appropriate, the per share exercise prices, as such parties shall agree. To the
extent the parties to such Sale Event do not provide for the assumption, continuation or substitution of Awards, upon the effective time of the Sale Event,
the Plan and all outstanding Awards granted hereunder shall terminate. In such case, except as may be otherwise provided in the relevant Award Certificate,
all Options and Stock Appreciation Rights with time-based vesting conditions or restrictions that are not vested and/or exercisable immediately prior to the
effective time of the Sale Event shall become fully vested and exercisable as of the effective time of the Sale Event, all other Awards with time-based
vesting, conditions or restrictions shall become fully vested and nonforfeitable as of the effective time of the Sale Event, and all Awards with conditions
and restrictions relating to the attainment of performance goals may become vested and nonforfeitable in connection with a Sale Event in the
Administrator’s discretion or to the extent specified in the relevant Award Certificate. In the event of such termination, (i) the Company shall have the
option (in its sole discretion) to make or provide for a payment, in cash or in kind, to the grantees holding Options and Stock Appreciation Rights, in
exchange for the cancellation thereof, in an amount equal to the difference between (A) the Sale Price multiplied by the number of shares of Stock subject
to outstanding Options and Stock Appreciation Rights (to the extent then exercisable at prices not in excess of the Sale Price) and (B) the aggregate
exercise price of all such outstanding Options and Stock Appreciation Rights (provided that, in the case of an Option or Stock Appreciation Right with an
exercise price equal to or greater than the Sale Price, such Option or Stock Appreciation Right shall be cancelled for no consideration); or (ii) each grantee
shall be permitted, within a specified period of time prior to the consummation of the Sale Event as determined by the Administrator, to exercise all
outstanding Options and Stock Appreciation Rights (to the extent then exercisable) held by such grantee. The Company shall also have the option (in its
sole discretion) to make or provide for a payment, in cash or in kind, to the grantees holding other Awards in an amount equal to the Sale Price multiplied
by the number of vested shares of Stock under such Awards.
SECTION 4.
ELIGIBILITY
Grantees under the Plan will be such individuals to whom the Company may issue securities without stockholder approval in accordance with Rule 5635(c)
(4) of the Marketplace Rules of the NASDAQ Stock Market, Inc. and related guidance thereunder, as are selected from time to time by the Administrator in
its sole discretion.
SECTION 5.
STOCK OPTIONS
(a) Award of Stock Options. The Administrator may grant Stock Options under the Plan. Any Stock Option granted under the Plan shall be a Non-Qualified
Stock Option and shall be in such form as the Administrator may from time to time approve.
Stock Options granted pursuant to this Section 5 shall be subject to the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable.
(b) Exercise Price. The exercise price per share for the Stock covered by a Stock Option granted pursuant to this Section 5 shall be determined by the
Administrator at the time of grant but shall not be less than 100 percent of the Fair Market Value on the date of grant. Notwithstanding the foregoing, Stock
Options may be granted with an exercise price per share that is less than 100 percent of the Fair Market Value on the date of grant (i) to individuals who are
not subject to U.S. income tax on the date of grant or (ii) the Stock Option is otherwise compliant with Section 409A.
(c) Option Term. The term of each Stock Option shall be fixed by the Administrator, but no Stock Option shall be exercisable more than ten years after the
date the Stock Option is granted.
(d) Exercisability; Rights of a Stockholder. Stock Options shall become exercisable at such time or times, whether or not in installments, as shall be
determined by the Administrator at or after the grant date. The Administrator may at any time accelerate the exercisability of all or any portion of any Stock
Option. An optionee shall have the rights of a stockholder only as to shares acquired upon the exercise of a Stock Option and not as to unexercised Stock
Options.
(e) Method of Exercise. Stock Options may be exercised in whole or in part, by giving written or electronic notice of exercise to the Company, specifying
the number of shares to be purchased. Payment of the purchase price may be made by one or more of the following methods except to the extent otherwise
provided in the Award Certificate:
(i) In cash, by certified or bank check or other instrument acceptable to the Administrator;
(ii) Through the delivery (or attestation to the ownership following such procedures as the Company may prescribe) of shares of Stock that are not then
subject to restrictions under any Company plan. Such surrendered shares shall be valued at Fair Market Value on the exercise date;
(iii) By the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to
the Company cash or a check payable and acceptable to the Company for the purchase price; provided that in the event the optionee chooses to pay the
purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other
agreements as the Company shall prescribe as a condition of such payment procedure; or
(iv) By a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock issuable upon exercise by the largest whole
number of shares with a Fair Market Value that does not exceed the aggregate exercise price.
Payment instruments will be received subject to collection. The transfer to the optionee on the records of the Company or of the transfer agent of the shares
of Stock to be purchased pursuant to the exercise of a Stock Option will be contingent upon receipt from the optionee (or a purchaser acting in his stead in
accordance with the provisions of the Stock Option) by the Company of the full purchase price for such shares and the fulfillment of any other
requirements contained in the Award Certificate or applicable provisions of laws (including the satisfaction of any withholding taxes that the Company is
obligated to withhold with respect to the optionee). In the event an optionee chooses to pay the purchase price by previously-owned shares of Stock through
the attestation method, the number of shares of Stock transferred to the optionee upon the exercise of the Stock Option shall be net of the number of
attested shares. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the exercise of Stock
Options, such as a system using an internet website or interactive voice response, then the paperless exercise of Stock Options may be permitted through
the use of such an automated system.
SECTION 6.
STOCK APPRECIATION RIGHTS
(a) Award of Stock Appreciation Rights. The Administrator may grant Stock Appreciation Rights under the Plan. A Stock Appreciation Right is an Award
entitling the recipient to receive shares of Stock (or cash, to the extent explicitly provided for in the applicable Award Certificate) having a value equal to
the excess of the Fair Market Value of a share of Stock on the date of exercise over the exercise price of the Stock Appreciation Right multiplied by the
number of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised.
(b) Exercise Price of Stock Appreciation Rights. The exercise price of a Stock Appreciation Right shall not be less than 100 percent of the Fair Market
Value of the Stock on the date of grant.
(c) Grant and Exercise of Stock Appreciation Rights. Stock Appreciation Rights may be granted by the Administrator independently of any Stock Option
granted pursuant to Section 5 of the Plan.
(d) Terms and Conditions of Stock Appreciation Rights. Stock Appreciation Rights shall be subject to such terms and conditions as shall be determined on
the date of grant by the Administrator. The term of a Stock Appreciation Right may not exceed ten years. The terms and conditions of each such Award
shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and grantees.
SECTION 7.
RESTRICTED STOCK AWARDS
(a) Nature of Restricted Stock Awards. The Administrator may grant Restricted Stock Awards under the Plan. A Restricted Stock Award is any Award of
Restricted Shares subject to such restrictions and conditions as the Administrator may determine at the time of grant. Conditions may be based on
continuing employment (or other Service Relationship) and/or achievement of pre-established performance goals and objectives.
(b) Rights as a Stockholder. Upon the grant of the Restricted Stock Award and payment of any applicable purchase price, a grantee shall have the rights of a
stockholder with respect to the voting of the Restricted Shares and receipt of dividends; provided that if the lapse of restrictions with respect to the
Restricted Stock Award is tied to the attainment of performance goals, any dividends paid by
the Company during the performance period shall accrue and shall not be paid to the grantee until and to the extent the performance goals are met with
respect to the Restricted Stock Award. Unless the Administrator shall otherwise determine, (i) uncertificated Restricted Shares shall be accompanied by a
notation on the records of the Company or the transfer agent to the effect that they are subject to forfeiture until such Restricted Shares are vested as
provided in Section 7(d) below, and (ii) certificated Restricted Shares shall remain in the possession of the Company until such Restricted Shares are vested
as provided in Section 7(d) below, and the grantee shall be required, as a condition of the grant, to deliver to the Company such instruments of transfer as
the Administrator may prescribe.
(c) Restrictions. Restricted Shares may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided
herein or in the Restricted Stock Award Certificate. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to
Section 16 below, in writing after the Award is issued, if a grantee’s employment (or other Service Relationship) with the Company and its Subsidiaries
terminates for any reason, any Restricted Shares that have not vested at the time of termination shall automatically and without any requirement of notice to
such grantee from or other action by or on behalf of, the Company be deemed to have been reacquired by the Company at its original purchase price (if
any) from such grantee or such grantee’s legal representative simultaneously with such termination of employment (or other Service Relationship), and
thereafter shall cease to represent any ownership of the Company by the grantee or rights of the grantee as a stockholder. Following such deemed
reacquisition of Restricted Shares that are represented by physical certificates, a grantee shall surrender such certificates to the Company upon request
without consideration.
(d) Vesting of Restricted Shares. The Administrator at the time of grant shall specify the date or dates and/or the attainment of pre-established performance
goals, objectives and other conditions on which the non-transferability of the Restricted Shares and the Company’s right of repurchase or forfeiture shall
lapse. Subsequent to such date or dates and/or the attainment of such pre-established performance goals, objectives and other conditions, the shares on
which all restrictions have lapsed shall no longer be Restricted Shares and shall be deemed “vested.”
SECTION 8.
RESTRICTED STOCK UNITS
(a) Nature of Restricted Stock Units. The Administrator may grant Restricted Stock Units under the Plan. A Restricted Stock Unit is an Award of stock
units that may be settled in shares of Stock (or cash, to the extent explicitly provided for in the applicable Award Certificate) upon the satisfaction of such
restrictions and conditions at the time of grant. Conditions may be based on continuing employment (or other Service Relationship) and/or achievement of
pre-established performance goals and objectives. The terms and conditions of each such Award shall be determined by the Administrator, and such terms
and conditions may differ among individual Awards and grantees. Except in the case of Restricted Stock Units with a deferred settlement date that complies
with Section 409A, at the end of the vesting period, the Restricted Stock Units, to the extent vested, shall be settled in the form of shares of Stock.
Restricted Stock Units with deferred settlement dates are subject to Section 409A and shall contain such additional terms and conditions as the
Administrator shall determine in its sole discretion in order to comply with the requirements of Section 409A.
(b) Rights as a Stockholder. A grantee shall have the rights as a stockholder only as to shares of Stock acquired by the grantee upon settlement of Restricted
Stock Units; provided, however, that the grantee may be credited with Dividend Equivalent Rights with respect to the stock units underlying his Restricted
Stock Units, subject to the provisions of Section 11 and such terms and conditions as the Administrator may determine.
(c) Termination. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to Section 16 below, in writing after
the Award is issued, a grantee’s right in all Restricted Stock Units that have not vested shall automatically terminate upon the grantee’s termination of
employment (or cessation of Service Relationship) with the Company and its Subsidiaries for any reason.
SECTION 9.
UNRESTRICTED STOCK AWARDS
Grant or Sale of Unrestricted Stock. The Administrator may grant (or sell at par value or such higher purchase price determined by the Administrator) an
Unrestricted Stock Award under the Plan. An Unrestricted Stock Award is an Award pursuant to which the grantee may receive shares of Stock free of any
restrictions under the Plan. Unrestricted Stock Awards may be granted in respect of past services or other valid consideration, or in lieu of cash
compensation due to such grantee.
SECTION 10.
RESERVED
SECTION 11.
DIVIDEND EQUIVALENT RIGHTS
(a) Dividend Equivalent Rights. The Administrator may grant Dividend Equivalent Rights under the Plan. A Dividend Equivalent Right is an Award
entitling the grantee to receive credits based on cash dividends that would have been paid on the shares of Stock specified in the Dividend Equivalent Right
(or other Award to which it relates) if such shares had been issued to the grantee. A Dividend Equivalent Right may be granted hereunder to any grantee as
a component of an award of Restricted Stock Units or as a freestanding award. The terms and conditions of Dividend Equivalent Rights shall be specified
in the Award Certificate. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be
reinvested in additional shares of Stock, which may thereafter accrue additional equivalents. Any such reinvestment shall be at Fair Market Value on the
date of reinvestment or such other price as may then apply under a dividend reinvestment plan sponsored by the Company, if any. Dividend Equivalent
Rights may be settled in cash or shares of Stock or a combination thereof, in a single installment or installments. A Dividend Equivalent Right granted as a
component of an Award of Restricted Stock Units shall provide that such Dividend Equivalent Right shall be settled only upon settlement or payment of, or
lapse of restrictions on, such other Award, and that such Dividend Equivalent Right shall expire or be forfeited or annulled under the same conditions as
such other Award.
(b) Termination. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to Section 16 below, in writing after
the Award is issued, a grantee’s rights in all Dividend Equivalent Rights shall automatically terminate upon the grantee’s termination of employment (or
cessation of Service Relationship) with the Company and its Subsidiaries for any reason.
SECTION 12.
TRANSFERABILITY OF AWARDS
(a) Transferability. Except as provided in Section 12(b) below, during a grantee’s lifetime, his or her Awards shall be exercisable only by the grantee, or by
the grantee’s legal representative or guardian in the event of the grantee’s incapacity. No Awards shall be sold, assigned, transferred or otherwise
encumbered or disposed of by a grantee other than by will or by the laws of descent and distribution or pursuant to a domestic relations order. No Awards
shall be subject, in whole or in part, to attachment, execution, or levy of any kind, and any purported transfer in violation hereof shall be null and void.
(b) Administrator Action. Notwithstanding Section 12(a), the Administrator, in its discretion, may provide either in the Award Certificate regarding a given
Award or by subsequent written approval that the grantee (who is an employee or director) may transfer his or her Non-Qualified Stock Options to his or
her immediate family members, to trusts for the benefit of such family members, or to partnerships in which such family members are the only partners,
provided that the transferee agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and the applicable Award. In no
event may an Award be transferred by a grantee for value.
(c) Family Member. For purposes of Section 12(b), “family member” shall mean a grantee’s child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, any person sharing the grantee’s household (other than a tenant of the grantee), a trust in which these persons (or the grantee) have more than
50 percent of the beneficial interest, a foundation in which these persons (or the grantee) control the management of assets, and any other entity in which
these persons (or the grantee) own more than 50 percent of the voting interests.
(d) Designation of Beneficiary. To the extent permitted by the Company, each grantee to whom an Award has been made under the Plan may designate a
beneficiary or beneficiaries to exercise any Award or receive any payment under any Award payable on or after the grantee’s death. Any such designation
shall be on a form provided for that purpose by the Administrator and shall not be effective until received by the Administrator. If no beneficiary has been
designated by a deceased grantee, or if the designated beneficiaries have predeceased the grantee, the beneficiary shall be the grantee’s estate.
SECTION 13.
TAX WITHHOLDING
(a) Payment by Grantee. Each grantee shall, no later than the date as of which the value of an Award or of any Stock or other amounts received thereunder
first becomes includable in the gross income of the grantee for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the
Administrator regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld by the Company with respect to such
income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the grantee. The Company’s obligation to deliver evidence of book entry (or stock certificates) to any grantee is subject to and conditioned
on tax withholding obligations being satisfied by the grantee.
(b) Payment in Stock. The Administrator may require the Company’s tax withholding obligation to be satisfied, in whole or in part, by the Company
withholding from shares of Stock to be issued pursuant to any Award a number of shares with an aggregate Fair Market Value (as of the date the
withholding is effected) that would satisfy the withholding amount due; provided, however, that the amount withheld does not exceed the maximum
statutory tax rate or such lesser amount as is necessary to avoid liability accounting treatment. For purposes of share withholding, the Fair Market Value of
withheld shares shall be determined in the same manner as the value of
Stock includible in income of the grantees. The Administrator may also require the Company’s tax withholding obligation to be satisfied, in whole or in
part, by an arrangement whereby a certain number of shares of Stock issued pursuant to any Award are immediately sold and proceeds from such sale are
remitted to the Company in an amount that would satisfy the withholding amount due.
SECTION 14.
SECTION 409A AWARDS
Awards are intended to be exempt from Section 409A to the greatest extent possible and to otherwise comply with Section 409A. The Plan and all Awards
shall be interpreted in accordance with such intent. To the extent that any Award is determined to constitute “nonqualified deferred compensation” within
the meaning of Section 409A (a “409A Award”), the Award shall be subject to such additional rules and requirements as specified by the Administrator
from time to time in order to comply with Section 409A. In this regard, if any amount under a 409A Award is payable upon a “separation from service”
(within the meaning of Section 409A) to a grantee who is then considered a “specified employee” (within the meaning of Section 409A), then no such
payment shall be made prior to the date that is the earlier of (i) six months and one day after the grantee’s separation from service, or (ii) the grantee’s
death, but only to the extent such delay is necessary to prevent such payment from being subject to interest, penalties and/or additional tax imposed
pursuant to Section 409A. Further, the settlement of any such Award may not be accelerated except to the extent permitted by Section 409A.
SECTION 15.
TERMINATION OF SERVICE RELATIONSHIP, TRANSFER, LEAVE OF ABSENCE, ETC.
(a) Termination of Service Relationship. If the grantee’s Service Relationship is with an Affiliate and such Affiliate ceases to be an Affiliate, the grantee
shall be deemed to have terminated his or her Service Relationship for purposes of the Plan.
