UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
☐
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 Number 001-37449
ALPINE IMMUNE SCIENCES, INC.
(Exact name of Registrant as specified in its Charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
188 East Blaine Street Suite 200
Seattle, WA
(Address of principal executive offices)
20-8969493
(I.R.S. Employer
Identification No.)
98102
(Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
Registrant’s telephone number, including area code: (206) 788-4545
Title of each class
Common Stock, par value $0.001 per share
Trading Symbol
ALPN
Name of each exchange on which registered
The Nasdaq Stock Market LLC
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 and posted 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
Emerging growth company
☐
☒
☐
Accelerated filer
Smaller reporting company
☐
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based on the closing price of the shares of common stock on the Nasdaq Stock
Market on June 30, 2021, was approximately $104.8 million. Shares of common stock held by each executive officer and director and by each other person who may be deemed to be an affiliate
of the registrant, have been excluded from this computation. The determination of affiliate status for this purpose is not necessarily a conclusive determination for other purposes.
The number of shares of the registrant’s common stock outstanding as of March 7, 2022 was 30,294,434.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Definitive Proxy Statement relating to the 2022 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission
subsequent to the date hereof, are incorporated by reference into Part III of this Report. Such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days
following the end of the Registrant’s fiscal year ended December 31, 2021.
Table of Contents
Summary Risk Factors
Forward-Looking Statements
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 Accounting Fees and Services
Exhibits, Financial Statement Schedules
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.
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In this report, unless otherwise stated or as the context otherwise requires, references to “Alpine,” “the Company,” “we,” “us,” “our” and similar
references refer to Alpine Immune Sciences, Inc. All rights reserved. “NEON-1," "NEON-2," "Synergy," and the Alpine logo are registered trademarks or
trademarks of Alpine Immune Sciences, Inc. in various jurisdictions.This report also contains registered marks, trademarks, and trade names of other
companies. All other trademarks, registered marks, and trade names appearing in this report are the property of their respective holders.
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Summary Risk Factors
Our business is subject to numerous risks and uncertainties, including those highlighted in the section of this report captioned “Risk Factors.” The
following is a summary of the principal risks we face:
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Our approach to the discovery and development of innovative therapeutic treatments based on our technology is unproven and may not result
in marketable products.
Our therapeutic candidates are in early stages of development and may fail in development or suffer delays that materially and adversely
affect their commercial viability.
Product development involves a lengthy and expensive process with an uncertain outcome, and results of earlier preclinical and clinical trials
may not be predictive of future clinical trial results.
• We face competition from entities that have developed or may develop therapeutic candidates for our target disease indications, including
companies developing novel treatments and technology platforms based on modalities and technology similar to us. If these companies
develop technologies or therapeutic candidates more rapidly than we do, or their technologies, including delivery technologies, are more
effective, our ability to develop and successfully commercialize therapeutic candidates may be adversely affected.
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To date, our revenue has been primarily derived from our collaboration agreements, and our success will be dependent, in part, on our
collaborators’ efforts to develop our therapeutic candidates.
If third parties on which we depend to conduct our clinical or preclinical studies, or any future clinical trials, do not perform as expected, fail
to satisfy regulatory or legal requirements, or miss expected deadlines, our development program could be delayed, which may result in
materially adverse effects on our business, financial condition, results of operations, and prospects.
• We may not successfully engage in strategic transactions, including any additional collaborations we seek, which could adversely affect our
ability to develop and commercialize therapeutic candidates, impact our cash position, increase our expenses, and present significant
distractions to our management.
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If any of our therapeutic candidates are approved for marketing and commercialization and we are unable to develop sales, marketing and
distribution capabilities on our own or enter into agreements with third parties to perform these functions on acceptable terms, we may be
unable to successfully commercialize any such future products.
The COVID-19 coronavirus could adversely impact our business, including our clinical trials.
• We depend on our information technology systems and any failure of these systems could harm our business.
• We will need to raise substantial additional funds to advance development of our therapeutic candidates, and we cannot guarantee we will
have sufficient funds available in the future to develop and commercialize our current or future therapeutic candidates.
• We are an early stage biopharmaceutical company with a history of losses, we expect to continue to incur significant loses for the foreseeable
future, we may never achieve or maintain profitability, and we have a limited operating history that may make it difficult for investors to
evaluate the potential success of our business.
•
If we are not able to obtain and enforce patent protection for our technology, including therapeutic candidates, therapeutic products, and
platform technology, development of our therapeutic candidates and platform, and commercialization of our therapeutic products may be
materially and adversely affected.
• We may license patent rights from third-party owners or licensees. If such owners or licensees do not properly or successfully obtain,
maintain or enforce the patents underlying such licenses, or if they retain or license to others any competing rights, our competitive position
and business prospects may be materially and adversely affected.
• We or our licensors, collaborators, or any future strategic partners may become subject to third-party claims or litigation alleging infringement
of patents or other proprietary rights or seeking to invalidate patents or other proprietary rights, and we may need to resort to litigation to
protect or enforce our patents or other proprietary rights, all of which could be costly, time consuming, delay or prevent the development of
our therapeutic candidates and commercialization of our therapeutic products, or put our patents and other proprietary rights at risk.
•
If we fail to comply with our obligations under any license, collaboration, or other agreements, we may be required to pay damages and could
lose intellectual property rights necessary for developing and protecting our technology, including our platform technology, therapeutic
candidates, and therapeutic products, or we could lose
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certain rights to grant sublicenses, either of which could have a material adverse effect on our results of operations and business prospects.