(b) For purposes of the Plan, the following events shall not be deemed a termination of a Service Relationship:
(i) a transfer to the employment of the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to another; or
(ii) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employee’s right to re-
employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Administrator
otherwise so provides in writing.
SECTION
16.
AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no such action shall materially and adversely affect rights under any outstanding
Award without the holder’s consent. Except as provided in Section 3(c) or 3(d), without prior stockholder approval, in no event may the Administrator
exercise its discretion to reduce the exercise price of outstanding Stock Options or Stock Appreciation Rights or effect repricing through cancellation and
re-grants or cancellation of Stock Options or Stock Appreciation Rights in exchange for cash or other Awards. Nothing in this Section 16 shall limit the
Administrator’s authority to take any action permitted pursuant to Section 3(c) or 3(d).
SECTION 17.
STATUS OF PLAN
With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or other consideration not received by a grantee, a
grantee shall have no rights greater than those of a general creditor of the Company unless the Administrator shall otherwise expressly determine in
connection with any Award or Awards. In its sole discretion, the Administrator may authorize the creation of trusts or other arrangements to meet the
Company’s obligations to deliver Stock or make payments with respect to Awards hereunder, provided that the existence of such trusts or other
arrangements is consistent with the foregoing sentence.
SECTION 18.
GENERAL PROVISIONS
(a) No Distribution. The Administrator may require each person acquiring Stock pursuant to an Award to represent to and agree with the Company in
writing that such person is acquiring the shares without a view to distribution thereof.
(b) Issuance. To the extent certificated, stock certificates to grantees under this Plan shall be deemed delivered for all purposes when the Company or a
stock transfer agent of the Company shall have mailed such certificates in the United States mail, addressed to the grantee, at the grantee’s last known
address on file with the Company. Uncertificated Stock shall be deemed delivered for all purposes when the Company or a Stock transfer agent of the
Company shall have given to the grantee by electronic mail (with proof of receipt) or by United States mail, addressed to the grantee, at the grantee’s last
known address on file with the Company, notice of issuance and recorded the issuance in its records (which may include electronic “book entry” records).
Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any evidence of book entry or certificates evidencing
shares of Stock pursuant to the exercise or settlement of any Award, unless and until the Administrator has determined, with advice of counsel (to the extent
the Administrator deems such advice necessary or advisable), that the issuance and delivery is in compliance with all applicable laws, regulations of
governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed, quoted or traded. Any Stock issued
pursuant to the Plan shall be subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with
federal, state or foreign jurisdiction, securities or other laws, rules and quotation system on which the Stock is listed, quoted or traded. The Administrator
may place legends on any Stock certificate or notations on any book entry to reference restrictions applicable to the Stock. In addition to the terms and
conditions provided herein, the Administrator may require that an individual make such reasonable covenants, agreements, and representations as the
Administrator, in its discretion, deems necessary or advisable in order to comply with any such laws, regulations, or requirements. The Administrator shall
have the right to require any individual to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a
window-period limitation, as may be imposed in the discretion of the Administrator.
(c) Stockholder Rights. Until Stock is deemed delivered in accordance with Section 18(b), no right to vote or receive dividends or any other rights of a
stockholder will exist with respect to shares of Stock to be issued in connection with an Award, notwithstanding the exercise of a Stock Option or any other
action by the grantee with respect to an Award.
(d) Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases. The adoption
of this Plan and the grant of Awards do not confer upon any employee any right to continued employment with the Company or any Subsidiary.
(e) Trading Policy Restrictions. Option exercises and other Awards under the Plan shall be subject to the Company’s insider trading policies and
procedures, as in effect from time to time.
(f) Clawback Policy. Awards under the Plan shall be subject to the Company’s clawback policy, as in effect from time to time.
SECTION 19.
EFFECTIVE DATE OF PLAN
This Plan shall become effective upon approval by the Board.
SECTION
20.
GOVERNING LAW
This Plan and all Awards and actions taken thereunder shall be governed by, and construed in accordance with, the laws of the State of Delaware, applied
without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS: JANUARY 27, 2022
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR COMPANY EMPLOYEES UNDER THE
ADICET BIO, INC.
2022 INDUCEMENT PLAN
Name of Optionee:
No. of Option Shares:
Option Exercise Price per Share:
Grant Date:
Expiration Date:
Pursuant to the Adicet Bio, Inc. 2022 Inducement Plan as amended through the date hereof (the “Plan”), Adicet Bio, Inc. (the “Company”) hereby grants to
the Optionee named above an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified above all or part of the number of shares
of Common Stock, par value $0.0001 per share (the “Stock”) of the Company specified above at the Option Exercise Price per Share specified above
subject to the terms and conditions set forth herein and in the Plan. This Stock Option has been granted as an inducement pursuant to Rule 5635(c)(4) of the
Marketplace Rules of The NASDAQ Stock Market LLC, and consequently is intended to be exempt from the NASDAQ rules regarding stockholder
approval of equity compensation plans. This Agreement and the terms and conditions of this Stock Option shall be interpreted in accordance with and
consistent with such exemption. This Stock Option is not intended to be an “incentive stock option” under Section 422 of the Internal Revenue Code of
1986, as amended. The Plan is discretionary in nature and may be amended, cancelled, or terminated at any time.
1. Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below,
and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability schedule hereunder, this Stock Option
shall be exercisable with respect to the following number of Option Shares on the dates indicated so long as Optionee remains an employee of the
Company or a Subsidiary on such dates:
The Stock Option will vest over a period of four years, with 25% of the shares underlying such option vesting on the first anniversary of the grant and the
remaining 75% vesting in thirty-six equal monthly installments thereafter.
Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the
provisions hereof and of the Plan.
2. Manner of Exercise.
(a) The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this Stock Option,
the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of
such notice. This notice shall specify the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other
instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the
Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that
otherwise satisfy any holding periods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the
Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee
and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as
a condition of such payment procedure; (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock
issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; or (v) a
combination of (i), (ii), (iii) and (iv) above. Payment instruments will be received subject to collection.
The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s receipt
from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in
the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the
Company may require to satisfy itself that the issuance of Stock to be
purchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be in compliance with applicable
laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the
number of shares of Stock transferred to the Optionee upon the exercise of the Stock Option shall be net of the Shares attested to.
(b) The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company or of the transfer
agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer
and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee.
The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock
Option unless and until this Stock Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred
the shares to the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon, the
Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.
(c) [Reserved].
(d) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.
3. Termination of Employment. If the Optionee’s employment by the Company or a Subsidiary (as defined in the Plan) is terminated, the period within
which to exercise the Stock Option may be subject to earlier termination as set forth below.
(a) Termination Due to Death. If the Optionee’s employment terminates by reason of the Optionee’s death, any portion of this Stock Option outstanding on
such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionee’s legal representative or legatee for a period of 12
months from the date of death or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of death shall
terminate immediately and be of no further force or effect.
(b) Termination Due to Disability. If the Optionee’s employment terminates by reason of the Optionee’s disability (as determined by the Administrator),
any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of such termination of employment, may thereafter be
exercised by the Optionee for a period of 12 months from the date of disability or until the Expiration Date, if earlier. Any portion of this Stock Option that
is not exercisable on the date of disability shall terminate immediately and be of no further force or effect.
(c) Termination for Cause. If the Optionee’s employment terminates for Cause, any portion of this Stock Option outstanding on such date shall terminate
immediately and be of no further force and effect. For purposes hereof, “Cause” shall mean, unless otherwise provided in an employment agreement
between the Company and the Optionee, a determination by the Administrator that the Optionee shall be dismissed as a result of (i) any material breach by
the Optionee of any agreement between the Optionee and the Company; (ii) the conviction of, indictment for or plea of nolo contendere by the Optionee to
a felony or a crime involving moral turpitude; or (iii) any material misconduct or willful and deliberate non-performance (other than by reason of disability)
by the Optionee of the Optionee’s duties to the Company.
(d) Other Termination. If the Optionee’s employment terminates for any reason other than the Optionee’s death, the Optionee’s disability or Cause, and
unless otherwise determined by the Administrator, any portion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on
the date of termination, for a period of three months from the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Option
that is not exercisable on the date of termination shall terminate immediately and be of no further force or effect.
The Administrator’s determination of the reason for termination of the Optionee’s employment shall be conclusive and binding on the Optionee and his or
her representatives or legatees.
4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions
of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning
specified in the Plan, unless a different meaning is specified herein.
5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise,
other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and
thereafter, only by the Optionee’s legal representative or legatee.
6. Tax Withholding. The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes a taxable event for Federal income
tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law
to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in
whole or in part, by withholding from shares of Stock to be issued to
the Optionee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due; provided, however, that the
amount withheld does not exceed the maximum statutory tax rate or such lesser amount as is necessary to avoid adverse accounting treatment or as
determined by the Administrator.
7. No Obligation to Continue Employment. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue
the Optionee in employment and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to
terminate the employment of the Optionee at any time.
8. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements
and discussions between the parties concerning such subject matter.
9. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its
subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including
but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary
or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i)
authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the
Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic
form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee
shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
10. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the
Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in
writing.
ADICET BIO, INC.
By:
Title:
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this
Agreement pursuant to the Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.
Dated:
Optionee’s Signature
Optionee’s name and address:
RESTRICTED STOCK UNIT AWARD AGREEMENT
FOR COMPANY EMPLOYEES
UNDER THE ADICET BIO, INC.
2022 INDUCEMENT PLAN
Name of Grantee:
No. of Restricted Stock Units:
Grant Date:
Expiration Date:
Pursuant to the Adicet Bio, Inc. 2022 Inducement Plan as amended through the date hereof (the “Plan”), Adicet Bio, Inc. (the “Company”)
hereby grants an award of the number of Restricted Stock Units listed above (an “Award”) to the Grantee named above. Each Restricted Stock Unit shall
relate to one share of Common Stock, par value $0.0001 per share (the “Stock”) of the Company. This Award has been granted as an inducement pursuant
to Rule 5635(c)(4) of the Marketplace Rules of NASDAQ Stock Market, Inc. and consequently is intended to be exempt from the NASDAQ rules
regarding stockholder approval of equity compensation plans.
1.
Restrictions on Transfer of Award. This Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed
of by the Grantee, and any shares of Stock issuable with respect to the Award may not be sold, transferred, pledged, assigned or otherwise encumbered or
disposed of until (i) the Restricted Stock Units have vested as provided in Paragraph 2 of this Agreement and (ii) shares of Stock have been issued to the
Grantee in accordance with the terms of the Plan and this Agreement.
2.
Vesting of Restricted Stock Units. The restrictions and conditions of Paragraph 1 of this Agreement shall lapse on the Vesting Date or
Dates specified in the following schedule so long as the Grantee remains an employee of the Company or a Subsidiary on such Dates. If a series of Vesting
Dates is specified, then the restrictions and conditions in Paragraph 1 shall lapse only with respect to the number of Restricted Stock Units specified as
vested on such date.
Incremental Number of
Restricted Stock Units Vested
Vesting Date
[________] (__%)
[________] (__%)
[________] (__%)
[________] (__%)
The Administrator may at any time accelerate the vesting schedule specified in this Paragraph 2.
3.
Termination of Employment. If the Grantee’s employment terminates for any reason (including death or disability) prior to the
satisfaction of the vesting conditions set forth in Paragraph 2 above, any Restricted Stock Units that have not vested as of such date shall automatically and
without notice terminate and be forfeited, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter
have any further rights or interests in such unvested Restricted Stock Units.
4.
Issuance of Shares of Stock. As soon as practicable following each Vesting Date (but in no event later than two and one-half months
after the end of the year in which the Vesting Date occurs), the Company shall issue to the Grantee the number of shares of Stock equal to the aggregate
number of Restricted Stock Units that have vested pursuant to Paragraph 2 of this Agreement on such date and the Grantee shall thereafter have all the
rights of a stockholder of the Company with respect to such shares.
5.
Incorporation of Plan. Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the
terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall
have the meaning specified in the Plan, unless a different meaning is specified herein.
6.
Tax Withholding. The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal
income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes
required by law to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to
be satisfied, in whole or in part, by (i) withholding from shares of Stock to be issued to the Grantee a number of shares of Stock with an aggregate Fair
Market Value that would satisfy the withholding amount due; provided, however, that the amount withheld does not exceed the maximum statutory tax rate
or such lesser amount as is necessary to avoid adverse accounting treatment or as determined by the Administrator or (ii) causing its transfer agent to sell
from the number of shares of Stock to be issued to the Grantee, the number of shares of Stock necessary to satisfy the Federal, state and local taxes required
by law to be withheld from the Grantee on account of such transfer.
7.
Section 409A of the Code. This Agreement shall be interpreted in such a manner that all provisions relating to the settlement of the
Award are exempt from the requirements of Section 409A of the Code as “short-term deferrals” as described in Section 409A of the Code.
8.
No Obligation to Continue Employment. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this
Agreement to continue the Grantee in employment and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any
Subsidiary to terminate the employment of the Grantee at any time.
9.
Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior
agreements and discussions between the parties concerning such subject matter.
10.
Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the
Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional
data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information
that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the
Grantee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy
rights the Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in
electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The
Grantee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
11.
Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or
delivered to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other
party in writing.
Adicet Bio, Inc.
By:
Title:
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this
Agreement pursuant to the Company’s instructions to the Grantee (including through an online acceptance process) is acceptable.
Dated:
Grantee’s Signature
Grantee’s name and address:
EMPLOYMENT AGREEMENT
Exhibit 10.16
This Employment Agreement (“Agreement”) is made between Adicet Bio, Inc., a Delaware corporation (the “Company”), and
_____________________ (the “Executive”).
WHEREAS, the Company desires to employ the Executive and the Executive desires to be employed by the Company beginning on
______________ (the “Effective Date”) on the terms contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1.
Employment.
Term. The term of this Agreement shall commence on the Effective Date and continue until terminated in
accordance with the provisions hereof (the “Term”). The Executive’s employment with the Company shall be “at will,” meaning that the Executive’s
employment may be terminated by the Company or the Executive at any time and for any reason subject to the terms of this Agreement.
(a)
(b)
Position and Duties. The Executive shall serve as the [Title] of the Company and shall have such powers and
duties as may from time to time be prescribed by [the Board of Directors of the Company (the “Board”)]1[the Chief Executive Officer of the Company (the
“CEO”)]2. The Executive shall devote [his/her] full working time and efforts to the business and affairs of the Company. Notwithstanding the foregoing,
the Executive may serve on other boards of directors, with the approval of the Nominating and Corporate Governance Committee of the Board [of
Directors of the Company (the “Board”)], or engage in religious, charitable or other community activities as long as such services and activities do not
interfere with the Executive’s performance of [his/her] duties to the Company as provided in this Agreement.
2.
Compensation and Related Matters.
(a)
Base Salary. The Executive’s initial base salary shall be paid at the rate of $[__________] per year. The
Executive’s base salary shall be subject to periodic review by the Compensation Committee of the Board (the “Compensation Committee”). The base
salary in effect at any given time is referred to herein as “Base Salary.” The Base Salary shall be payable in a manner that is consistent with the Company’s
usual payroll practices for executive officers. The Executive’s salary and any other cash compensation may be provided through TriNet, Inc. or another
professional employer organization (a “PEO”). As a result of the Company’s arrangement with the PEO, the PEO will be considered the Executive’s
employer of record for these purposes for so long as that arrangement exists. While the PEO will have responsibility for
1 NTD: For the CEO.
2 NTD: For non-CEO C-Level Executives.
ACTIVE/115800828.1
the functions above, the Company retains responsibility for overseeing the Executive’s work and reviewing the Executive’s performance, among other
functions.
(b)
Incentive Compensation. The Executive shall be eligible to receive cash incentive compensation as determined
by the Board or the Compensation Committee from time to time. [Commencing in calendar year _____,]3 [t]he Executive’s initial target annual incentive
compensation shall be [___] percent of the Executive’s Base Salary[; provided that any incentive compensation for calendar year ____ will be prorated
based on the Effective Date]4. The target annual incentive compensation in effect at any given time is referred to herein as “Target Bonus.” The actual
amount of the Executive’s annual incentive compensation, if any, shall be determined in the sole discretion of the Board or the Compensation Committee,
subject to the terms of any applicable incentive compensation plan that may be in effect from time to time. Except [as otherwise provided herein, ]as may
be provided by the Board or the Compensation Committee or as may otherwise be set forth in the applicable incentive compensation plan the Executive
must be employed by the Company on the day such incentive compensation is paid in order to earn or receive any incentive compensation.
(c)
Expenses. The Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive during the Term in performing services hereunder, in accordance with the policies and procedures then in effect and established by the
Company for its executive officers.
employee benefit plans in effect from time to time, subject to the terms of such plans.
(d)
Other Benefits. The Executive shall be eligible to participate in or receive benefits under the Company’s
(e)
Paid Time Off. The Company’s current paid time off policy for executives is flexible and paid time off may be
taken at such times and intervals as the Executive may determine, subject to the business needs of the Company and the terms and conditions of any
policies as may be in effect from time to time.
(f)
Equity. The Executive shall be granted an option to purchase approximately [___] percent of issued and
outstanding shares of Common Stock at the Closing of the Merger at a per share exercise price determined on the grant date in accordance with the
Company’s equity grant policies, with [25 percent of the shares underlying the option vesting on the first anniversary] of the Effective Date and the
remainder of the shares underlying the option vesting thereafter in [36 equal monthly]5 installments until the fourth anniversary of the Effective Date,
subject to the Executive’s continued service with the Company through each such vesting date. [This grant will be subject to the terms of a non-shareholder
approved equity incentive plan to be approved by the Board pursuant to the “inducement exception” provided under NASDAQ Listing Rule 5635(c)(4).]
3 NTD: For a new hire executive who commences employment at the end of a calendar year and will not be eligible for incentive compensation until
the following year.
4 NTD: For a new hire executive who commences employment part-way through a calendar year and will be eligible for prorated incentive
compensation in the year of hire.
5 NTD: To be modified for each executive.
ACTIVE/115800828.1
(g)
Indemnification. The Company shall indemnify the Executive to the extent that its officers, directors and
employees are entitled to indemnification pursuant to the Company’s Certificate of Incorporation and Bylaws for any acts or omissions by reason of being
an officer or employee of the Company as of the Effective Date. At all times during the Employment Term, the Company shall maintain in effect a director
and officers liability insurance policy with the Executive as a covered officer.
3.
Termination. The Executive’s employment hereunder may be terminated without any breach of this Agreement under the following
circumstances:
(a)
(b)
Death. The Executive’s employment hereunder shall terminate upon death.
Disability. The Company may terminate the Executive’s employment if the Executive is disabled and unable to
perform or expected to be unable to perform the essential functions of the Executive’s then existing position or positions under this Agreement with or
without reasonable accommodation for a period of 180 days (which need not be consecutive) in any 12-month period. If any question shall arise as to
whether during any period the Executive is disabled so as to be unable to perform the essential functions of the Executive’s then existing position or
positions with or without reasonable accommodation, the Executive may, and at the request of the Company shall, submit to the Company a certification in
reasonable detail by a physician selected by the Company to whom the Executive or the Executive’s guardian has no reasonable objection as to whether the
Executive is so disabled or how long such disability is expected to continue, and such certification shall for the purposes of this Agreement be conclusive
of the issue. The Executive shall cooperate with any reasonable request of the physician in connection with such certification. If such question shall arise
and the Executive shall fail to submit such certification, the Company’s determination of such issue shall be binding on the Executive. Nothing in this
Section 3(b) shall be construed to waive the Executive’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act
of 1993, 29 U.S.C. §2601 et seq. and the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.
(c)
Termination by the Company for Cause. The Company may terminate the Executive’s employment hereunder for
Cause. For purposes of this Agreement, “Cause” shall mean: (i) conduct by the Executive constituting a material act of misconduct in connection with the
performance of [his/her] duties, including, without limitation, misappropriation of funds or property of the Company or any of its subsidiaries or affiliates
other than the occasional, customary and de minimis use of Company property for personal purposes; (ii) the commission by the Executive of acts
satisfying the elements of (A) any felony or (B) a misdemeanor involving moral turpitude, deceit, dishonesty or fraud; (iii) any misconduct by the
Executive, regardless of whether or not in the course of the Executive’s employment, that would reasonably be expected to result in material injury or
reputational harm to the Company or any of its subsidiaries or affiliates if the Executive were to continue to be employed in the same position; (iv)
continued willful nonperformance by the Executive of [his/her] material duties hereunder (other than by reason of the Executive’s physical or mental
illness, incapacity or disability) which, to the extent it is curable by the Executive, is not cured within thirty (30) after written notice thereof is given to the
Executive by the [Board/CEO]; (v) a breach by the Executive of the Restrictive Covenants Agreement or any of the provisions contained in Section 8 of
this Agreement; (vi) a material violation by the Executive of the Company’s written employment policies; or (vii) failure to cooperate with a bona fide
internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or the willful
destruction or failure to preserve documents or other materials known to be relevant to such investigation or the inducement of others to fail to cooperate or
to produce documents or other materials in connection with such investigation.
(d)
Termination by the Company without Cause. The Company may terminate the Executive’s employment
hereunder at any time without Cause. Any termination by the Company of the Executive’s employment under this Agreement which does not constitute a
termination for Cause under Section 3(c) and does not result from the death or disability of the Executive under Section 3(a) or (b) shall be deemed a
termination without Cause.
(e)
Termination by the Executive. The Executive may terminate [his/her] employment hereunder at any time for any
reason, including for Good Reason. For purposes of this Agreement, “Good Reason” shall mean that the Executive has complied with the “Good Reason
Process” (hereinafter defined) following the occurrence of any of the following events: (i) a material diminution in the Executive’s responsibilities,
authority or
ACTIVE/115800828.1
duties provided changes to the Executive’s responsibilities, authority or duties prior to a Change in Control that are made in the good faith discretion of the
Company’s CEO as part of the Company’s evolving business needs and strategy shall not be a Good Reason occurrence; (ii) a material diminution in the
Executive’s Base Salary except for across-the-board salary reductions based on the Company’s financial performance similarly affecting all or substantially
all senior management employees of the Company; (iii) a material change in the geographic location at which the Executive provides services to the
Company such that there is an increase of at least thirty (30) miles of driving distance to such location from the Executive’s principal residence as of such
change; or (iv) the material breach of this Agreement by the Company. “Good Reason Process” shall mean that (i) the Executive reasonably determines in
good faith that a “Good Reason” condition has occurred; (ii) the Executive notifies the Company in writing of the first occurrence of the Good Reason
condition within 60 days of the first occurrence of such condition; (iii) the Executive cooperates in good faith with the Company’s efforts, for a period not
less than 30 days following such notice (the “Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition
continues to exist; and (v) the Executive terminates [his/her] employment within 180 days after the end of the Cure Period.
4.
Matters Related to Termination.
(a)
Notice of Termination. Except for termination as specified in Section 3(a), any termination of the Executive’s
employment by the Company or any such termination by the Executive shall be communicated by written Notice of Termination to the other party hereto.
For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement
relied upon.
(b)
Date of Termination. “Date of Termination” shall mean: (i) if the Executive’s employment is terminated by
death, the date of death; (ii) if the Executive’s employment is terminated on account of disability under Section 3(b) or by the Company for Cause under
Section 3(c), the date on which Notice of Termination is given; (iii) if the Executive’s employment is terminated by the Company without Cause under
Section 3(d), the date on which a Notice of Termination is given or the date otherwise specified by the Company in the Notice of Termination; (iv) if the
Executive’s employment is terminated by the Executive under Section 3(e) other than for Good Reason, 30 days after the date on which a Notice of
Termination is given, and (v) if the Executive’s employment is terminated by the Executive under Section 3(e) for Good Reason, the date on which a
Notice of Termination is given after the end of the Cure Period. Notwithstanding the foregoing, in the event that the Executive gives a Notice of
Termination to the Company, the Company may unilaterally accelerate the Date of Termination and such acceleration shall not result in a termination by
the Company for purposes of this Agreement.
(c)
Accrued Obligations. If the Executive’s employment with the Company is terminated for any reason, the
Company shall pay or provide to the Executive (or to the Executive’s authorized representative or estate) (i) any Base Salary earned through the Date of
Termination; (ii) unpaid expense reimbursements (subject to, and in accordance with, Section 2(c) of this Agreement); and (iii) any vested benefits the
Executive may have under any employee benefit plan of the Company through the Date of Termination, which vested benefits shall be paid and/or provided
in accordance with the terms of such employee benefit plans (collectively, the “Accrued Obligations”).
(d)
Resignation of All Other Positions. To the extent applicable, the Executive shall be deemed to have resigned
from all officer and board member positions that the Executive holds with the Company or any of its respective subsidiaries and affiliates upon the
termination of the Executive’s employment for any reason. The Executive shall execute any documents in reasonable form as may be requested to confirm
or effectuate any such resignations.
5.
Severance Pay and Benefits Upon Termination by the Company without Cause or by the Executive for Good Reason Outside the
Change in Control Period. If the Executive’s employment is terminated by the Company without Cause as provided in Section 3(d) or the Executive
terminates employment for Good Reason as provided in Section 3(e), in each case outside of the Change in Control Period (as defined below), then, in
addition to the Accrued Obligations, subject to the Executive signing a separation agreement containing, among other provisions, a general release of
claims in favor of the Company and related persons and entities, including the PEO, a reaffirmation of the Executive’s Continuing Obligations (as defined
below), confidentiality, return of property and non-disparagement, in a form and manner satisfactory to the Company (the “Separation Agreement and
Release”)
ACTIVE/115800828.1
and the Separation Agreement and Release becoming irrevocable and fully effective, all within 60 days after the Date of Termination (or such shorter time
period provided in the Separation Agreement and Release):
(a)
the Company shall pay the Executive an amount equal to [___] months6 of the Executive’s Base Salary (the
“Severance Amount”); and
6 NTD: 12 months for CEO, 9 months for all other executives.
termination, payable at the time it otherwise would have been paid had the Executive’s employment with the Company not terminated; and
(b)
the Company shall pay any unpaid bonus earned for the year preceding the date of Executive’s employment
(c)
subject to the Executive’s copayment of premium amounts at the applicable active employees’ rate and the
Executive’s proper election to receive benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the
Company shall pay to the Executive a monthly cash payment (including a gross up payment to account for applicable taxes and withholdings) equal to the
monthly employer contribution that the Company would have made to provide health insurance to the Executive and covered dependents if the Executive
had remained employed by the Company until the earliest of (A) the [__]7 month anniversary of the Date of Termination; (B) the date that the Executive
becomes eligible for group medical plan benefits under any other employer’s group medical plan; or (C) the cessation of the Executive’s health
continuation rights under COBRA.
The amounts payable under Section 5(a) and (c), to the extent taxable, shall be paid out in substantially equal installments in accordance with the
Company’s payroll practice over [__]8 months commencing within 60 days after the Date of Termination; provided, however, that if the 60-day period
begins in one calendar year and ends in a second calendar year, such payments, to the extent they qualify as “non-qualified deferred compensation” within
the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), shall begin to be paid in the second calendar year by the last
day of such 60-day period; provided, further, that the initial payment shall include a catch-up payment to cover amounts retroactive to the day immediately
following the Date of Termination. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury
Regulation Section 1.409A-2(b)(2).
6.
Severance Pay and Benefits Upon Termination by the Company without Cause or by the Executive for Good Reason within the
Change in Control Period. The provisions of this Section 6 shall apply in lieu of, and expressly supersede, the provisions of Section 5 if (i) the Executive’s
employment is terminated either (a) by the Company without Cause as provided in Section 3(d), or (b) by the Executive for Good Reason as provided in
Section 3(e), and (ii) the Date of Termination occurs on or within 12 months after the occurrence of the first event constituting a Change in Control (such
period, the “Change in Control Period”)9 following the Effective Date. These provisions shall terminate and be of no further force or effect after the Change
in Control Period.
(a)
If the Executive’s employment is terminated by the Company without Cause as provided in Section 3(d) or the
Executive terminates employment for Good Reason as provided in Section 3(e) and in each case the Date of Termination occurs during the Change in
Control Period, then, in addition to the Accrued Obligations, and subject to the signing of the Separation Agreement and Release by the Executive and the
Separation Agreement and Release
7 NTD: 12 months for CEO, 9 months for all other executives.
8 NTD: 12 months for CEO, 9 months for all other executives.
9 NTD: The CIC Period begins 3 months prior to the CIC for CEO only.
ACTIVE/115800828.1
becoming fully effective, all within the time frame set forth in the Separation Agreement and Release but in no event more than 60 days after the Date of
Termination:
(i)
the Company shall pay the Executive a lump sum in cash in an amount equal to [___] times the sum of
(A) the Executive’s then-current Base Salary (or the Executive’s Base Salary in effect immediately prior to the Change in Control, if higher) plus
(B) the Executive’s Target Bonus for the then-current year (or the Executive’s Target Bonus in effect immediately prior to the Change in Control,
if higher) and
the Company shall pay any unpaid bonus earned for the year preceding the date of Executive’s
employment termination, payable at the time it otherwise would have been paid had the Executive’s employment with the Company not
terminated, and
(ii)
(iii)
notwithstanding anything to the contrary in any applicable option agreement or other stock-based
award agreement, all stock options and other stock-based awards held by the Executive that are subject solely to time-based vesting (the “Time-
Based Equity Awards”) shall immediately accelerate and become fully vested and exercisable or nonforfeitable as of the later of (i) the Date of
Termination or (ii) the effective date of the Separation Agreement and Release (the “Accelerated Vesting Date”), provided in order to effectuate
the accelerated vesting contemplated by this subsection, the unvested portion of the Executive’s options that would otherwise be forfeited on the
Date of Termination will be delayed until the earlier of (A) the effective date of the Separation Agreement Release (at which time acceleration
will occur), or (B) the date that the Separation Agreement and Release can no longer become fully effective (at which time the unvested Time-
Based Equity Awards will be terminated or forfeited). Notwithstanding the foregoing, no additional time-based vesting of the Time-Based Equity
Awards shall occur during the period between the Date of Termination and the Accelerated Vesting Date; and
(iv)
subject to the Executive’s copayment of premium amounts at the applicable active employees’ rate and
the Executive’s proper election to receive benefits under COBRA, the Company shall pay to the Executive a monthly cash payment (including a
gross up payment to account for applicable taxes and withholdings) equal to the monthly employer contribution that the Company would have
made to provide health insurance to the Executive and covered dependents if the Executive had remained employed by the Company until the
earliest of (A) the [__] month anniversary of the Date of Termination; (B) the date that the Executive becomes eligible for group medical plan
benefits under any other employer’s group medical plan; or (C) the cessation of the Executive’s health continuation rights under COBRA.
The amounts payable under this Section 6(a), to the extent taxable, shall be paid or commence to be paid within 60 days after the Date of Termination;
provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, such payments to the extent they qualify as
“non-qualified deferred compensation” within the meaning of Section 409A of the Code, shall be paid or commence to be paid in the second calendar year
by the last day of such 60-day period.
(b)
Additional Limitation.
(i)
Anything in this Agreement to the contrary notwithstanding, in the event that the amount of any
compensation, payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, calculated in a manner consistent with Section 280G of the Code, and the
applicable regulations thereunder (the “Aggregate Payments”), would be subject to the excise tax imposed by Section 4999 of the Code, then the
Aggregate Payments shall be reduced (but not below zero) so that the sum of all of the Aggregate Payments shall be $1.00 less than the amount
at which the Executive becomes subject to the excise tax imposed by Section 4999 of the Code; provided that such reduction shall only occur if it
would result in the Executive receiving a higher After Tax Amount (as defined below) than the Executive would receive if the Aggregate
Payments were not subject to such reduction. In such event, the Aggregate Payments shall be reduced in the following order, in each case, in
reverse chronological order beginning with the Aggregate Payments that are to be paid the furthest in time from consummation of the transaction
that is subject to Section 280G of the Code: (1) cash payments not subject to Section 409A of the Code; (2)
ACTIVE/115800828.1
cash payments subject to Section 409A of the Code; (3) equity-based payments and acceleration; and (4) non-cash forms of benefits; provided
that in the case of all the foregoing Aggregate Payments all amounts or payments that are not subject to calculation under Treas. Reg. §1.280G-1,
Q&A-24(b) or (c) shall be reduced before any amounts that are subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c).
(ii)
For purposes of this Section 6(b), the “After Tax Amount” means the amount of the Aggregate
Payments less all federal, state, and local income, excise and employment taxes imposed on the Executive as a result of the Executive’s receipt of
the Aggregate Payments. For purposes of determining the After Tax Amount, the Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and
state and local income taxes at the highest marginal rates of individual taxation in each applicable state and locality, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such state and local taxes.
(iii)
The determination as to whether a reduction in the Aggregate Payments shall be made pursuant to
Section 6(b)(i) shall be made by a nationally recognized accounting firm selected by the Company (the “Accounting Firm”), which shall provide
detailed supporting calculations both to the Company and the Executive within 15 business days of the Date of Termination, if applicable, or at
such earlier time as is reasonably requested by the Company or the Executive. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive.
(c)
Definitions. For purposes of this Section 6, the following terms shall have the following meanings:
“Change in Control” shall mean any of the following:
(i)
any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the “Act”), any of its subsidiaries, or any trustee, fiduciary or other person or entity holding securities under any employee benefit
plan or trust of the Company or any of its subsidiaries), together with all “affiliates” and “associates” (as such terms are defined in Rule 12b-2
under the Act) of such person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Act), directly or indirectly,
of securities of the Company representing 50 percent or more of the combined voting power of the Company’s then outstanding securities having
the right to vote in an election of the Board (“Voting Securities”) (in such case other than as a result of an acquisition of securities directly from
the Company); or
whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or
(ii)
the date a majority of the members of the Board is replaced during any 12-month period by directors
(iii)
the consummation of (A) any consolidation or merger of the Company where the stockholders of the
Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such
term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate more than 50 percent of the voting shares
of the Company issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any), or (B) any sale or other
transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the
assets of the Company.
Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred for purposes of the foregoing clause (i) solely as the
result of an acquisition of securities by the Company which, by reducing the number of shares of Voting Securities outstanding, increases the proportionate
number of Voting Securities beneficially owned by any person to 50 percent or more of the combined voting power of all of the then outstanding Voting
Securities; provided, however, that if any person referred to in this sentence shall thereafter become the beneficial owner of any additional shares of Voting
Securities (other than pursuant to a stock split, stock dividend, or similar transaction or as a result of an acquisition of securities directly from the
Company) and immediately
ACTIVE/115800828.1
thereafter beneficially owns 50 percent or more of the combined voting power of all of the then outstanding Voting Securities, then a “Change in Control”
shall be deemed to have occurred for purposes of the foregoing clause (i).
7.
Section 409A.
(a)
Anything in this Agreement to the contrary notwithstanding, if at the time of the Executive’s separation from
service within the meaning of Section 409A of the Code, the Company determines that the Executive is a “specified employee” within the meaning of
Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Executive becomes entitled to under this Agreement or otherwise
on account of the Executive’s separation from service would be considered deferred compensation otherwise subject to the 20 percent additional tax
imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable
and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after the Executive’s separation from service, or (B)
the Executive’s death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment
covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the
installments shall be payable in accordance with their original schedule.
(b)
All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by
the Company or incurred by the Executive during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as
administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the
expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits
to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to
medical expenses). Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(c)
To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred
compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Executive’s termination of employment,
then such payments or benefits shall be payable only upon the Executive’s “separation from service.” The determination of whether and when a separation
from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A‑1(h).
(d)
The parties intend that this Agreement will be administered in accordance with Section 409A of the Code. To the
extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner
so that all payments hereunder comply with Section 409A of the Code. Each payment pursuant to this Agreement or the Restrictive Covenants Agreement
is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A‑2(b)(2). The parties agree that this Agreement may be
amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and
regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.
(e)
The Company makes no representation or warranty and shall have no liability to the Executive or any other
person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an
exemption from, or the conditions of, such Section.
8.
Continuing Obligations.
(a)
Restrictive Covenants Agreement. As a condition of employment, the Executive is required to enter into the
Employee Confidentiality, Assignment and Nonsolicitation Agreement, attached hereto as Exhibit A (the “Restrictive Covenants Agreement”). For
purposes of this Agreement, the obligations in this Section 8 and those that arise in the Restrictive Covenants Agreement and any other agreement relating
to confidentiality, assignment of inventions, or other restrictive covenants shall collectively be referred to as the “Continuing Obligations.”
ACTIVE/115800828.1
(b)
Third-Party Agreements and Rights. The Executive hereby confirms that the Executive is not bound by the terms
of any agreement with any previous employer or other party which restricts in any way the Executive’s use or disclosure of information, other than
confidentiality restrictions (if any), or the Executive’s engagement in any business. The Executive represents to the Company that the Executive’s execution
of this Agreement, the Executive’s employment with the Company and the performance of the Executive’s proposed duties for the Company will not
violate any obligations the Executive may have to any such previous employer or other party. In the Executive’s work for the Company, the Executive will
not disclose or make use of any information in violation of any agreements with or rights of any such previous employer or other party, and the Executive
will not bring to the premises of the Company any copies or other tangible embodiments of non-public information belonging to or obtained from any such
previous employment or other party.
(c)
Litigation and Regulatory Cooperation. During and after the Executive’s employment, the Executive shall
cooperate fully with the Company in (i) the defense or prosecution of any claims or actions now in existence or which may be brought in the future against
or on behalf of the Company which relate to events or occurrences that transpired while the Executive was employed by the Company, and (ii) the
investigation, whether internal or external, of any matters about which the Company believes the Executive may have knowledge or information. The
Executive’s full cooperation in connection with such claims, actions or investigations shall include, but not be limited to, being available to meet with
counsel to answer questions or to prepare for discovery or trial and to act as a witness on behalf of the Company at mutually convenient times. During and
after the Executive’s employment, the Executive also shall cooperate fully with the Company in connection with any investigation or review of any federal,
state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Executive was employed by
the Company. The Company shall reimburse the Executive for any reasonable out‑of‑pocket expenses incurred in connection with the Executive’s
performance of obligations pursuant to this Section 8(c).
(d)
Relief. The Executive agrees that it would be difficult to measure any damages caused to the Company which
might result from any breach by the Executive of the Continuing Obligations, and that in any event money damages would be an inadequate remedy for
any such breach. Accordingly, the Executive agrees that if the Executive breaches, or proposes to breach, any portion of the Continuing Obligations, the
Company shall be entitled, in addition to all other remedies that it may have, to an injunction or other appropriate equitable relief to restrain any such
breach without showing or proving any actual damage to the Company.
9.
Arbitration of Disputes.
(a)
Arbitration Generally. Any controversy or claim arising out of or relating to this Agreement or the breach thereof
or otherwise arising out of the Executive’s employment or the termination of that employment (including, without limitation, any claims of unlawful
employment discrimination or retaliation, whether based on race, religion, national origin, sex, gender, age, disability, sexual orientation, or any other
protected class under applicable law) shall, to the fullest extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties
or, in the absence of such an agreement, under the auspices of JAMS in [Boston, Massachusetts/San Francisco, California] in accordance with the JAMS
Employment Arbitration Rules, including, but not limited to, the rules and procedures applicable to the selection of arbitrators. The Executive understands
that the Executive may only bring such claims in the Executive’s individual capacity, and not as a plaintiff or class member in any purported class
proceeding or any purported representative proceeding. The Executive further understands that, by signing this Agreement, the Company and the
Executive are giving up any right they may have to a jury trial on all claims they may have against each other. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. This Section 9 shall be specifically enforceable. Notwithstanding the foregoing, this
Section 9 shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary
injunction in circumstances in which such relief is appropriate, including without limitation relief sought under the Restrictive Covenants Agreement;
provided that any other relief shall be pursued through an arbitration proceeding pursuant to this Section 9.
(b)
Arbitration Fees and Costs. The Executive shall be required to pay an arbitration fee to initiate any arbitration
equal to what the Executive would be charged as a first appearance fee in court. The Company shall advance the remaining fees and costs of the arbitrator.
However, to the extent permissible under the
ACTIVE/115800828.1
law, and following the arbitrator’s ruling on the matter, the arbitrator may rule that the arbitrator’s fees and costs be distributed in an alternative manner.
Each party shall pay its own costs and attorneys’ fees, if any. If, however, any party prevails on a statutory or contractual claim that affords the prevailing
party attorneys’ fees (including pursuant to this Agreement), the arbitrator may award attorneys’ fees to the prevailing party to the extent permitted by law.
10.
Consent to Jurisdiction. The parties hereby consent to the jurisdiction of the state and federal courts of the [State/Commonwealth] of
[California/Massachusetts]. Accordingly, with respect to any such court action, the Executive (a) submits to the exclusive personal jurisdiction of such
courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to
personal jurisdiction or service of process.
11.
Integration. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements between the parties concerning such subject matter, provided that, the Restrictive Covenants Agreement remains in full
force and effect.
12.
Withholding; Tax Effect. All payments made by the Company to the Executive under this Agreement shall be net of any tax or other
amounts required to be withheld by the Company under applicable law. Nothing in this Agreement shall be construed to require the Company to make any
payments to compensate the Executive for any adverse tax effect associated with any payments or benefits or for any deduction or withholding from any
payment or benefit.
13.
Successors and Assigns. Neither the Executive nor the Company may make any assignment of this Agreement or any interest in it, by
operation of law or otherwise, without the prior written consent of the other; provided, however, that the Company may assign its rights and obligations
under this Agreement (including the Restrictive Covenants Agreement) without the Executive’s consent to any affiliate or to any person or entity with
whom the Company shall hereafter effect a reorganization or consolidation, into which the Company merges or to whom it transfers all or substantially all
of its properties or assets; provided further that if the Executive remains employed or becomes employed by the Company, the purchaser or any of their
affiliates in connection with any such transaction, then the Executive shall not be entitled to any payments, benefits or vesting pursuant to Section 5 or
pursuant to Section 6 of this Agreement solely as a result of such transaction. This Agreement shall inure to the benefit of and be binding upon the
Executive and the Company, and each of the Executive’s and the Company’s respective successors, executors, administrators, heirs and permitted assigns.
In the event of the Executive’s death after the Executive’s termination of employment but prior to the completion by the Company of all payments due to
the Executive under this Agreement, the Company shall continue such payments to the Executive’s beneficiary designated in writing to the Company prior
to the Executive’s death (or to the Executive’s estate, if the Executive fails to make such designation).
14.
Enforceability. If any portion or provision of this Agreement (including, without limitation, any portion or provision of any section of
this Agreement) shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
15.
Survival. The provisions of this Agreement shall survive the termination of this Agreement and/or the termination of the Executive’s
employment to the extent necessary to effectuate the terms contained herein.
16.
Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of
any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not
prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
17.
Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and
delivered in person or sent by a nationally recognized overnight courier service or by registered or certified mail, postage prepaid, return receipt requested,
to the Executive at the last address the
ACTIVE/115800828.1
Executive has filed in writing with the Company or, in the case of the Company, at its main offices, attention of the Board.
18.
Amendment. This Agreement may be amended or modified only by a written instrument signed by the Executive and by a duly
authorized representative of the Company.
19.
Effect on Other Plans and Agreements. An election by the Executive to resign for Good Reason under the provisions of this
Agreement shall not be deemed a voluntary termination of employment by the Executive for the purpose of interpreting the provisions of any of the
Company's benefit plans, programs or policies. Nothing in this Agreement shall be construed to limit the rights of the Executive under the Company’s
benefit plans, programs or policies except as otherwise provided in Section 8 hereof, and except that the Executive shall have no rights to any severance
benefits under any Company severance pay plan, offer letter or otherwise. In the event that the Executive is party to an agreement with the Company
providing for payments or benefits under such plan or agreement and under this Agreement, the terms of this Agreement shall govern and the Executive
may receive payment under this Agreement only and not both. Further, Section 5 and Section 6 of this Agreement are mutually exclusive and in no event
shall the Executive be entitled to payments or benefits pursuant to both Section 5 and Section 6 of this Agreement.
20.
Governing Law. This is a [California/Massachusetts] contract and shall be construed under and be governed in all respects by the laws
of the [State/Commonwealth] of [California/Massachusetts], without giving effect to the conflict of laws principles thereof. With respect to any disputes
concerning federal law, such disputes shall be determined in accordance with the law as it would be interpreted and applied by the United States Court of
Appeals for the [9th/1st]Circuit.
21.
[Conditions. Notwithstanding anything to the contrary herein, the effectiveness of this Agreement shall be conditioned on (i) the
Executive’s satisfactory completion of reference and background checks, if so requested by the Company, and (ii) the Executive’s submission of
satisfactory proof of the Executive’s legal authorization to work in the United States.]10
22.
Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall
be taken to be an original; but such counterparts shall together constitute one and the same document.
10 NTD: For new hires only.
ACTIVE/115800828.1
IN WITNESS WHEREOF, the parties have executed this Agreement effective on the Effective Date.
ADICET BIO, INC.
By:
Name:
Its:
[EXECUTIVE]
[Name]
ACTIVE/115800828.1
ADICET BIO, INC.
FORM OF DIRECTOR INDEMNIFICATION AGREEMENT
Exhibit 10.17
This Indemnification Agreement (“Agreement”) is made as of [________] by and between Adicet Bio, Inc., a Delaware
corporation (the “Company”), and [Director] (“Indemnitee”).
RECITALS
WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to
serve the Company;
WHEREAS, in order to induce Indemnitee to provide or continue to provide services to the Company, the Company
wishes to provide for the indemnification of, and advancement of expenses to, Indemnitee to the maximum extent permitted by
law;
WHEREAS, the Third Amended and Restated Certificate of Incorporation (as amended and in effect from time to time,
the “Charter”) and the Amended and Restated Bylaws (as amended and in effect from time to time, the “Bylaws”) of the
Company require indemnification of the officers and directors of the Company, and Indemnitee may also be entitled to
indemnification pursuant to the General Corporation Law of the State of Delaware (the “DGCL”);
WHEREAS, the Charter, the Bylaws and the DGCL expressly provide that the indemnification provisions set forth
therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the
board of directors, officers and other persons with respect to indemnification;
WHEREAS, the Board of Directors of the Company (the “Board”) has determined that the increased difficulty in
attracting and retaining highly qualified persons such as Indemnitee is detrimental to the best interests of the Company’s
stockholders;
WHEREAS, it is reasonable and prudent for the Company contractually to obligate itself to indemnify, and to advance
expenses on behalf of, such persons to the fullest extent permitted by applicable law, regardless of any amendment or revocation
of the Charter or the Bylaws, so that they will serve or continue to serve the Company free from undue concern that they will not
be so indemnified;
WHEREAS, this Agreement is a supplement to and in furtherance of the indemnification provided in the Charter, the
Bylaws and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate
any rights of Indemnitee thereunder; and
[WHEREAS, Indemnitee has certain rights to indemnification and/or insurance provided by [ ] (“[•]”) which Indemnitee
and [•] intend to be secondary to the primary obligation of the Company to indemnify Indemnitee as provided in this Agreement,
with the Company’s acknowledgment and agreement to the foregoing being a material condition to Indemnitee’s willingness to
serve or continue to serve on the Board.]
NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee
do hereby covenant and agree as follows:
ACTIVE/105004718.3
1
Section 1. Services to the Company. Indemnitee agrees to [continue to] serve as a director of the Company.
Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any
obligation imposed by law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee
in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries
or any Enterprise) and Indemnitee.
Section 2. Definitions.
As used in this Agreement:
(a) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, as in effect on the
date of this Agreement; provided, however, that no Person who is a director or officer of the Company shall be deemed
an Affiliate or an Associate of any other director or officer of the Company solely as a result of his or her position as
director or officer of the Company.
Own” and have “Beneficial Ownership” of, any securities:
(b) A Person shall be deemed the “Beneficial Owner” of, and shall be deemed to “Beneficially
(i) which such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, Beneficially Owns (as determined pursuant to Rule 13d-3 of the Rules under the Exchange Act, as in effect on
the date of this Agreement);
(ii) which such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has: (A) the legal, equitable or contractual right or obligation to acquire (whether directly or indirectly and
whether exercisable immediately or only after the passage of time, compliance with regulatory requirements, satisfaction
of one or more conditions (whether or not within the control of such Person) or otherwise) upon the exercise of any
conversion rights, exchange rights, rights, warrants or options, or otherwise; (B) the right to vote pursuant to any
agreement, arrangement or understanding (whether or not in writing); or (C) the right to dispose of pursuant to any
agreement, arrangement or understanding (whether or not in writing) (other than customary arrangements with and
between underwriters and selling group members with respect to a bona fide public offering of securities);
(iii) which are Beneficially Owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with which such Person or any of such Person’s Affiliates or Associates has any
agreement, arrangement or understanding (whether or not in writing) (other than customary agreements with and
between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose
of acquiring, holding, voting or disposing of any securities of the Company; or
(iv) that are the subject of a derivative transaction entered into by such Person or any of
such Person’s Affiliates or Associates, including, for these purposes, any derivative security acquired by such Person or
any of such Person’s Affiliates or Associates that gives such Person or any of such Person’s Affiliates or Associates the
economic equivalent of ownership of an amount of securities due to the fact that the value of the derivative security is
explicitly determined by reference to the price or value of such securities, or that provides such Person or any of such
Person’s Affiliates or Associates an opportunity, directly or indirectly, to profit or to share in any profit derived from any
change in the value of such securities, in any case without regard to whether (A) such derivative security conveys any
voting rights in such securities to such Person or any of such Person’s Affiliates or Associates; (B) the derivative
ACTIVE/105004718.3
2
security is required to be, or capable of being, settled through delivery of such securities; or (C) such Person or any of
such Person’s Affiliates or Associates may have entered into other transactions that hedge the economic effect of such
derivative security;
Notwithstanding the foregoing, no Person engaged in business as an underwriter of securities shall be deemed
the Beneficial Owner of any securities acquired through such Person’s participation as an underwriter in good faith in a
firm commitment underwriting.