• We may be unable to obtain U.S. or foreign regulatory approval and, as a result, may be unable to commercialize our therapeutic candidates.
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The healthcare industry is heavily regulated in the U.S. at the federal, state, and local levels, and our failure to comply with applicable
requirements may subject us to penalties and negatively affect our financial condition.
Our stock price may be volatile, and an active, liquid, and orderly trading market may not develop for our common stock. As a result,
stockholders may not be able to resell shares at or above their purchase price.
Our officers and directors, and their respective affiliates, have a controlling influence over our business affairs and may make business
decisions with which stockholders disagree and which may adversely affect the value of their investment.
Our Risk Factors are not guarantees that no such conditions exist as of the date of this report and should not be interpreted as an affirmative
statement that such risks or conditions have not materialized, in whole or in part.
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Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections.
In some cases you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,”
“intend,” “could,” “would,” “project,” “plan,” “expect,” or similar expressions, or the negative or plural of these words or expressions. You should read
these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other
“forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the
assumptions that underlie these statements. These forward-looking statements include, but are not limited to:
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our ability to identify, develop and commercialize additional products or product candidates;
our estimates regarding our expenses, revenues, anticipated capital requirements and our needs for additional financing;
our ability to obtain funding for our operations;
the implementation of our business model and strategic plans for our business and technology;
the timing of the commencement, progress and receipt of data from any of our preclinical and clinical trials;
the expected results of any preclinical or clinical trial and the impact on the likelihood or timing of any regulatory approval;
the scope of protection we are able to establish and maintain for intellectual property rights covering our technology and product candidates;
the anticipated impact of the COVID-19 pandemic on our business, research and clinical development plans and timelines and results of
operations;
the timing or likelihood of regulatory filings and approvals;
the therapeutic benefits, effectiveness and safety of our product candidates;
the rate and degree of market acceptance and clinical utility of any future products;
our ability to maintain and establish collaborations;
our ability to achieve milestones in our current and any future collaborations;
our expectations regarding market risk, including interest rate changes;
our expectations regarding the sufficiency of our cash and cash equivalents to fund operations for at least the next 12 months;
developments relating to our competitors and our industry; and
our expectations regarding licensing, acquisitions and strategic operations.
These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated
in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part I, Item
1A. Risk Factors, and elsewhere in this report. Forward-looking statements are based on our management’s beliefs and assumptions and on information
currently available to our management. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to
update or revise these statements in light of future developments, except as required by law.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based
upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such
information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review
of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these
statements.
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PART I
Item 1. Business
Overview
We are a clinical-stage biopharmaceutical company dedicated to discovering and developing innovative, protein-based immunotherapies to treat
cancer and autoimmune and inflammatory diseases. Our approach includes a proprietary scientific platform that converts native immune system proteins
into differentiated, multi-targeted therapeutics. We believe our strategies are capable of meaningfully modulating the human immune system and
significantly improving outcomes in patients with serious diseases.
Autoimmune/Inflammatory Diseases
ALPN-101, or acazicolcept, is a dual Inducible T cell Costimulator, or ICOS, and CD28 antagonist intended for the treatment of autoimmune and
inflammatory diseases. Preclinical studies with acazicolcept have demonstrated efficacy in models of systemic lupus erythematosus, or SLE, Sjögren’s
syndrome, or SjS, arthritis, inflammatory bowel disease, multiple sclerosis, type 1 diabetes, uveitis, and graft versus host disease. We have evaluated
acazicolcept in a Phase 1 healthy volunteer study and initiated patient dosing in Synergy, a global, randomized, double-blind, placebo-controlled Phase 2
study of acazicolcept in adults with moderate-to-severe SLE. In June 2020, we entered into an Option and License Agreement with AbbVie Ireland
Unlimited Company, or AbbVie, which grants AbbVie an exclusive option to take an exclusive license to acazicolcept. Through December 31, 2021, we
have received $105.0 million in upfront and pre-option exercise development milestones as part of the Option and License Agreement with AbbVie, or the
AbbVie Agreement.
ALPN-303 is a dual B cell cytokine antagonist, being developed for the treatment of B cell mediated inflammatory and autoimmune diseases.
Engineered using our proprietary directed evolution platform, ALPN-303 potently inhibits the pleiotropic B cell cytokines B cell activating factor (BAFF,
BLyS) and a proliferation inducing ligand (APRIL), which play key roles in B cell development, differentiation, and survival, and together contribute to the
pathogenesis of multiple autoimmune diseases such as SLE and many other autoantibody-related inflammatory diseases. Data presented at the American
College of Rheumatology (ACR) Convergence 2021 Annual Meeting demonstrated that ALPN-303 inhibits the activity of the B cell cytokines APRIL and
BAFF more potently than wild-type TACI-Fc counterparts, as well as anti-BAFF and anti-APRIL monoclonal antibodies. In addition, ALPN-303 has been
well-tolerated in preclinical models and exhibited superior pharmacokinetics and pharmacodynamics over wild-type TACI-Fc counterparts, including
superior serum exposure, suppression of T-dependent antibody production, and/or serum immunoglobulins in mice and/or cynomolgus monkeys. A first-in-
human, Phase 1 study of ALPN-303 in healthy volunteers was initiated in the fourth quarter of 2021, with top-line results targeted by mid-2022. This
randomized, placebo-controlled study is designed to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of ALPN-303 administered
intravenously and subcutaneously. We are planning to initiate patient-based studies in the second half of 2022 including SLE, and possibly other
autoantibody-related diseases in other therapeutic areas.