Agreement of any of the following events:
(c) A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this
(i) Acquisition of Stock by Third Party. Any Person is or becomes the Beneficial Owner (as
defined above), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the
combined voting power of the Company’s then outstanding securities unless the change in relative Beneficial Ownership
of the Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares
of securities entitled to vote generally in the election of directors [or as a result of conversions of Class B Common
Stock], provided that a Change of Control shall be deemed to have occurred if subsequent to such reduction such Person
becomes the Beneficial Owner, directly or indirectly, of any additional securities of the Company conferring upon such
Person any additional voting power;
(ii) Change in Board of Directors. During any period of two (2) consecutive years (not
including any period prior to the execution of this Agreement), individuals who at the beginning of such period
constitute the Board, and any new director (other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in Sections 2(c)(i), 2(c)(iii) or 2(c)(iv) whose election by
the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute at least a majority of the members of the Board;
(iii) Corporate Transactions. The effective date of a merger or consolidation of the Company
with any other entity, other than a merger or consolidation which would result in the voting securities of the Company
outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving or successor entity) more than 50% of the combined voting
power of the voting securities of the surviving or successor entity outstanding immediately after such merger or
consolidation and with the power to elect at least a majority of the board of directors or other governing body of such
surviving or successor entity;
(iv) Liquidation. The approval by the stockholders of the Company of a complete liquidation
of the Company or an agreement for the sale, lease, exchange or other transfer by the Company, in one or a series of
related transactions, of all or substantially all of the Company’s assets; and
(v) Other Events. There occurs any other event of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar
schedule or form) promulgated under the Securities Exchange Act of 1934, as amended, whether or not the Company is
then subject to such reporting requirement.
ACTIVE/105004718.3
3
(d) “Corporate Status” describes the status of a person as a current or former director of the
Company or current or former director, manager, partner, officer, employee, agent or trustee of any other Enterprise
which such person is or was serving at the request of the Company.
(e) “Enforcement Expenses” shall include all reasonable attorneys’ fees, court costs, transcript
costs, fees of experts, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery
service fees, and all other out-of-pocket disbursements or expenses of the types customarily incurred in connection with
an action to enforce indemnification or advancement rights, or an appeal from such action. Expenses, however, shall not
include fees, salaries, wages or benefits owed to Indemnitee.
(f) “Enterprise” shall mean any corporation (other than the Company), partnership, joint venture,
trust, employee benefit plan, limited liability company, or other legal entity of which Indemnitee is or was serving at the
request of the Company as a director, manager, partner, officer, employee, agent or trustee.
(g) “Expenses” shall include all reasonable attorneys’ fees, court costs, transcript costs, fees of
experts, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees,
and all other out-of-pocket disbursements or expenses of the types customarily incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise
participating in, a Proceeding or an appeal resulting from a Proceeding. Expenses, however, shall not include amounts
paid in settlement by Indemnitee, the amount of judgments or fines against Indemnitee or fees, salaries, wages or
benefits owed to Indemnitee.
(h) “Independent Counsel” means a law firm, or a partner (or, if applicable, member or shareholder)
of such a law firm, that is experienced in matters of Delaware corporation law and neither presently is, nor in the past
five (5) years has been, retained to represent: (i) the Company, any subsidiary of the Company, any Enterprise or
Indemnitee in any matter material to any such party; or (ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person
who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The
Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully
indemnify such counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto.
(i) “Person” shall mean (i) an individual, a corporation, a partnership, a limited liability company,
an association, a joint stock company, a trust, a business trust, a government or political subdivision, any unincorporated
organization, or any other association or entity including any successor (by merger or otherwise) thereof or thereto, and
(ii) a “group” as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
(j) The term “Proceeding” shall include any threatened, pending or completed action, suit,
arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual,
threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil,
criminal, administrative, regulatory or investigative nature, and whether formal or informal, in which Indemnitee was, is
or will be involved as a party or otherwise by reason of the fact that Indemnitee is or was a director of the Company or is
or was serving at the request of the Company as a director, manager, partner, officer, employee, agent or trustee of any
Enterprise or by reason
ACTIVE/105004718.3
4
of any action taken by Indemnitee or of any action taken on his or her part while acting as a director of the Company or
while serving at the request of the Company as a director, manager, partner, officer, employee, agent or trustee of any
Enterprise, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which
indemnification, reimbursement or advancement of expenses can be provided under this Agreement; provided, however,
that the term “Proceeding” shall not include any action, suit or arbitration, or part thereof, initiated by Indemnitee to
enforce Indemnitee’s rights under this Agreement as provided for in Section 12(a) of this Agreement.
Section 3. Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee to the extent set forth
in this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a
Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be
indemnified against all Expenses, judgments, fines, penalties, excise taxes, and amounts paid in settlement actually and
reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding or any claim, issue or matter
therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best
interests of the Company and, in the case of a criminal proceeding, had no reasonable cause to believe that his or her conduct was
unlawful.
Section 4. Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee
to the extent set forth in this Section 4 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding
by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified
against all Expenses actually and reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding
or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 4 in respect
of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company,
unless and only to the extent that the Delaware Court of Chancery (the “Delaware Court”) shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnification for such expenses as the Delaware Court shall deem proper.
Section 5. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other
provisions of this Agreement and except as provided in Section 7, to the extent that Indemnitee is a party to or a participant in
any Proceeding and is successful in such Proceeding or in defense of any claim, issue or matter therein, the Company shall
indemnify Indemnitee against all Expenses actually and reasonably incurred by him or her in connection therewith. If
Indemnitee is not wholly successful in such Proceeding but is successful as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by
Indemnitee or on his or her behalf in connection with each successfully resolved claim, issue or matter. For purposes of this
Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
Section 6. Reimbursement for Expenses of a Witness or in Response to a Subpoena. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee, by reason of his or her Corporate Status, (i) is a witness in any
Proceeding to which Indemnitee is not a party and is not threatened to be made a party or (ii) receives a subpoena with respect to
any Proceeding to which Indemnitee is not a party and is not threatened to be made a party, the Company shall reimburse
Indemnitee for all Expenses actually and reasonably incurred by him or her or on his or her behalf in connection therewith.
ACTIVE/105004718.3
5
Section 7. Exclusions. Notwithstanding any provision in this Agreement to the contrary, the Company shall not be
obligated under this Agreement:
(a) to indemnify for amounts otherwise indemnifiable hereunder (or for which advancement is provided
hereunder) if and to the extent that Indemnitee has otherwise actually received such amounts under any insurance policy,
contract, agreement or otherwise; provided that the foregoing shall not [i] apply to any personal or umbrella liability insurance
maintained by Indemnitee, [or (ii) affect the rights of Indemnitee or the Fund Indemnitors as set forth in Section 13(c)];
(b) to indemnify for an accounting of profits made from the purchase and sale (or sale and purchase) by
Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as
amended, or similar provisions of state statutory law or common law, or from the purchase or sale by Indemnitee of such
securities in violation of Section 306 of the Sarbanes Oxley Act of 2002 (“SOX”);
(c) to indemnify with respect to any Proceeding, or part thereof, brought by Indemnitee against the
Company, any legal entity which it controls, any director or officer thereof or any third party, unless (i) the Board has consented
to the initiation of such Proceeding or part thereof and (ii) the Company provides the indemnification, in its sole discretion,
pursuant to the powers vested in the Company under applicable law; provided, however, that this Section 7(c) shall not apply to
(A) counterclaims or affirmative defenses asserted by Indemnitee in an action brought against Indemnitee or (B) any action
brought by Indemnitee for indemnification or advancement from the Company under this Agreement or under any directors’ and
officers’ liability insurance policies maintained by the Company in the suit for which indemnification or advancement is being
sought as described in Section 12; or
law exists at the time payment would otherwise be required pursuant to this Agreement).
(d) to provide any indemnification or advancement of expenses that is prohibited by applicable law (as such
Section 8. Advancement of Expenses. Subject to Section 9(b), the Company shall advance the Expenses incurred by
Indemnitee in connection with any Proceeding, and such advancement shall be made as incurred, and such advancement shall be
made within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances (including
any invoices received by Indemnitee, which such invoices may be redacted as necessary to avoid the waiver of any privilege
accorded by applicable law) from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be
unsecured and interest free. Advances shall be made without regard to Indemnitee’s (i) ability to repay the expenses, (ii) ultimate
entitlement to indemnification under the other provisions of this Agreement, and (iii) entitlement to and availability of insurance
coverage, including advancement, payment or reimbursement of defense costs, expenses of covered loss under the provisions of
any applicable insurance policy (including, without limitation, whether such advancement, payment or reimbursement is
withheld, conditioned or delayed by the insurer(s)). Indemnitee shall qualify for advances upon the execution and delivery to the
Company of this Agreement which shall constitute an undertaking providing that Indemnitee undertakes to the fullest extent
required by law to repay the advance if and to the extent that it is ultimately determined by a court of competent jurisdiction in a
final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. No other form of
undertaking shall be required. The right to advances under this paragraph shall in all events continue until final disposition of any
Proceeding, including any appeal therein. Nothing in this Section 8 shall limit Indemnitee’s right to advancement pursuant to
Section 12(e) of this Agreement.
ACTIVE/105004718.3
6
Section 9. Procedure for Notification and Defense of Claim.
(a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written
request therefor specifying the basis for the claim, the amounts for which Indemnitee is seeking payment under this Agreement,
and all documentation related thereto as reasonably requested by the Company.
(b) In the event that the Company shall be obligated hereunder to provide indemnification for or make any
advancement of Expenses with respect to any Proceeding, the Company shall be entitled to assume the defense of such
Proceeding, or any claim, issue or matter therein, with counsel approved by Indemnitee (which approval shall not be
unreasonably withheld or delayed) upon the delivery to Indemnitee of written notice of the Company’s election to do so. After
delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company
will not be liable to Indemnitee under this Agreement for any fees or expenses of separate counsel subsequently employed by or
on behalf of Indemnitee with respect to the same Proceeding; provided that (i) Indemnitee shall have the right to employ separate
counsel in any such Proceeding at Indemnitee’s expense and (ii) if (A) the employment of separate counsel by Indemnitee has
been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of such defense, (C) the Company shall not continue to retain such
counsel to defend such Proceeding, or (D) a Change in Control shall have occurred, then the fees and expenses actually and
reasonably incurred by Indemnitee with respect to his or her separate counsel shall be Expenses hereunder.
above, then the Company will be entitled to participate in the Proceeding at its own expense.
(c) In the event that the Company does not assume the defense in a Proceeding pursuant to paragraph (b)
(d) The Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in
settlement of any Proceeding effected without its prior written consent (which consent shall not be unreasonably withheld or
delayed). The Company shall not, without the prior written consent of Indemnitee (which consent shall not be unreasonably
withheld or delayed), enter into any settlement which (i) includes an admission of fault of Indemnitee, any non-monetary remedy
imposed on Indemnitee or any monetary damages for which Indemnitee is not wholly and actually indemnified hereunder or (ii)
with respect to any Proceeding with respect to which Indemnitee may be or is made a party or may be otherwise entitled to seek
indemnification hereunder, does not include the full release of Indemnitee from all liability in respect of such Proceeding.
Section 10. Procedure Upon Application for Indemnification.
(a) Upon written request by Indemnitee for indemnification pursuant to Section 9(a), a determination, if
such determination is required by applicable law, with respect to Indemnitee’s entitlement to indemnification hereunder shall be
made in the specific case by one of the following methods: (x) if a Change in Control shall have occurred, by Independent
Counsel in a written opinion to the Board; or (y) if a Change in Control shall not have occurred: (i) by a majority vote of the
disinterested directors, even though less than a quorum; (ii) by a committee of disinterested directors designated by a majority
vote of the disinterested directors, even though less than a quorum; or (iii) if there are no disinterested directors or if the
disinterested directors so direct, by Independent Counsel in a written opinion to the Board. For purposes hereof, disinterested
directors are those members of the Board who are not parties to the action, suit or proceeding in respect of which indemnification
is sought. In the case that such determination is made by Independent Counsel, a copy of Independent Counsel’s written opinion
shall be delivered to Indemnitee and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee
shall be made within thirty (30) days after such determination. Indemnitee shall cooperate with the Independent Counsel or the
Company, as applicable, in making such determination with respect to Indemnitee’s entitlement to indemnification, including
providing to
ACTIVE/105004718.3
7
such counsel or the Company, upon reasonable advance request, any documentation or information which is not privileged or
otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such
determination. The Company shall likewise cooperate with Indemnitee and Independent Counsel, if applicable, in making such
determination with respect to Indemnitee’s entitlement to indemnification, including providing to such counsel and Indemnitee,
upon reasonable advance request, any documentation or information which is not privileged or otherwise protected from
disclosure and which is reasonably available to the Company and reasonably necessary to such determination. Any out-of-pocket
costs or expenses (including reasonable attorneys’ fees and disbursements) actually and reasonably incurred by Indemnitee in so
cooperating with the Independent Counsel or the Company shall be borne by the Company (irrespective of the determination as
to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless
therefrom.
(b) If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to
Section 10(a), the Independent Counsel shall be selected by the Board if a Change in Control shall not have occurred or, if a
Change in Control shall have occurred, by Indemnitee. Indemnitee or the Company, as the case may be, may, within ten (10)
days after written notice of such selection, deliver to the Company or Indemnitee, as the case may be, a written objection to such
selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected
does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set
forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act
as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not
serve as Independent Counsel unless and until such objection is withdrawn or the Delaware Court has determined that such
objection is without merit. If, within twenty (20) days after the later of (i) submission by Indemnitee of a written request for
indemnification pursuant to Section 9(a), and (ii) the final disposition of the Proceeding, including any appeal therein, no
Independent Counsel shall have been selected without objection, either Indemnitee or the Company may petition the Delaware
Court for resolution of any objection which shall have been made by Indemnitee or the Company to the selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court
shall designate. The person with respect to whom all objections are so resolved or the person so appointed shall act as
Independent Counsel under Section 10(a) hereof. Upon the due commencement of any judicial proceeding or arbitration
pursuant to Section 12(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility
in such capacity (subject to the applicable standards of professional conduct then prevailing).
(c) Notwithstanding anything to the contrary contained in this Agreement, the determination of entitlement to
indemnification under this Agreement shall be made without regard to the Indemnitee’s entitlement to and availability of
insurance coverage, including advancement, payment or reimbursement of defense costs, expenses or covered loss under the
provisions of any applicable insurance policy (including, without limitation, whether such advancement, payment or
reimbursement is withheld, conditioned or delayed by the insurer(s)).
Section 11. Presumptions and Effect of Certain Proceedings.
(a) To the extent permitted by applicable law, in making a determination with respect to entitlement to
indemnification hereunder, it shall be presumed that Indemnitee is entitled to indemnification under this Agreement if Indemnitee
has submitted a request for indemnification in accordance with Section 9(a) of this Agreement, and the Company shall have the
burden of proof and the burden of persuasion by clear and convincing evidence to overcome that presumption in connection with
the making of any determination contrary to that presumption. Neither (i) the failure of the Company or of Independent Counsel
to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper
in the
ACTIVE/105004718.3
8
circumstances because Indemnitee has met the applicable standard of conduct, nor (ii) an actual determination by the Company
or by Independent Counsel that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that Indemnitee has not met the applicable standard of conduct.
(b) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order,
settlement or conviction, or upon a plea of guilty, nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that
Indemnitee did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best
interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or
her conduct was unlawful.
(c) Indemnitee shall be deemed to have acted in good faith if Indemnitee’s actions are based on the records
or books of account of the Company or any other Enterprise, including financial statements, or on information supplied to
Indemnitee by the directors, officers, agents or employees of the Company or any other Enterprise in the course of their duties, or
on the advice of legal counsel for the Company or any other Enterprise or on information or records given or reports made to the
Company or any other Enterprise by an independent certified public accountant or by an appraiser or other expert selected with
reasonable care by the Company or any other Enterprise. The provisions of this Section 11(c) shall not be deemed to be exclusive
or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of
conduct set forth in this Agreement. In addition, the knowledge and/or actions, or failure to act, of any director, manager, partner,
officer, employee, agent or trustee of the Company, any subsidiary of the Company, or any Enterprise shall not be imputed to
Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing
provisions of this Section 11(c) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith
and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to
overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.
Section 12. Remedies of Indemnitee.
(a) Subject to Section 12(f), in the event that (i) a determination is made pursuant to Section 10 of this
Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely
made pursuant to Section 8 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made
pursuant to Section 10(a) of this Agreement within sixty (60) days after receipt by the Company of the request for
indemnification for which a determination is to be made other than by Independent Counsel, (iv) payment of indemnification or
reimbursement of expenses is not made pursuant to Section 5 or 6 or the last sentence of Section 10(a) of this Agreement within
thirty (30) days after receipt by the Company of a written request therefor (including any invoices received by Indemnitee, which
such invoices may be redacted as necessary to avoid the waiver of any privilege accorded by applicable law) or (v) payment of
indemnification pursuant to Section 3 or 4 of this Agreement is not made within thirty (30) days after a determination has been
made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication by the Delaware Court of his
or her entitlement to such indemnification or advancement. Alternatively, Indemnitee, at his or her option, may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration
Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days
following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided,
however, that the foregoing time limitation shall not apply in respect of a proceeding brought by Indemnitee to enforce his or her
rights under Section 5 of this Agreement. The Company shall not oppose Indemnitee’s right to seek any such adjudication or
award in arbitration.