In December 2021, we entered into an exclusive license and collaboration agreement, or the Horizon Agreement, with Horizon Therapeutics Ireland
DAC, or Horizon, for the development and commercialization of up to four preclinical candidates generated from our unique discovery platform for
autoimmune and inflammatory diseases. Under the terms of the agreement, Horizon made an upfront payment to us of $25.0 million as well as an equity
investment for which they paid $15.0 million, a 25 percent premium to the 30-day volume-weighted average share price as of December 9, 2021. In
addition, we are eligible to receive up to $381.0 million per program, or approximately $1.5 billion in total, in future success-based payments related to
development, regulatory and commercial milestones as well as tiered royalties on global net sales.
Immuno-oncology
Our lead oncology program is ALPN-202, or davoceticept, a conditional CD28 costimulator and dual checkpoint inhibitor intended for the
treatment of cancer. Preclinical in vivo data have demonstrated monotherapy efficacy in tumor models superior to approved therapies. In June 2020, we
initiated NEON-1, a Phase 1 monotherapy dose escalation and expansion study in patients with advanced malignancies. Initial data from NEON-1 were
presented at the 2021 American Society of Clinical Oncology (ASCO) Virtual Meeting demonstrating that davoceticept was well-tolerated as of the cutoff
date (April 22, 2021) with evidence of peripheral T cell modulation consistent with CD28 agonism. In addition, although most enrolled participants had
tumors considered classically non-responsive to immunotherapies, the majority derived clinical benefit as defined as a best outcome of stable disease or
better. Completion of dose escalation for NEON-1 and initiation of expansion cohorts is anticipated in the first half of 2022.
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In June 2021, we announced a collaboration and supply agreement with Merck to evaluate the safety and efficacy of davoceticept in combination
with Merck’s anti-PD-1 therapy KEYTRUDA® (pembrolizumab) in a Phase 1 dose escalation and expansion study. The clinical trial, NEON-2, was
initiated in June 2021and is currently subject to a partial clinical hold. As discussed further below, on March 7, 2022, we announced that the FDA placed a
partial clinical hold on the NEON-2 trial in response to the death of a study participant in the NEON-2 trial. The participant’s death was attributed to
cardiogenic shock, considered by the treating physicians as likely related to immune-mediated myocarditis, or possibly infection. Participants who are
currently enrolled in the NEON-2 trial may continue to receive davoceticept and pembrolizumab, although no new participants may be enrolled until the
partial clinical hold is resolved. This partial clinical hold does not affect the ongoing NEON-1 clinical trial of davoceticept as monotherapy
(NCT04186637).
Our scientific platform has also generated immune modulatory proteins with the potential of improving engineered cellular therapies such as
chimeric antigen receptor T cells, T cell receptor-engineered T cells, and tumor infiltrating lymphocytes. In May 2019, we signed a collaboration and
license agreement with Adaptimmune Therapeutics plc, or Adaptimmune, to develop next-generation SPEAR™ T cell products which incorporate our
secreted and transmembrane immunomodulatory protein (termed SIP™ and TIP™) technology. We intend to continue to leverage our existing pipeline and
platform to actively explore and evaluate potential value-creating partnering opportunities.
Our Strategy
Our goal is to discover and develop modern therapies to treat patients with serious conditions such as cancer and autoimmune/inflammatory
diseases. To achieve our goals, we intend to:
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aggressively move our lead autoimmune/inflammatory program acazicolcept through clinical development as part of the AbbVie Agreement,
including conducting Synergy, our Phase 2 study for the treatment of SLE;
aggressively move our second autoimmune/inflammatory program ALPN-303 through a Phase 1 study in healthy volunteers and into patient-
based studies for the treatment of B cell mediated autoimmune/inflammatory diseases;
aggressively move our lead oncology program davoceticept through clinical development for the treatment of cancer, and;
• maximize the value of our pipeline and platform via potential partnering activities.
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Product Pipeline
We have a diverse pipeline of novel therapies, as shown in Figure 1 below.
Our Scientific Platform
Figure 1
The human immune system is a complex network of biological processes and structures evolved to protect humans from external infections and
harmful changes of internal cells. Within the immune system, proteins play a key role in a variety of essential functions, including recognition of foreign
and self-antigens, cell adhesion and trafficking, and modulation of cellular activity through costimulatory or inhibitory signaling. Our scientific platform
seeks to develop novel therapeutics by engineering native, or so-called “wild-type,” proteins with unique properties that may benefit patients with cancer or
inflammatory diseases. We have focused our efforts to-date on two major protein superfamilies that play critical roles in the regulation of immune cell
signaling and activity: the immunoglobulin superfamily, or IgSF, and the tumor necrosis factor (receptor) superfamily, or TNFSF/TNFRSF.
The IgSF is the largest family of adhesion, costimulatory (activating), and inhibitory (blocking) proteins found on the surface of immunological,
neurological, and other human cell types. These cell surface and soluble molecules are broadly involved with recognition of antigens, assisting in the
formation of the immune synapse, and performing costimulatory, coinhibitory, and cytokine receptor signaling functions. This family includes many well-
known targets, such as those seen in Figure 2. We believe the IgSF protein family members may be particularly valuable because many IgSF proteins
naturally bind multiple binding partners, also referred to as “counterstructures.” Acazicolcept and davoceticept are both derived from members of the IgSF.
TNFSF/TNFRSF proteins are expressed broadly in the immune system and play a critical role in immune cell signaling and proliferation.