ACTIVE/105004718.3
9
(b) In the event that a determination shall have been made pursuant to Section 10(a) of this Agreement that
Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 12 shall
be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 12, the Company shall
have the burden of proving Indemnitee is not entitled to indemnification or advancement, as the case may be.
(c) If a determination shall have been made pursuant to Section 10(a) of this Agreement that Indemnitee is
entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration
commenced pursuant to this Section 12, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material
fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or
(ii) a prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced
pursuant to this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and
shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.
(e) The Company shall indemnify Indemnitee to the fullest extent permitted by law against any and all
Enforcement Expenses and, if requested by Indemnitee, shall (within thirty (30) days after receipt by the Company of a written
request therefor) advance, to the extent not prohibited by law, such Enforcement Expenses to Indemnitee, which are incurred by
Indemnitee in connection with any action brought by Indemnitee for indemnification or advancement from the Company under
this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company in the suit for which
indemnification or advancement is being sought. Such written request for advancement shall include invoices received by
Indemnitee in connection with such Enforcement Expenses but, in the case of invoices in connection with legal services, any
references to legal work performed or to expenditures made that would cause Indemnitee to waive any privilege accorded by
applicable law need not be included with the invoice.
(f) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to
indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding, including any
appeal therein.
Section 13. Non-exclusivity; Survival of Rights; Insurance; Primacy of Indemnification; Subrogation.
(a) The rights of indemnification and to receive advancement as provided by this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter, the
Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of
this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any
action taken or omitted by such Indemnitee in his or her Corporate Status prior to such amendment, alteration or repeal. To the
extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement
than would be afforded currently under the Charter, Bylaws and this Agreement, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred
is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any
other right or remedy.
ACTIVE/105004718.3
10
(b) To the extent that the Company maintains an insurance policy or policies providing liability insurance
for directors, managers, partners, officers, employees, agents or trustees of the Company or of any other Enterprise, Indemnitee
shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available
for any such director, manager, partner, officer, employee, agent or trustee under such policy or policies. If, at the time of the
receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the
Company shall give prompt notice of such claim to the insurers in accordance with the procedures set forth in the respective
policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the
Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies. Upon request of
Indemnitee, the Company shall also promptly provide to Indemnitee: (i) copies of all of the Company’s potentially applicable
directors’ and officers’ liability insurance policies, (ii) copies of such notices delivered to the applicable insurers, and (iii) copies
of all subsequent communications and correspondence between the Company and such insurers regarding the Proceeding.
(c) [The Company hereby acknowledges that Indemnitee has certain rights to indemnification, advancement
of expenses and/or insurance provided by [ ] and certain of its affiliates (collectively, the “Secondary Indemnitors”). The
Company hereby agrees (i) that it is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary and any
obligation of the Secondary Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities
incurred by Indemnitee are secondary), (ii) that it shall be required to advance the full amount of expenses incurred by
Indemnitee and shall be liable for the full amount of all Expenses, judgments, penalties, fines and amounts paid in settlement to
the extent legally permitted and as required by the terms of this Agreement and the Charter and/or Bylaws (or any other
agreement between the Company and Indemnitee), without regard to any rights Indemnitee may have against the Secondary
Indemnitors, and (iii) that it irrevocably waives, relinquishes and releases the Secondary Indemnitors from any and all claims
against the Secondary Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The
Company further agrees that no advancement or payment by the Secondary Indemnitors on behalf of Indemnitee with respect to
any claim for which Indemnitee has sought indemnification from the Company shall affect the foregoing and the Secondary
Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the
rights of recovery of Indemnitee against the Company. The Company and Indemnitee agree that the Secondary Indemnitors are
express third party beneficiaries of the terms of this Section 13(c).]
(d) [Except as provided in paragraph (c) above,] in the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee [(other than against the
Secondary Indemnitors)], who shall execute all papers required and take all action necessary to secure such rights, including
execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
(e) [Except as provided in paragraph (c) above,] the Company’s obligation to provide indemnification or
advancement hereunder to Indemnitee who is or was serving at the request of the Company as a director, manager, partner,
officer, employee, agent or trustee of any other Enterprise shall be reduced by any amount Indemnitee has actually received as
indemnification or advancement from such other Enterprise.
Section 14. Duration of Agreement. This Agreement shall continue until and terminate upon the later of: (a) ten (10)
years after the date that Indemnitee shall have ceased to serve as a director of the Company or (b) one (1) year after the final
termination of any Proceeding, including any appeal, then pending in respect of which Indemnitee is granted rights of
indemnification or advancement hereunder and of any proceeding commenced by Indemnitee pursuant to Section 12 of this
Agreement relating thereto. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to
the benefit of Indemnitee and his or her heirs, executors
ACTIVE/105004718.3
11
and administrators. The Company shall require and cause any successor (whether direct or indirect by purchase, merger,
consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written
agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
Section 15. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or
unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this
Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be
invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired
thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed
reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto;
and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section
of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested thereby.
Section 16. Enforcement.
(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the
obligations imposed on it hereby in order to induce Indemnitee to serve or continue to serve as a director of the Company, and the
Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director of the Company.
(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with
respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Charter,
the Bylaws and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee
thereunder.
Section 17. Modification and Waiver. No supplement, modification or amendment, or waiver of any provision, of
this Agreement shall be binding unless executed in writing by the parties thereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute
a continuing waiver. No supplement, modification or amendment of this Agreement or of any provision hereof shall limit or
restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee prior to such
supplement, modification or amendment.
Section 18. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served
with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or
matter which may be subject to indemnification, reimbursement or advancement as provided hereunder. The failure of
Indemnitee to so notify the Company or any delay in notification shall not relieve the Company of any obligation which it may
have to Indemnitee under this Agreement or otherwise. unless, and then only to the extent that, the Company did not otherwise
learn of the Proceeding and such delay is materially prejudicial to the Company’s ability to defend such Proceeding or matter;
and, provided, further, that notice will be deemed to have been given without any action on the part of Indemnitee in the event the
Company is a party to the same Proceeding.
Section 19. Notices. All notices, requests, demands and other communications under this Agreement shall be in
writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the
ACTIVE/105004718.3
12
party to whom said notice or other communication shall have been directed, (ii) mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it is so mailed, (iii) mailed by reputable overnight courier and
receipted for by the party to whom said notice or other communication shall have been directed or (iv) sent by facsimile
transmission, with receipt of oral confirmation that such transmission has been received:
(a) If to Indemnitee, at such address as Indemnitee shall provide to the Company.
(b) If to the Company to:
Adicet Bio, Inc.
200 Clarendon Street, Floor 6
Boston, MA 02116
Attention: President and CEO
or to any other address as may have been furnished to Indemnitee by the Company.
Section 20. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for
in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee,
shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to
be paid in settlement and/or for Expenses, in connection with any Proceeding in such proportion as is deemed fair and reasonable
in light of all of the circumstances in order to reflect (i) the relative benefits received by the Company and Indemnitee in
connection with the event(s) and/or transaction(s) giving rise to such Proceeding; and/or (ii) the relative fault of the Company
(and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transactions.
Section 21. Internal Revenue Code Section 409A. The Company intends for this Agreement to comply with the
Indemnification exception under Section 1.409A-1(b)(10) of the regulations promulgated under the Internal Revenue Code of
1986, as amended (the “Code”), which provides that indemnification of, or the purchase of an insurance policy providing for
payments of, all or part of the expenses incurred or damages paid or payable by Indemnitee with respect to a bona fide claim
against Indemnitee or the Company do not provide for a deferral of compensation, subject to Section 409A of the Code, where
such claim is based on actions or failures to act by Indemnitee in his or her capacity as a service provider of the Company. The
parties intend that this Agreement be interpreted and construed with such intent.
Section 22. Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties
shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its
conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 12(a) of this
Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising
out of or in connection with this Agreement shall be brought only in the Delaware Court, and not in any other state or federal
court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the
Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) consent to
service of process at the address set forth in Section 19 of this Agreement with the same legal force and validity as if served upon
such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or
proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding
brought in the Delaware Court has been brought in an improper or inconvenient forum.
ACTIVE/105004718.3
13
Section 23. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall
not be deemed to constitute part of this Agreement or to affect the construction thereof.
Section 24. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which
shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only
one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of
this Agreement.
Section 25. Monetary Damages Insufficient/Specific Enforcement. The Company and Indemnitee agree that a
monetary remedy for breach of this Agreement may be inadequate, impracticable and difficult of proof, and further agree that
such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree that Indemnitee may enforce this
Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or
irreparable harm (having agreed that actual and irreparable harm will result in not forcing the Company to specifically perform its
obligations pursuant to this Agreement) and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be
precluded from seeking or obtaining any other relief to which he may be entitled. The Company and Indemnitee further agree
that Indemnitee shall be entitled to such specific performance and injunctive relief, including temporary restraining orders,
preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertaking in connection
therewith. The Company acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee by
the Court, and the Company hereby waives any such requirement of a bond or undertaking.
ACTIVE/105004718.3
[Remainder of Page Intentionally Left Blank]
14
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above
written.
ADICET BIO, INC.
By:
Name:
Title:
[Indemnitee]
ADICET BIO, INC.
FORM OF OFFICER INDEMNIFICATION AGREEMENT
This Indemnification Agreement (“Agreement”) is made as of [________________] by and between Adicet Bio, Inc., a
Delaware corporation (the “Company”), and [Officer] (“Indemnitee”).1
RECITALS
WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to
serve the Company;
WHEREAS, in order to induce Indemnitee to provide or continue to provide services to the Company, the Company
wishes to provide for the indemnification of, and advancement of expenses to, Indemnitee to the maximum extent permitted by
law;
WHEREAS, the Third Amended and Restated Certificate of Incorporation (as amended and in effect from time to time,
the “Charter”) and the Amended and Restated Bylaws (as amended and in effect from time to time, the “Bylaws”) of the
Company require indemnification of the officers and directors of the Company, and Indemnitee may also be entitled to
indemnification pursuant to the General Corporation Law of the State of Delaware (the “DGCL”);
WHEREAS, the Charter, the Bylaws and the DGCL expressly provide that the indemnification provisions set forth
therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the
board of directors, officers and other persons with respect to indemnification;
WHEREAS, the Board of Directors of the Company (the “Board”) has determined that the increased difficulty in
attracting and retaining highly qualified persons such as Indemnitee is detrimental to the best interests of the Company’s
stockholders;
WHEREAS, it is reasonable and prudent for the Company contractually to obligate itself to indemnify, and to advance
expenses on behalf of, such persons to the fullest extent permitted by applicable law, regardless of any amendment or revocation
of the Charter or the Bylaws, so that they will serve or continue to serve the Company free from undue concern that they will not
be so indemnified; and
WHEREAS, this Agreement is a supplement to and in furtherance of the indemnification provided in the Charter, the
Bylaws and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate
any rights of Indemnitee thereunder.
NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee
do hereby covenant and agree as follows:
1 To be entered into with all C-level officers and Section 16 officers.
ACTIVE/105005427.2
1
Section 1. Services to the Company. Indemnitee agrees to [continue to] serve as [a director and] an officer of the
Company. Indemnitee may at any time and for any reason resign from [any] such position (subject to any other contractual
obligation or any obligation imposed by law), in which event the Company shall have no obligation under this Agreement to
continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or
any of its subsidiaries or any Enterprise) and Indemnitee.
Section 2. Definitions.
As used in this Agreement:
(a) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2
of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, as in effect on the date of
this Agreement; provided, however, that no Person who is a director or officer of the Company shall be deemed an
Affiliate or an Associate of any other director or officer of the Company solely as a result of his or her position as
director or officer of the Company.
and have “Beneficial Ownership” of, any securities:
(b) A Person shall be deemed the “Beneficial Owner” of, and shall be deemed to “Beneficially Own”
(i) which such Person or any of such Person’s Affiliates or Associates, directly or indirectly,
Beneficially Owns (as determined pursuant to Rule 13d-3 of the Rules under the Exchange Act, as in effect on the date
of this Agreement);
(ii) which such Person or any of such Person’s Affiliates or Associates, directly or indirectly,
has: (A) the legal, equitable or contractual right or obligation to acquire (whether directly or indirectly and whether
exercisable immediately or only after the passage of time, compliance with regulatory requirements, satisfaction of one
or more conditions (whether or not within the control of such Person) or otherwise) upon the exercise of any conversion
rights, exchange rights, rights, warrants or options, or otherwise; (B) the right to vote pursuant to any agreement,
arrangement or understanding (whether or not in writing); or (C) the right to dispose of pursuant to any agreement,
arrangement or understanding (whether or not in writing) (other than customary arrangements with and between
underwriters and selling group members with respect to a bona fide public offering of securities);
(iii) which are Beneficially Owned, directly or indirectly, by any other Person (or any Affiliate
or Associate thereof) with which such Person or any of such Person’s Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing) (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of
acquiring, holding, voting or disposing of any securities of the Company; or
(iv) that are the subject of a derivative transaction entered into by such Person or any of such
Person’s Affiliates or Associates, including, for these purposes, any derivative security acquired by such Person or any of
such Person’s Affiliates or Associates that gives such Person or any of such Person’s Affiliates or Associates the
economic equivalent of ownership of an amount of securities due to the fact that the value of the derivative security is
explicitly determined by reference to the price or value of such securities, or that provides such Person or any of such
Person’s Affiliates or Associates an opportunity, directly or indirectly, to profit or to share in any profit derived from any
change in the value of such securities, in any case without regard to whether (A) such derivative security conveys any
voting
ACTIVE/105005427.2
2
rights in such securities to such Person or any of such Person’s Affiliates or Associates; (B) the derivative security is
required to be, or capable of being, settled through delivery of such securities; or (C) such Person or any of such Person’s
Affiliates or Associates may have entered into other transactions that hedge the economic effect of such derivative
security;
Notwithstanding the foregoing, no Person engaged in business as an underwriter of securities shall be deemed the
Beneficial Owner of any securities acquired through such Person’s participation as an underwriter in good faith in a firm
commitment underwriting.
Agreement of any of the following events:
(c) A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this
(i) Acquisition of Stock by Third Party. Any Person is or becomes the Beneficial Owner (as
defined above), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the
combined voting power of the Company’s then outstanding securities [(other than acquisitions of Class B Common
Stock by a Qualified Stockholder (as defined in the Charter))] unless the change in relative Beneficial Ownership of the
Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of
securities entitled to vote generally in the election of directors [or as a result of conversions of Class B Common Stock],
provided that a Change of Control shall be deemed to have occurred if subsequent to such reduction such Person
becomes the Beneficial Owner, directly or indirectly, of any additional securities of the Company conferring upon such
Person any additional voting power;
(ii) Change in Board of Directors. During any period of two (2) consecutive years (not
including any period prior to the execution of this Agreement), individuals who at the beginning of such period
constitute the Board, and any new director (other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in Sections 2(c)(i), 2(c)(iii) or 2(c)(iv) whose election by
the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute at least a majority of the members of the Board;
(iii) Corporate Transactions. The effective date of a merger or consolidation of the Company
with any other entity, other than a merger or consolidation which would result in the voting securities of the Company
outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving or successor entity) more than 50% of the combined voting
power of the voting securities of the surviving or successor entity outstanding immediately after such merger or
consolidation and with the power to elect at least a majority of the board of directors or other governing body of such
surviving or successor entity;
(iv) Liquidation. The approval by the stockholders of the Company of a complete liquidation
of the Company or an agreement for the sale, lease, exchange or other transfer by the Company, in one or a series of
related transactions, of all or substantially all of the Company’s assets; and
(v) Other Events. There occurs any other event of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar
schedule or form) promulgated under the Securities Exchange Act of 1934, as amended, whether or not the Company is
then subject to such reporting requirement.
ACTIVE/105005427.2
3
(d) “Corporate Status” describes the status of a person as a current or former [director or] officer of the
Company or current or former director, manager, partner, officer, employee, agent or trustee of any other Enterprise
which such person is or was serving at the request of the Company.
(e) “Enforcement Expenses” shall include all reasonable attorneys’ fees, court costs, transcript costs,
fees of experts, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery
service fees, and all other out-of-pocket disbursements or expenses of the types customarily incurred in connection with
an action to enforce indemnification or advancement rights, or an appeal from such action. Expenses, however, shall not
include fees, salaries, wages or benefits owed to Indemnitee.
(f) “Enterprise” shall mean any corporation (other than the Company), partnership, joint venture, trust,
employee benefit plan, limited liability company, or other legal entity of which Indemnitee is or was serving at the
request of the Company as a director, manager, partner, officer, employee, agent or trustee.
(g) “Expenses” shall include all reasonable attorneys’ fees, court costs, transcript costs, fees of experts,
travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all
other out-of-pocket disbursements or expenses of the types customarily incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise
participating in, a Proceeding or an appeal resulting from a Proceeding. Expenses, however, shall not include amounts
paid in settlement by Indemnitee, the amount of judgments or fines against Indemnitee or fees, salaries, wages or
benefits owed to Indemnitee.