TNFSF/TNFRSF members are composed of 48 unique proteins that are structurally similar and are
Figure 2
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characterized by their ability to bind to trimeric tumor necrosis factors (Figure 3). Members of the TNFSF/TNFRSF include many clinically relevant
targets with applications in both autoimmune disease and immuno-oncology (e.g., CD40, TACI, BCMA, 4-1BB, TNFα).
The TNF Superfamily
Figure 3
Our scientists create engineered proteins from IgSF members (variant immunoglobulin domains, or vIgDs) and TNFSF/TNFRSF members (variant
TNF domains, or vTDs). We use directed evolution, which is an iterative scientific engineering process purposefully conducted to modify an IgSF and
TNFSF/TNFRSF protein for a desired therapeutic function. The potential to create therapies capable of working within a formed immune synapse, forcing
a synapse to occur, or preventing a synapse from occurring are important, novel attributes of our scientific platform.
Figure 4 illustrates the process of directed evolution in our scientific platform. Our scientists utilize yeast display protein library strategies to
identify variants of wild-type proteins with desired binding characteristics. We start with a wild-type IgSF or TNFSF/TNFRSF protein and then enter a
cycle of library generation and yeast display. Flow cytometry or other methods are used to sort for yeast clones displaying variants with desired binding
characteristics. Biologic and biophysical assays of purified proteins assess biological function and manufacturing characteristics. The end product is an
optimized vIgD or vTD. Additional cycles can be carried out by building next generation libraries from the output of prior libraries to result in further
optimization.
Figure 4
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Our scientific platform is generally able to improve upon native IgSF or TNFSF/TNFRSF activity regardless of whether natural binding affinity is
weak or strong. When starting affinity is very weak, techniques employed by our scientists have accomplished several thousand-fold increases in binding
affinity with sometimes as few as two library generation cycles. Even when starting affinity is very high, our scientific platform can still improve binding
affinities. The same general strategies can be used when the desired therapeutic profile requires reduced affinity compared to the wild-type protein. We
have applied our scientific platform to several IgSF and TNFSF/TNFRSF protein targets.
We believe our vIgDs and vTDs are highly flexible. In many cases, a single affinity-maturation campaign can result in multiple domains suitable for
use in the formats such as those illustrated in Figure 5 and further described below.
vIgD-Fc or vTD-Fc
Figure 5
A vIgD- or vTD-Fc fusion protein is the simplest format. Our lead autoimmune/inflammatory program, acazicolcept, and lead oncology program,
davoceticept, are both examples of vIgD-Fc formats. ALPN-303 is an example of a vTD-Fc format. The engineered vIgD or vTD protein is fused to an Fc
backbone. Combining vIgDs or vTDs with antibody Fc domains to make Fc fusion proteins potentially allows for better expression, facilitates purification,
and improves pharmacokinetic (dosing) properties. Fc fusion proteins are a standard format in the industry, with examples such as etanercept, abatacept,
and belatacept. A vIgD- or vTD-Fc could potentially be administered intravenously, subcutaneously, topically, or via other methods of delivery.
Cell Therapy Enhancement
Our scientific platform has also generated immune modulatory proteins with the potential of improving engineered cellular therapies, such as CAR-
Ts, TCR-Ts, or TILs.
Acazicolcept, a Dual ICOS/CD28 Antagonist for Autoimmune/Inflammatory Diseases
Our lead autoimmune/inflammatory disease program, acazicolcept, is an Fc fusion protein of a human inducible T cell costimulator ligand, or
ICOSL, vIgD designed to inhibit simultaneously the CD28 and ICOS T cell costimulatory pathways (Figure 6). This vIgD is fused to an “effectorless” Fc
backbone and is intended for the potential treatment of autoimmune/inflammatory diseases. Notably, acazicolcept is not a bispecific antibody construct. A
traditional bispecific might be constructed of one domain binding ICOS and one domain binding CD28. Instead, acazicolcept makes use of a novel single
vIgD domain capable of binding both ICOS and CD28 engineered by our scientists using our proprietary scientific platform.
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Figure 6
CD28 has been long recognized to be required for naïve T cell activation. The therapeutic inhibitors of the CD28 pathway (e.g., abatacept, CTLA4-
Ig; and belatacept, a second generation CTLA4-Ig) have proven valuable for the treatment of some inflammatory arthritis conditions (rheumatoid arthritis,
juvenile idiopathic arthritis, psoriatic arthritis) and for the prevention of renal allograft rejection or graft versus host disease. However, therapeutic blockade
of the CD28 pathway, primarily as studied with abatacept, has not been successful in several other inflammatory diseases (e.g., Crohn’s disease, lupus
nephritis, multiple sclerosis) despite extensive evidence implicating T cells in disease pathogenesis and evidence of clinical biological activity. This
suggests an additional pathogenic costimulatory pathway(s) remains unaddressed.
ICOS is part of the CD28 costimulatory family of molecules, including PD-1, CD28, and CTLA-4. ICOS is related to CD28, but, in contrast, is
poorly expressed in naïve T cells. ICOS is, however, rapidly induced upon T cell activation. It appears to be a dominant costimulatory pathway in at least
some effector or pathogenic T cells, such as potentially in the absence of CD28. Elevated levels of ICOS‑expressing T cells have been described in an
increasing number of autoimmune/inflammatory diseases, correlating with disease activity. At the same time, inhibition of ICOS is effective in several
preclinical inflammatory disease models. The ICOS pathway may therefore represent a major costimulatory pathway, nonredundant with CD28, and highly
relevant to autoimmune/inflammatory diseases.
We have performed a number of preclinical experiments demonstrating acazicolcept is active in both in vitro and in vivo models, several of which
are described below.
A potent immunomodulator of diseased cells
Acazicolcept inhibits cytokine production from human peripheral blood mononuclear cells in vitro more potently than single CD28 (abatacept, or
CTLA4-Ig) or ICOS (prezalumab, or anti-ICOSL mAb) pathway inhibitors alone or in combination (Figure 7).
Figure 7
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Sjögren’s Syndrome Model
Sjögren’s syndrome is an autoimmune disease in which immune cells attack the glands that produce saliva and tears, as well as other internal
organs. In an animal model of salivary gland inflammation (sialoadenitis), a key organ manifestation of Sjögren’s syndrome, acazicolcept appeared more
efficacious in reducing the incidence and severity of sialadenitis as compared to abatacept or wild-type ICOSL-Fc alone or in combination. These data were
presented at the 2019 annual meeting of the ACR. (Figure 8)
Systemic Lupus Erythematosus Model
Figure 8
Acazicolcept has demonstrated efficacy in a preclinical model of SLE, a multiorgan autoimmune disease that that can lead to serious organ
complications and death. In Figure 9, which evaluated acazicolcept in a bm12 inducible model of SLE, treatment with acazicolcept reduced serum titers of
anti-dsDNA autoantibodies throughout the study compared to Fc control treatment. These data were presented at the 2019 annual meeting of the ACR. We
evaluated acazicolcept in a Phase 1 healthy volunteer study and in the second quarter of 2021 initiated patient dosing in Synergy, a global, randomized,
double-blind, placebo-controlled Phase 2 study of acazicolcept in adults with moderate-to-severe SLE.
Figure 9
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Arthritis Model
Figure 10 shows data from an in vivo collagen-induced arthritis model. This model is designed to test a drug’s ability to reduce inflammatory
signals thought to play a role in rheumatoid arthritis, psoriatic arthritis, and other types of inflammatory arthritis conditions. In the data presented at the
2019 annual meeting of the American College of Rheumatology, acazicolcept was superior to abatacept, a drug approved by the FDA to treat rheumatoid,
psoriatic, and juvenile idiopathic arthritis.
Human Xenograft GVHD Model
Figure 10
Acazicolcept has been studied in an in vivo mouse model of GVHD, a damaging and potentially fatal inflammatory disease frequently observed
following allogeneic stem cell and/or bone marrow transplant treatments for cancer or other serious diseases. The results represented in Figure 11 show
acazicolcept had superior survival when dosed three times per week for four weeks compared to belatacept (an FDA-approved drug for prevention of renal
allograft rejection - a type of inflammation-related rejection process analogous to GVHD. Belatacept is a more potent variant of abatacept, which is FDA-
approved for the prevention of GVHD). In fact, 100% of acazicolcept multi-dose treated animals across three different dose levels survived. Animals given
only a single dose of acazicolcept performed comparably to animals treated with belatacept dosed 3x/week for four weeks, demonstrating the potency and
efficacy of acazicolcept in this disease model.
Summary of acazicolcept Program Preclinical Data
Figure 11
Our scientists and collaborators have demonstrated in in vivo preclinical studies that acazicolcept:
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demonstrates a lower incidence and severity of sialadenitis, a model of Sjögren’s syndrome, as compared to abatacept or wild-type ICOSL-Fc
alone or in combination;
reduces levels of pathogenic anti-dsDNA autoantibodies compared to an Fc control in an animal model of SLE;
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reduces disease severity and delays disease onset time relative to control in an in vivo arthritis model with activity superior to abatacept, an
FDA-approved drug for rheumatoid, psoriatic, and juvenile idiopathic arthritis;
improves survival compared to belatacept in a humanized in vivo mouse GVHD model;
demonstrates control of colitis in an animal model of inflammatory bowel disease, or IBD; and
shows improved disease scores in an animal model of multiple sclerosis, or MS, compared to abatacept.
Acazicolcept Clinical Development
We have completed a Phase 1 study of acazicolcept in healthy volunteers (NCT03748836). This study was designed to evaluate the safety and
tolerability of single and multiple ascending intravenous and/or subcutaneous doses of acazicolcept. In addition, pharmacokinetics, pharmacodynamics and
exploratory biomarkers were evaluated to help determine acazicolcept’s potential for the treatment of autoimmune/inflammatory diseases. Results of the
study were presented at the 2020 European Alliance of Associations for Rheumatology (EULAR) E-Congress and published in the peer-reviewed journal
Clinical Translational Science (doi:10.1111/cts.12983). The first-in-human study randomized 96 healthy adults to receive single or multiple, intravenous or
subcutaneous, placebo or acazicolcept at doses ranging from 1 μg/kg to 10 mg/kg. At all dose levels, acazicolcept was well-tolerated, with no severe
adverse events, clinically-significant immunogenicity events, or evidence of cytokine release. Pharmacokinetics and pharmacodynamics (Figure 12)
exhibited desirable dose dependence, with increasing doses corresponding to increasing duration of complete, or near-complete target saturation, as well as
inhibition of antibody responses to keyhole limpet hemocyanin, or KLH, immunization.
Supported by these results, and as part of the AbbVie Agreement, we initiated Synergy, an international, double-blind placebo-controlled Phase 2
study of acazicolcept in patients with SLE in mid-2021.