(h) “Independent Counsel” means a law firm, or a partner (or, if applicable, member or shareholder) of
such a law firm, that is experienced in matters of Delaware corporation law and neither presently is, nor in the past five
(5) years has been, retained to represent: (i) the Company, any subsidiary of the Company, any Enterprise or Indemnitee
in any matter material to any such party; or (ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person
who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The
Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully
indemnify such counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto.
(i) “Person” shall mean (i) an individual, a corporation, a partnership, a limited liability company, an
association, a joint stock company, a trust, a business trust, a government or political subdivision, any unincorporated
organization, or any other association or entity including any successor (by merger or otherwise) thereof or thereto, and
(ii) a “group” as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
(j) The term “Proceeding” shall include any threatened, pending or completed action, suit, arbitration,
alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or
completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal,
administrative, regulatory or investigative nature, and whether formal or informal, in which Indemnitee was, is or will be
involved as a party or otherwise by reason of the fact that Indemnitee is or was [a director or] an officer of the Company
or is or was serving at the
ACTIVE/105005427.2
4
request of the Company as a director, manager, partner, officer, employee, agent or trustee of any Enterprise or by reason
of any action taken by Indemnitee or of any action taken on his or her part while acting as [a director or] an officer of the
Company or while serving at the request of the Company as a director, manager, partner, officer, employee, agent or
trustee of any Enterprise, in each case whether or not serving in such capacity at the time any liability or expense is
incurred for which indemnification, reimbursement or advancement of expenses can be provided under this Agreement;
provided, however, that the term “Proceeding” shall not include any action, suit or arbitration, or part thereof, initiated
by Indemnitee to enforce Indemnitee’s rights under this Agreement as provided for in Section 12(a) of this Agreement.
Section 3. Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee to the extent set forth
in this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a
Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be
indemnified against all Expenses, judgments, fines, penalties, excise taxes, and amounts paid in settlement actually and
reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding or any claim, issue or matter
therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best
interests of the Company and, in the case of a criminal proceeding, had no reasonable cause to believe that his or her conduct was
unlawful.
Section 4. Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee
to the extent set forth in this Section 4 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding
by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified
against all Expenses actually and reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding
or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 4 in respect
of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company,
unless and only to the extent that the Delaware Court of Chancery (the “Delaware Court”) shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnification for such expenses as the Delaware Court shall deem proper.
Section 5. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other
provisions of this Agreement and except as provided in Section 7, to the extent that Indemnitee is a party to or a participant in
any Proceeding and is successful in such Proceeding or in defense of any claim, issue or matter therein, the Company shall
indemnify Indemnitee against all Expenses actually and reasonably incurred by him or her in connection therewith. If
Indemnitee is not wholly successful in such Proceeding but is successful as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by
Indemnitee or on his or her behalf in connection with each successfully resolved claim, issue or matter. For purposes of this
Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
Section 6. Reimbursement for Expenses of a Witness or in Response to a Subpoena. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee, by reason of his or her Corporate Status, (i) is a witness in any
Proceeding to which Indemnitee is not a party and is not threatened to be made a party or (ii) receives a subpoena with respect to
any Proceeding to which Indemnitee is not a party and is not threatened to be
ACTIVE/105005427.2
5
made a party, the Company shall reimburse Indemnitee for all Expenses actually and reasonably incurred by him or her or on his
or her behalf in connection therewith.
Section 7. Exclusions. Notwithstanding any provision in this Agreement to the contrary, the Company shall not be
obligated under this Agreement:
(a) to indemnify for amounts otherwise indemnifiable hereunder (or for which advancement is provided
hereunder) if and to the extent that Indemnitee has otherwise actually received such amounts under any insurance policy,
contract, agreement or otherwise; provided that the foregoing shall not [i] apply to any personal or umbrella liability insurance
maintained by Indemnitee, [or (ii) affect the rights of Indemnitee or the Fund Indemnitors as set forth in Section 13(c)];
(b) to indemnify for an accounting of profits made from the purchase and sale (or sale and purchase) by
Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as
amended, or similar provisions of state statutory law or common law, or from the purchase or sale by Indemnitee of such
securities in violation of Section 306 of the Sarbanes-Oxley Act of 2002 (“SOX”);
(c) to indemnify for any reimbursement of, or payment to, the Company by Indemnitee of any bonus or
other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the
Company pursuant to Section 304 of SOX or any formal policy of the Company adopted by the Board (or a committee thereof),
or any other remuneration paid to Indemnitee if it shall be determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(d) to indemnify with respect to any Proceeding, or part thereof, brought by Indemnitee against the
Company, any legal entity which it controls, any director or officer thereof or any third party, unless (i) the Board has consented
to the initiation of such Proceeding or part thereof and (ii) the Company provides the indemnification, in its sole discretion,
pursuant to the powers vested in the Company under applicable law; provided, however, that this Section 7(d) shall not apply to
(A) counterclaims or affirmative defenses asserted by Indemnitee in an action brought against Indemnitee or (B) any action
brought by Indemnitee for indemnification or advancement from the Company under this Agreement or under any directors’ and
officers’ liability insurance policies maintained by the Company in the suit for which indemnification or advancement is being
sought as described in Section 12; or
law exists at the time payment would otherwise be required pursuant to this Agreement).
(e) to provide any indemnification or advancement of expenses that is prohibited by applicable law (as such
Section 8. Advancement of Expenses. Subject to Section 9(b), the Company shall advance the Expenses incurred by
Indemnitee in connection with any Proceeding, and such advancement shall be made as incurred, and such advancement shall be
made within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances (including
any invoices received by Indemnitee, which such invoices may be redacted as necessary to avoid the waiver of any privilege
accorded by applicable law) from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be
unsecured and interest free. Advances shall be made without regard to Indemnitee’s (i) ability to repay the expenses, (ii) ultimate
entitlement to indemnification under the other provisions of this Agreement, and (iii) entitlement to and availability of insurance
coverage, including advancement, payment or reimbursement of defense costs, expenses of covered loss under the provisions of
any applicable insurance policy (including , without limitation, whether such advancement, payment or reimbursement is
withheld, conditioned or delayed by the insurer(s)). Indemnitee shall qualify for advances upon the execution and delivery to the
Company of this Agreement which shall
ACTIVE/105005427.2
6
constitute an undertaking providing that Indemnitee undertakes to the fullest extent required by law to repay the advance if and to
the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that
Indemnitee is not entitled to be indemnified by the Company. No other form of undertaking shall be required. The right to
advances under this paragraph shall in all events continue until final disposition of any Proceeding, including any appeal therein.
Nothing in this Section 8 shall limit Indemnitee’s right to advancement pursuant to Section 12(e) of this Agreement.
Section 9. Procedure for Notification and Defense of Claim.
(a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written
request therefor specifying the basis for the claim, the amounts for which Indemnitee is seeking payment under this Agreement,
and all documentation related thereto as reasonably requested by the Company.
(b) In the event that the Company shall be obligated hereunder to provide indemnification for or make any
advancement of Expenses with respect to any Proceeding, the Company shall be entitled to assume the defense of such
Proceeding, or any claim, issue or matter therein, with counsel approved by Indemnitee (which approval shall not be
unreasonably withheld or delayed) upon the delivery to Indemnitee of written notice of the Company’s election to do so. After
delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company
will not be liable to Indemnitee under this Agreement for any fees or expenses of separate counsel subsequently employed by or
on behalf of Indemnitee with respect to the same Proceeding; provided that (i) Indemnitee shall have the right to employ separate
counsel in any such Proceeding at Indemnitee’s expense and (ii) if (A) the employment of separate counsel by Indemnitee has
been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of such defense, (C) the Company shall not continue to retain such
counsel to defend such Proceeding, or (D) a Change in Control shall have occurred, then the fees and expenses actually and
reasonably incurred by Indemnitee with respect to his or her separate counsel shall be Expenses hereunder.
above, then the Company will be entitled to participate in the Proceeding at its own expense.
(c) In the event that the Company does not assume the defense in a Proceeding pursuant to paragraph (b)
(d) The Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in
settlement of any Proceeding effected without its prior written consent (which consent shall not be unreasonably withheld or
delayed). The Company shall not, without the prior written consent of Indemnitee (which consent shall not be unreasonably
withheld or delayed), enter into any settlement which (i) includes an admission of fault of Indemnitee, any non-monetary remedy
imposed on Indemnitee or any monetary damages for which Indemnitee is not wholly and actually indemnified hereunder or (ii)
with respect to any Proceeding with respect to which Indemnitee may be or is made a party or may be otherwise entitled to seek
indemnification hereunder, does not include the full release of Indemnitee from all liability in respect of such Proceeding.
ACTIVE/105005427.2
7
Section 10. Procedure Upon Application for Indemnification.2
(a) Upon written request by Indemnitee for indemnification pursuant to Section 9(a), a determination, if
such determination is required by applicable law, with respect to Indemnitee’s entitlement to indemnification hereunder shall be
made in the specific case by one of the following methods: [(x) if a Change in Control shall have occurred and indemnification is
being requested by Indemnitee hereunder in his or her capacity as a director of the Company, by Independent Counsel in a written
opinion to the Board; or (y) in any other case,] (i) by a majority vote of the disinterested directors, even though less than a
quorum; (ii) by a committee of disinterested directors designated by a majority vote of the disinterested directors, even though
less than a quorum; or (iii) if there are no disinterested directors or if the disinterested directors so direct, by Independent Counsel
in a written opinion to the Board. For purposes hereof, disinterested directors are those members of the Board who are not parties
to the action, suit or proceeding in respect of which indemnification is sought. In the case that such determination is made by
Independent Counsel, a copy of Independent Counsel’s written opinion shall be delivered to Indemnitee and, if it is so determined
that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within thirty (30) days after such
determination. Indemnitee shall cooperate with the Independent Counsel or the Company, as applicable, in making such
determination with respect to Indemnitee’s entitlement to indemnification, including providing to such counsel or the Company,
upon reasonable advance request, any documentation or information which is not privileged or otherwise protected from
disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. The Company shall
likewise cooperate with Indemnitee and Independent Counsel, if applicable, in making such determination with respect to
Indemnitee’s entitlement to indemnification, including providing to such counsel and Indemnitee, upon reasonable advance
request, any documentation or information which is not privileged or otherwise protected from disclosure and which is
reasonably available to the Company and reasonably necessary to such determination. Any out-of-pocket costs or expenses
(including reasonable attorneys’ fees and disbursements) actually and reasonably incurred by Indemnitee in so cooperating with
the Independent Counsel or the Company shall be borne by the Company (irrespective of the determination as to Indemnitee’s
entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
2 Bracketed portions for CEO Director version only
ACTIVE/105005427.2
8
(b) If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to
Section 10(a), the Independent Counsel shall be selected by the Board[; provided that, if a Change in Control shall have occurred
and indemnification is being requested by Indemnitee hereunder in his or her capacity as a director of the Company, the
Independent Counsel shall be selected by Indemnitee]. Indemnitee [or the Company, as the case may be,] may, within ten (10)
days after written notice of such selection, deliver to the Company [or Indemnitee, as the case may be,] a written objection to
such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so
selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection
shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected
shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected
may not serve as Independent Counsel unless and until such objection is withdrawn or the Delaware Court has determined that
such objection is without merit. If, within twenty (20) days after the later of (i) submission by Indemnitee of a written request for
indemnification pursuant to Section 9(a), and (ii) the final disposition of the Proceeding, including any appeal therein, no
Independent Counsel shall have been selected without objection, either Indemnitee or the Company may petition the Delaware
Court for resolution of any objection which shall have been made by Indemnitee or the Company to the selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court
shall designate. The person with respect to whom all objections are so resolved or the person so appointed shall act as
Independent Counsel under Section 10(a) hereof. Upon the due commencement of any judicial proceeding or arbitration
pursuant to Section 12(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility
in such capacity (subject to the applicable standards of professional conduct then prevailing).
(c) Notwithstanding anything to the contrary contained in this Agreement, the determination of entitlement
to indemnification under this Agreement shall be made without regard to the Indemnitee’s entitlement to and availability of
insurance coverage, including advancement, payment or reimbursement of defense costs, expenses or covered loss under the
provisions of any applicable insurance policy (including, without limitation, whether such advancement, payment or
reimbursement is withheld, conditioned or delayed by the insurer(s)).
Section 11. Presumptions and Effect of Certain Proceedings.
(a) To the extent permitted by applicable law, in making a determination with respect to entitlement to
indemnification hereunder, it shall be presumed that Indemnitee is entitled to indemnification under this Agreement if Indemnitee
has submitted a request for indemnification in accordance with Section 9(a) of this Agreement, and the Company shall have the
burden of proof and the burden of persuasion by clear and convincing evidence to overcome that presumption in connection with
the making of any determination contrary to that presumption. Neither (i) the failure of the Company or of Independent Counsel
to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper
in the circumstances because Indemnitee has met the applicable standard of conduct, nor (ii) an actual determination by the
Company or by Independent Counsel that Indemnitee has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that Indemnitee has not met the applicable standard of conduct.
(b) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order,
settlement or conviction, or upon a plea of guilty, nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that
Indemnitee did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best
interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or
her conduct was unlawful.
ACTIVE/105005427.2
9
(c) Indemnitee shall be deemed to have acted in good faith if Indemnitee’s actions are based on the records
or books of account of the Company or any other Enterprise, including financial statements, or on information supplied to
Indemnitee by the directors, officers, agents or employees of the Company or any other Enterprise in the course of their duties, or
on the advice of legal counsel for the Company or any other Enterprise or on information or records given or reports made to the
Company or any other Enterprise by an independent certified public accountant or by an appraiser or other expert selected with
reasonable care by the Company or any other Enterprise. The provisions of this Section 11(c) shall not be deemed to be exclusive
or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of
conduct set forth in this Agreement. In addition, the knowledge and/or actions, or failure to act, of any director, manager, partner,
officer, employee, agent or trustee of the Company, any subsidiary of the Company, or any Enterprise shall not be imputed to
Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing
provisions of this Section 11(c) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith
and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to
overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.
Section 12. Remedies of Indemnitee.
(a) Subject to Section 12(f), in the event that (i) a determination is made pursuant to Section 10 of this
Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely
made pursuant to Section 8 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made
pursuant to Section 10(a) of this Agreement within sixty (60) days after receipt by the Company of the request for
indemnification for which a determination is to be made other than by Independent Counsel, (iv) payment of indemnification or
reimbursement of expenses is not made pursuant to Section 5 or 6 or the last sentence of Section 10(a) of this Agreement within
thirty (30) days after receipt by the Company of a written request therefor (including any invoices received by Indemnitee, which
such invoices may be redacted as necessary to avoid the waiver of any privilege accorded by applicable law) or (v) payment of
indemnification pursuant to Section 3 or 4 of this Agreement is not made within thirty (30) days after a determination has been
made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication by the Delaware Court of his
or her entitlement to such indemnification or advancement. Alternatively, Indemnitee, at his or her option, may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration
Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days
following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided,
however, that the foregoing time limitation shall not apply in respect of a proceeding brought by Indemnitee to enforce his or her
rights under Section 5 of this Agreement. The Company shall not oppose Indemnitee’s right to seek any such adjudication or
award in arbitration.
(b) In the event that a determination shall have been made pursuant to Section 10(a) of this Agreement that
Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 12 shall
be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 12, the Company shall
have the burden of proving Indemnitee is not entitled to indemnification or advancement, as the case may be.
(c) If a determination shall have been made pursuant to Section 10(a) of this Agreement that Indemnitee is
entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration
commenced pursuant to this Section 12, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material
fact necessary to make Indemnitee’s statement not materially
ACTIVE/105005427.2
10
misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced
pursuant to this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and
shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.
(e) The Company shall indemnify Indemnitee to the fullest extent permitted by law against any and all
Enforcement Expenses and, if requested by Indemnitee, shall (within thirty (30) days after receipt by the Company of a written
request therefor) advance, to the extent not prohibited by law, such Enforcement Expenses to Indemnitee, which are incurred by
Indemnitee in connection with any action brought by Indemnitee for indemnification or advancement from the Company under
this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company in the suit for which
indemnification or advancement is being sought. Such written request for advancement shall include invoices received by
Indemnitee in connection with such Enforcement Expenses but, in the case of invoices in connection with legal services, any
references to legal work performed or to expenditures made that would cause Indemnitee to waive any privilege accorded by
applicable law need not be included with the invoice.
(f) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to
indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding, including any
appeal therein.
Section 13. Non-exclusivity; Survival of Rights; Insurance; Subrogation.
(a) The rights of indemnification and to receive advancement as provided by this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter, the
Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of
this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any
action taken or omitted by such Indemnitee in his or her Corporate Status prior to such amendment, alteration or repeal. To the
extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement
than would be afforded currently under the Charter, Bylaws and this Agreement, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred
is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any
other right or remedy.