Figure 12
Davoceticept, a Conditional CD28 Costimulator and Dual PD-L1/CTLA-4 Inhibitor for Oncology
Immune checkpoint blockade using inhibitors of the cytotoxic T-lymphocyte antigen 4, or CTLA-4, or programmed death 1, or PD-1, pathways
have been therapeutically successful for a wide variety of malignancies, dramatically altering the
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treatment paradigm in oncology. However, the majority of patients treated with an inhibitor of CTLA-4, PD-1, or programmed death-ligand 1, or PD-L1,
fail to respond or develop resistance, indicating that additional strategies to improve anti-tumor immunity and responses remain needed to improve
outcomes. Because immune checkpoints like PD-1 and CTLA-4 appear to suppress anti-tumor immune responses in part by inhibiting the activating signals
mediated by cluster of differentiation 28, or CD28 (Figure 13), next generation immunotherapeutic strategies may substantially improve anti-tumor
responses by activating a T cell (co-)stimulatory pathway(s) while also inhibiting a checkpoint pathway(s). Preferably, such activity might be focused
primarily within the tumor microenvironment to limit potential systemic immune activation and toxicity.
Davoceticept is an Fc fusion protein of a modified human cluster of differentiation 80, or CD80, vIgD designed to block the inhibitory immune
checkpoints PD-L1 and CTLA-4, and to provide PD-L1-dependent T cell activation via CD28 costimulatory receptor. As illustrated in Figure 14,
davoceticept binds PD-L1 expressed on the tumor, blocking PD-L1/PD-1 interactions. Localized to the tumor, davoceticept is able to provide a CD28
signal to T cells (PD-L1-dependent CD28 costimulation). Additionally, davoceticept binds CTLA-4 expressed on T cells and blocks CTLA4-CD80/CD86
interactions.
Figure 13
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Using in vitro assays, we have characterized and validated the three primary mechanisms of action of davoceticept: conditional CD28 costimulation
and dual PD-L1/CTLA-4 inhibition (Figure 15). Importantly, CD28 costimulation with davoceticept requires both T cell receptor, or TCR, signaling and
expression of PD-L1 on the antigen presenting cell, or APC. PD-L1 dependent T cell costimulation is a unique and key attribute of davoceticept which we
believe may limit the risk for systemic toxicity while providing potent anti-tumor activity.
Figure 14
Figure 15
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Davoceticept has also been validated in in vivo tumor models. In a mouse model where mice were implanted with MC38 mouse colon cancer
tumors transfected with human PD-L1, davoceticept as a monotherapy demonstrated superior tumor control compared to durvalumab, an FDA-approved
anti-PD-L1 monoclonal antibody (Figure 16).
16 Figure 17
Figure
When tumor-free mice in the davoceticept arm were re-challenged with additional tumors, they continued to be tumor free despite no additional
doses of davoceticept. (Figure 17)
The effects of davoceticept or durvalumab on various components of the immune system were compared using a technique called RNA sequencing
in the tumor model. This technique generates a display of inflammatory gene signatures where green represents lower or no upregulation of inflammatory
genes and red represents higher upregulation of inflammatory genes. For the treatment of cancer, it is thought the more upregulation of the immune system
- indicated by higher upregulation of inflammatory genes - potentially results in better outcomes for patients. As seen in Figure 18 below, davoceticept
upregulates a broader variety of different inflammatory genes connected with several different types of immune cells compared to durvalumab.
Summary of davoceticept Preclinical Data
We have demonstrated in preclinical studies that davoceticept:
Figure 18
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exhibits three primary mechanisms of action: conditional CD28 costimulation and dual PD-L1/CTLA-4 inhibition;
improves tumor control in a human PD-L1 transduced mouse model of colon cancer compared to the FDA approved anti PD-L1 therapeutic
durvalumab;
demonstrates a more robust intra-tumor inflammatory signature in the mouse colon cancer model than durvalumab, potentially indicating
superior immune system upregulation to fight cancer; and
has the potential to be used as a monotherapy or in combination with standard of care chemotherapy or checkpoint only inhibition.
Davoceticept Clinical Development
In June 2020, we initiated enrollment in NEON-1, our Phase 1 study in patients with advanced malignancies (Figure 19). NEON-1 enrolls adults
with advanced solid tumors or lymphoma refractory or resistant to standard therapy, including checkpoint inhibitors when indicated. Measurable disease is
required for most participants, as are an ECOG status of 0 to 2 and adequate hematological, renal, and hepatic function. Safety endpoints include dose-
limiting toxicities, adverse events, and
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circulating cytokines. Objective responses will be assessed by RECIST v1.1 for solid tumors and Lugano criteria for lymphoma. Pharmacokinetics and
pharmacodynamics will also be evaluated. More information is available at www.clinicaltrials.gov (NCT04186637).
Initial data from NEON-1 were presented at the 2021 ASCO Virtual Meeting demonstrating that davoceticept was well-tolerated as of the cutoff
date (April 22, 2021) with evidence of peripheral T cell modulation consistent with CD28 agonism. In addition, although most enrolled participants had
tumors considered classically non-responsive to immunotherapies, the majority derived clinical benefit as defined as a best outcome of stable disease or
better (Figure 20). Completion of dose escalation for NEON-1 and initiation of monotherapy expansion cohorts, initially cutaneous melanoma and PD-L1+
(non-melanoma) tumors, is anticipated in the first half of 2022.
Figure 19
In June 2021, we announced a collaboration and supply agreement with Merck to evaluate the safety and efficacy of davoceticept in combination
with Merck’s anti-PD-1 therapy KEYTRUDA® (pembrolizumab) in a Phase 1 dose escalation and
Figure 20
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expansion study. The clinical trial, NEON-2, was initiated in June 2021. More information for both NEON-1 (NCT04186637) and NEON-2
(NCT04920383) is available at www.clinicaltrials.gov.