(b) To the extent that the Company maintains an insurance policy or policies providing liability insurance
for directors, managers, partners, officers, employees, agents or trustees of the Company or of any other Enterprise, Indemnitee
shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available
for any such director, manager, partner, officer, employee, agent or trustee under such policy or policies. If, at the time of the
receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the
Company shall give prompt notice of such claim to the insurers in accordance with the procedures set forth in the respective
policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the
Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies. Upon request of
Indemnitee, the Company shall also promptly provide to Indemnitee: (i) copies of all of the Company’s
ACTIVE/105005427.2
11
potentially applicable directors’ and officers’ liability insurance policies, (ii) copies of such notices delivered to the applicable
insurers, and (iii) copies of all subsequent communications and correspondence between the Company and such insurers
regarding the Proceeding.
(c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of
such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to
secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such
rights.
(d) The Company’s obligation to provide indemnification or advancement hereunder to Indemnitee who is
or was serving at the request of the Company as a director, manager, partner, officer, employee, agent or trustee of any other
Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement from such other
Enterprise.
Section 14. Duration of Agreement. This Agreement shall continue until and terminate upon the later of: (a) ten (10)
years after the date that Indemnitee shall have ceased to serve as [both a director and] an officer of the Company or (b) one (1)
year after the final termination of any Proceeding, including any appeal, then pending in respect of which Indemnitee is granted
rights of indemnification or advancement hereunder and of any proceeding commenced by Indemnitee pursuant to Section 12 of
this Agreement relating thereto. This Agreement shall be binding upon the Company and its successors and assigns and shall
inure to the benefit of Indemnitee and his or her heirs, executors and administrators. The Company shall require and cause any
successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part,
of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to
assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place.
Section 15. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or
unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this
Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be
invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired
thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed
reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto;
and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section
of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested thereby.
Section 16. Enforcement.
(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the
obligations imposed on it hereby in order to induce Indemnitee to serve or continue to serve as [a director and] an officer of the
Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as [a director and] an
officer of the Company.
(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with
respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Charter,
the Bylaws and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee
thereunder.
ACTIVE/105005427.2
12
Section 17. Modification and Waiver. No supplement, modification or amendment, or waiver of any provision, of
this Agreement shall be binding unless executed in writing by the parties thereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute
a continuing waiver. No supplement, modification or amendment of this Agreement or of any provision hereof shall limit or
restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee prior to such
supplement, modification or amendment.
Section 18. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served
with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or
matter which may be subject to indemnification, reimbursement or advancement as provided hereunder. The failure of
Indemnitee to so notify the Company or any delay in notification shall not relieve the Company of any obligation which it may
have to Indemnitee under this Agreement or otherwise. unless, and then only to the extent that, the Company did not otherwise
learn of the Proceeding and such delay is materially prejudicial to the Company’s ability to defend such Proceeding or matter;
and, provided, further, that notice will be deemed to have been given without any action on the part of Indemnitee in the event the
Company is a party to the same Proceeding.
Section 19. Notices. All notices, requests, demands and other communications under this Agreement shall be in
writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice
or other communication shall have been directed, (ii) mailed by certified or registered mail with postage prepaid, on the third
business day after the date on which it is so mailed, (iii) mailed by reputable overnight courier and receipted for by the party to
whom said notice or other communication shall have been directed or (iv) sent by facsimile transmission, with receipt of oral
confirmation that such transmission has been received:
(a) If to Indemnitee, at such address as Indemnitee shall provide to the Company.
(b) If to the Company to:
Adicet Bio, Inc.
200 Clarendon Street, Floor 6
Boston, MA 02116
Attention: President and CEO
or to any other address as may have been furnished to Indemnitee by the Company.
Section 20. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for
in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee,
shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to
be paid in settlement and/or for Expenses, in connection with any Proceeding in such proportion as is deemed fair and reasonable
in light of all of the circumstances in order to reflect (i) the relative benefits received by the Company and Indemnitee in
connection with the event(s) and/or transaction(s) giving rise to such Proceeding; and/or (ii) the relative fault of the Company
(and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transactions.
Section 21. Internal Revenue Code Section 409A. The Company intends for this Agreement to comply with the
Indemnification exception under Section 1.409A-1(b)(10) of the regulations promulgated under the Internal Revenue Code of
1986, as amended (the “Code”), which provides that indemnification of, or the purchase of an insurance policy providing for
payments of, all or part of the expenses incurred or damages paid or payable
ACTIVE/105005427.2
13
by Indemnitee with respect to a bona fide claim against Indemnitee or the Company do not provide for a deferral of
compensation, subject to Section 409A of the Code, where such claim is based on actions or failures to act by Indemnitee in his
or her capacity as a service provider of the Company. The parties intend that this Agreement be interpreted and construed with
such intent.
Section 22. Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties
shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its
conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 12(a) of this
Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising
out of or in connection with this Agreement shall be brought only in the Delaware Court, and not in any other state or federal
court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the
Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) consent to
service of process at the address set forth in Section 19 of this Agreement with the same legal force and validity as if served upon
such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or
proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding
brought in the Delaware Court has been brought in an improper or inconvenient forum.
Section 23. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall
not be deemed to constitute part of this Agreement or to affect the construction thereof.
Section 24. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which
shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only
one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of
this Agreement.
Section 25. Monetary Damages Insufficient/Specific Enforcement. The Company and Indemnitee agree that a
monetary remedy for breach of this Agreement may be inadequate, impracticable and difficult of proof, and further agree that
such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree that Indemnitee may enforce this
Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or
irreparable harm (having agreed that actual and irreparable harm will result in not forcing the Company to specifically perform its
obligations pursuant to this Agreement) and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be
precluded from seeking or obtaining any other relief to which he may be entitled. The Company and Indemnitee further agree
that Indemnitee shall be entitled to such specific performance and injunctive relief, including temporary restraining orders,
preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertaking in connection
therewith. The Company acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee by
the Court, and the Company hereby waives any such requirement of a bond or undertaking.
ACTIVE/105005427.2
[Remainder of Page Intentionally Left Blank]
14
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above
written.
ADICET BIO, INC.
By:
Name:
Title:
[Name of Indemnitee]
ACTIVE/105005427.2
ADICET BIO, INC.
Exhibit 10.18
AMENDED AND RESTATED NON-EMPLOYEE DIRECTOR COMPENSATION POLICY
The purpose of this Amended and Restated Non-Employee Director Compensation Policy (the “Policy”) of Adicet Bio, Inc. (the
“Company”), is to provide a total compensation package that enables the Company to attract and retain, on a long-term basis,
high-caliber directors who are not employees or officers of the Company or its subsidiaries. In furtherance of the purpose stated
above, all non-employee directors shall be paid compensation for services provided to the Company asset forth below:
Cash Retainers
Annual Retainer for Board Membership: $35,000 for general availability and participation in meetings and conference calls of
our Board of Directors (the “Board”). No additional compensation will be paid for attending individual meetings of the Board.
Additional Annual Retainer for Non-Executive Chair of the Board: $30,000
Additional Annual Retainers for Committee Membership:
Audit Committee Chair:
Audit Committee member:
Compensation Committee Chair:
Compensation Committee member:
Nominatingand Corporate Governance Committee Chair:
Nominatingand Corporate Governance Committee member:
$15,000
$7,500
$10,000
$5,000
$8,000
$4,000
No additional compensation for attending individual committee meetings. All cash retainers will be paid quarterly, in arrears,
or upon the earlier resignation or removal of the non-employee directors, pro-rated based on the number of actual days served
by the director during such calendar quarter. Chair and committee member retainers are in addition to retainers for members of
the Board.
ACTIVE/114637232.2
1
Equity Retainers
Initial Award: An initial, one-time equity award (the “Initial Award”) of 37,000 options to each new non-employee director
upon his or her election to the Board, which shall vest in thirty-six (36) equal monthly beginning on the date of grant, however,
that all vesting shall cease if the director resigns from the Board or otherwise ceases to serve as a director of the Company. This
Initial Award applies only to non-employee directors who are first elected to the Board subsequent to the Company’s initial
public offering. If the Initial Award is in the form of a stock option, such stock option shall have a per share exercise price
equal to the Fair Market Value (as defined in the Company’s 2018 Stock Option and Incentive Plan) of the Company’s common
stock on the date of grant.
Annual Award: On each date of the Company’s Annual Meeting of Stockholders following the completion of the Company’s
initial public offering (the “Annual Meeting”), each continuing non-employee member of the Board, other than a director
receiving an Initial Award, will receive an annual equity award (the “Annual Award”) of 18,500 options, which shall vest in
full upon the earlier to occur of the first anniversary of the date of grant or the date of the next Annual Meeting; provided,
however, that all vesting shall cease if the director resigns from the Board or otherwise ceases to serve as a director, unless the
Board determines that the circumstances warrant continuation of vesting. If the Annual Award is in the form of a stock option,
such stock option shall have a per share exercise price equal to the Fair Market Value (as defined in the Company’s 2018 Stock
Option and Incentive Plan) of the Company’s common stock on the date of grant.
Expenses
The Company will reimburse all reasonable out-of-pocket expenses incurred by non-employee directors in attending meetings
of the Board or any Committee.
Adopted by the Board on December 21, 2017, as amended by the Board on April 30, 2021 and subsequently on January 27, 2022.
ACTIVE/114637232.2
2
ADICET BIO, INC.
AMENDED AND RESTATED
SENIOR EXECUTIVE CASH INCENTIVE BONUS PLAN
Exhibit 10.19
1.
Purpose
This Senior Executive Cash Incentive Bonus Plan (the “Incentive Plan”) is intended to provide an incentive for superior
work and to motivate eligible executives of Adicet Bio, Inc. (the “Company”) and its subsidiaries toward even higher
achievement and business results, to tie their goals and interests to those of the Company and its stockholders and to enable the
Company to attract and retain highly qualified executives. The Incentive Plan is for the benefit of Covered Executives (as
defined below).
2.
Covered Executives
From time to time, the Compensation Committee of the Board of Directors of the Company (the “Compensation
Committee”) may select certain key executives (the “Covered Executives”) to be eligible to receive bonuses hereunder.
Participation in this Plan does not change the “at will” nature of a Covered Executive’s employment with the Company.
3.
4.
Administration
The Compensation Committee shall have the sole discretion and authority to administer and interpret the Incentive Plan.
Bonus Determinations
a.
Corporate Performance Goals. A Covered Executive may receive a bonus payment under the Incentive Plan
based upon the attainment of one or more performance objectives that are established by the Compensation Committee in its sole
discretion and relate to financial and/or operational metrics with respect to the Company or any of its subsidiaries (the
“Corporate Performance Goals”), including the following: cash flow (including, but not limited to, operating cash flow and free
cash flow); research and development, publication, clinical and/or regulatory milestones; revenue; corporate revenue; earnings
before interest, taxes, depreciation and amortization; net income (loss) (either before or after interest, taxes, depreciation and/or
amortization); changes in the market price of the Company’s common stock; economic value-added; acquisitions or strategic
transactions, including licenses, collaborations, joint ventures or promotion arrangements; operating income (loss); return on
capital, assets, equity, or investment; total stockholder returns; coverage decisions; return on sales; gross or net profit levels;
productivity; expense efficiency; margins; operating efficiency; working capital; earnings (loss) per share of the Company’s
common stock; sales or market shares; number of prescriptions or prescribing physicians; revenue; corporate revenue; operating
income and/or net annual recurring revenue; or any other performance goal selected by the Compensation Committee, any of
which may be (A) measured in absolute terms or compared to any incremental increase, (B) measured in terms of growth, (C)
compared to another company or companies or to results of a peer group, (D) measured against the market as a whole and/or as
compared to applicable market indices and/or (E) measured on a pre-tax or post-tax basis (if applicable). Further, any Corporate
Performance Goals may be used to measure the performance of the Company as a whole or a business unit or other segment of
the Company, or one or more product lines or specific markets. The Corporate Performance Goals may differ from Covered
Executive to Covered Executive and from performance period to performance period.
b.
Calculation of Corporate Performance Goals. At the beginning of each applicable performance period, the
Compensation Committee will determine whether any significant element(s) will be included in or
excluded from the calculation of any Corporate Performance Goal with respect to any Covered Executive. In all other respects,
Corporate Performance Goals will be calculated in accordance with the Company’s financial statements, generally accepted
accounting principles, or under a methodology established by the Compensation Committee at the beginning of the performance
period and which is consistently applied with respect to a Corporate Performance Goal in the relevant performance period.
c.
Target; Minimum; Maximum. Each Corporate Performance Goal shall have a “target” (100 percent attainment
of the Corporate Performance Goal) and may also have a “minimum” hurdle and/or a “maximum” amount.
d.
Bonus Requirements; Individual Goals. Except as otherwise set forth in this Section 4(d): (i) any bonuses paid
to Covered Executives under the Incentive Plan shall be based upon objectively determinable bonus formulas that tie such
bonuses to one or more performance targets relating to the Corporate Performance Goals, (ii) bonus formulas for Covered
Executives shall be adopted in each performance period by the Compensation Committee and communicated to each Covered
Executive at the beginning of each performance period and (iii) no bonuses shall be paid to Covered Executives unless and until
the Compensation Committee makes a determination with respect to the attainment of the performance targets relating to the
Corporate Performance Goals. Notwithstanding the foregoing, the Compensation Committee may adjust bonuses payable under
the Incentive Plan based on achievement of one or more individual performance objectives or pay bonuses (including, without
limitation, discretionary bonuses) to Covered Executives under the Incentive Plan based on individual performance goals and/or
upon such other terms and conditions as the Compensation Committee may in its discretion determine.
e.
Individual Target Bonuses. The Compensation Committee shall establish a target bonus opportunity for each
Covered Executive for each performance period. For each Covered Executive, the Compensation Committee shall have the
authority to apportion the target award so that a portion of the target award shall be tied to attainment of Corporate Performance
Goals and a portion of the target award shall be tied to attainment of individual performance objectives.
f.
Employment Requirement. Subject to any additional terms contained in a written agreement between the
Covered Executive and the Company, the payment of a bonus to a Covered Executive with respect to a performance period shall
be conditioned upon the Covered Executive’s employment by the Company on the bonus payment date. If a Covered Executive
was not employed for an entire performance period, the Compensation Committee may pro rate the bonus based on the number
of days employed during such period.
5.
Timing of Payment
a.
With respect to Corporate Performance Goals established and measured on a basis more frequently than
annually (e.g., quarterly or semi-annually), the Corporate Performance Goals will be measured at the end of each performance
period after the Company’s financial reports with respect to such period(s) have been published. If the Corporate Performance
Goals and/or individual goals for such period are met, payments will be made as soon as practicable following the end of such
period, but not later than 74 days after the end of the fiscal year in which such performance period ends.
b.
With respect to Corporate Performance Goals established and measured on an annual or multi-year basis,
Corporate Performance Goals will be measured as of the end of each such performance period (e.g., the end of each fiscal year)
after the Company’s financial reports with respect to such period(s) have been published. If the Corporate Performance Goals
and/or individual goals for any such period are met, bonus payments will be made as soon as practicable, but not later than 74
days, after the end of the relevant fiscal year.
c.
For the avoidance of doubt, bonuses earned at any time in a fiscal year must be paid no later than 74 days after
the last day of such fiscal year.
6.
Amendment and Termination
The Company reserves the right to amend or terminate the Incentive Plan at any time in its sole discretion.
7. Company Recoupment Rights
A Covered Executive’s rights with respect to any award granted pursuant to the Incentive Plan shall in all events be
subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with (i) any right that the Company
may have under any Company clawback, forfeiture or recoupment policy as in effect from time to time or other agreement or
arrangement with a Covered Executive, or (ii) applicable law.
Adopted by the Board on December 21, 2017, as amended on January 27, 2022.
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
We consent to the incorporation by reference in the registration statements (Nos. 333-258763, 333-254192, 333-250033, 333-249275, 333-237123, 333-
230363, and 333-222746) on Form S-8 and (Nos. 333-256088 and 333-254193) on Form S-3 of our report dated March 15, 2022, with respect to the
consolidated financial statements of Adicet Bio, Inc.
/s/ KPMG LLP
Boston, Massachusetts
March 15, 2022
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a) / RULE 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED
I, Chen Schor, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2021 of Adicet Bio, Inc. (the “registrant”);
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(s) 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:
Exhibit 31.1
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(s) 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.
Dated: March 15, 2022
/s/ Chen Schor
Chen Schor
President and Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a) / RULE 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED
I, Nick Harvey, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2021 of Adicet Bio, Inc. (the “registrant”);
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(s) 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:
Exhibit 31.2
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(s) 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.
Dated: March 15, 2022
/s/ Nick Harvey
Nick Harvey
Chief Financial Officer
(Principal Financial and Accounting Officer)
CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION
1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Adicet Bio, Inc. (the “Company”) for the fiscal year ended December 31, 2021 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certify, pursuant to 18 U.S.C. Section 1350, that,
to the best of their knowledge:
(1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Exhibit 32.1
Dated: March 15, 2022
Dated: March 15, 2022
/s/ Chen Schor
Chen Schor
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Nick Harvey
Nick Harvey
Chief Financial Officer
(Principal Financial and Accounting Officer)