On March 7, 2022, we announced that the FDA placed a partial clinical hold on the NEON-2 trial evaluating davoceticept in combination with
pembrolizumab in adults with advanced malignancies. This partial clinical hold was prompted by report of a death of a study participant in the NEON-2
trial. The participant had choroidal melanoma previously treated with nivolumab and ipilimumab, and had received a single dose each of davoceticept and
pembrolizumab. The participant’s death was attributed to cardiogenic shock, considered by the treating physicians as likely related to immune-mediated
myocarditis, or possibly infection. We are working closely with the FDA, Merck, the study Safety Monitoring Committee, and the study investigators to
further understand this event and to evaluate the appropriate safety precautions before we resume enrollment of additional participants. Participants who are
currently enrolled in the NEON-2 trial may continue to receive davoceticept and pembrolizumab, although no new participants may be enrolled until the
partial clinical hold is resolved. This partial clinical hold does not affect the ongoing NEON-1 clinical trial of davoceticept as monotherapy
(NCT04186637).
ALPN-303, a Dual B Cell Cytokine Antagonist for B Cell-Mediated Autoimmune/Inflammatory Diseases
ALPN-303 is a dual B cell cytokine antagonist, being developed for the treatment of B cell mediated inflammatory and autoimmune diseases.
Engineered using our proprietary directed evolution platform, ALPN-303 is an Fc fusion protein of a human transmembrane activator and CAML
interactor, or TACI, variant TNFR domain, or vTD, that potently inhibits the pleiotropic B cell cytokines BAFF and APRIL. It mediates significantly
improved combined BAFF and APRIL inhibition in vitro and enhanced pharmacokinetic and immunomodulatory properties in vivo, as compared to wild-
type, or WT, TACI-Fc molecules. BAFF and APRIL are TNF superfamily members that bind TACI, BCMA, and/or BAFF-R on B cells and together
support B cell development, differentiation, and survival. Their co-neutralization dramatically reduces B cell survival and function, including antibody
production, whereas inhibition of either BAFF or APRIL alone mediates only modest effects (Figure 21). B cell targeting therapies like the WT TACI-Fc
fusions atacicept and telitacicept have demonstrated promising clinical potential in B cell-related diseases like SLE but have not yet clearly exhibited long-
term and/or complete disease remissions. ALPN-303, with enhanced inhibitory activity against BAFF & APRIL, could further improve clinical outcomes.
Data on ALPN-303 presented at the ACR Convergence 2021 Annual Meeting demonstrated that ALPN-303 inhibited the activity of the B cell
cytokines APRIL and BAFF more potently than wild-type TACI-Fc counterparts, as well as anti-BAFF and anti-APRIL monoclonal antibodies. In Figure
22, ALPN-303 inhibited BAFF- and APRIL-mediated signaling in vitro with significantly lower IC50 values than WT TACI-Fc, anti-BAFF mAb, and anti-
APRIL mAb comparators.
Figure 21
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Administration of ALPN-303 rapidly and significantly reduced key B lymphocyte subsets including plasma cells, germinal center, and follicular B
cells in a KLH immunization mouse model (Figure 23).
Figure 22
Figure 23
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Furthermore, treatment with ALPN-303 potently suppressed anti-dsDNA auto antibodies, proteinuria, sialoadenitis, kidney lesions, and renal
immune complex deposition in the (NZBxNZW)F1 lupus model (Figure 24).
ALPN-303 has been well-tolerated in nonclinical studies (Figure 25) and exhibited superior pharmacokinetics and pharmacodynamics than wild-
type TACI-Fc counterparts, including superior serum exposure and pharmacodynamic reduction of serum immunoglobulins in mice and/or cynomolgus
monkeys (Figure 26). Based on these data, we believe that ALPN-303 represents an attractive development candidate for the treatment of multiple
autoimmune and inflammatory diseases, including SLE and other autoantibody-mediated diseases.
Figure 24
Figure 25
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ALPN-303 Clinical Development
Figure 26
Enrollment in a first-in-human, Phase 1 study of ALPN-303 in healthy volunteers began in the fourth quarter of 2021, with top-line results targeted
by mid-2022. This randomized, placebo-controlled study is designed to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of
ALPN-303 administered intravenously and subcutaneously. We are planning to initiate patient-based studies in the second half of 2022 including SLE, and
possibly other autoantibody-related diseases in other therapeutic areas.
Other Research Programs
In addition to our acazicolcept, davoceticept, and ALPN-303 programs, we have a number of other research efforts underway to address cancer and
autoimmune/inflammatory diseases that we intend to continue to develop either internally or together with a partner.
Partnerships
In addition to advancing programs internally, we continue to seek partners who can bring therapeutic area experience, development expertise,
commercialization capabilities, and funding to maximize the potential of our existing programs and scientific platform.
Collaboration with Horizon (December 2021)
In December 2021, we entered into the Horizon Agreement, pursuant to which we granted to Horizon rights to one of our existing preclinical biologic
therapeutic programs, or the Existing Program, and agreed to collaborate with Horizon in the discovery, research and preclinical development of up to three
additional autoimmune and inflammatory disease programs for other designated biological targets, or the Research Programs, and products arising from the
Existing Program and the Research Programs, or the Agreement Products.
Existing Program
We granted to Horizon an exclusive, worldwide, royalty-bearing, sublicensable license under our intellectual property rights for the development,
manufacture and commercialization of Agreement Products associated with the Existing Program, or the Existing Program Products, for all applications;
however, Horizon has agreed not to pursue the Existing Program Products for oncology. In addition, we granted to Horizon a non-exclusive license to
access our libraries of proteins and molecules for research, discovery and identification of additional compounds meeting the agreed criteria (subject to
certain exceptions, including compounds reserved by us from the libraries, as set forth in the Horizon Agreement) which would be included in Horizon’s
license.
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We will conduct our activities under the Existing Program and deliver compounds meeting the agreed criteria pursuant to one or more deliverables
plans as mutually agreed by the parties. In addition, Horizon will pay us for the costs and expenses of conducting such activities under the deliverables
plans.
Research Programs
Under the Horizon Agreement, during a limited research term, we will conduct, together with Horizon, up to three Research Programs for specified
biological targets selected by Horizon (subject to certain exceptions, including targets reserved by us) to discover proteins and molecules with specified
attributes and biological functions, pursuant to a mutually agreed research plan for each such Research Program. Each party has the right to reserve certain
targets and to replace such reserved targets or reserve more targets (up to a fixed number) through a gatekeeper mechanism. We will deliver certain
compounds meeting the agreed criteria for each Research Program as mutually agreed upon by the parties. Horizon will pay us for the costs and expenses
for conducting its activities under the Research Programs. As agreed between the parties, Horizon will own the inventions and intellectual property
developed from the Research Programs or otherwise associated with the Agreement Products arising therefrom.
Governance
The parties will establish a joint research committee composed of an equal number of representatives from each of Alpine and Horizon, which will,
among other responsibilities, oversee and govern the Existing Program and the Research Programs and review and approve research plans. The parties will
also form a joint patent committee comprised of one or two representatives of each party to discuss strategy and facilitate communication and coordination
for prosecution and maintenance of the relevant patents under the Horizon Agreement.
Development, Manufacture, Regulatory and Commercialization.
Horizon will have the sole right and responsibility for the development, manufacturing, regulatory and commercialization of all the Agreement
Products. We will provide Horizon reasonable assistance and cooperation. In addition, we have agreed during the term of the Horizon Agreement not to
conduct or enable any third party to conduct the development, manufacture or commercialization of certain competing products as set forth therein.
Financial Terms
In connection with the transaction, Horizon made an upfront payment to us of $25.0 million as well as an equity investment for which they paid
$15.0 million, a 25 percent premium to the 30-day volume-weighted average share price as of December 9, 2021.
In addition to the upfront payment and equity consideration, Horizon has agreed to make milestone payments to us upon our achievement of certain
preclinical, clinical and regulatory and commercialization milestones, up to an aggregate amount of $381.0 million per program, or approximately $1.5
billion in total, if all milestones are met.
Horizon has further agreed to pay the Company royalties based on future net sales of the Agreement Products. For the Existing Program, such
royalty percentages range from a mid-single digit percentage to a low double-digit percentage of net sales, with the specific royalty rate depending on the
aggregate net sales. For each Research Program, such royalty percentages are in a range of mid-single digit percentages of net sales, with the specific
royalty rate depending on the aggregate net sales. Horizon’s obligations to pay royalties with respect to an Agreement Product and country will expire after
specific criteria for such Agreement Product in such country including it no longer being covered by valid claims of applicable patent rights in such
country, or the Royalty Term. Royalty payments are subject to reduction in specified circumstances, including expiration of patent rights, biosimilar
competition, or Horizon is required to make payments to a third party with respect to an Agreement Product.
Term and Termination
Unless earlier terminated, the Horizon Agreement remains in effect until the expiration of the Royalty Term for all Agreement Products. The
Horizon Agreement is subject to customary termination provisions including termination by a party for the other party’s uncured, material breach.
Additionally, Horizon may terminate the Horizon Agreement with specified prior notice in its entirety or on a Program-by-Program basis, for any or no
reason.
In the event of certain terminations of the Horizon Agreement, at our request, the parties will negotiate one or more licenses for us to develop,
manufacture and commercialize terminated Agreement Products.
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The Horizon Agreement includes certain other customary terms and conditions, including mutual representations and warranties, indemnification
and confidentiality provisions.
Collaboration with AbbVie (June 2020)
In June 2020, we entered into the AbbVie Agreement, which grants to AbbVie an exclusive option to take an exclusive license to acazicolcept, or
the License Option.
Under the terms of the AbbVie Agreement we granted to AbbVie an exclusive option to obtain an exclusive, royalty-bearing, sublicensable license
to certain intellectual property rights for the research, development and commercialization of acazicolcept and any other molecule owned or controlled by
us that binds to or directly modulates or targets ICOS at certain agreed-upon levels, or the Compounds, on a worldwide basis for all human and non-human
diagnostic, prophylactic and therapeutic uses, subject to certain exceptions set forth in the AbbVie Agreement. The License Option is immediately
exercisable and will expire 90 days following our delivery of the data package described below to AbbVie, subject to certain exceptions, including
clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or the HSR Act, if required.
Financial Terms
In connection with the execution of the AbbVie Agreement, AbbVie paid us a nonrefundable upfront payment of $60.0 million in cash. If AbbVie
exercises its License Option, they will pay a one-time cash payment of $75.0 million.
In addition to the upfront payment and License Option payment, AbbVie has agreed to make cash payments upon our achievement of certain
development milestones, the Alpine Development Milestones, prior to the exercise of the License Option as set forth in a written development plan, up to
an aggregate amount of $75.0 million. In the second quarter of 2021, we achieved $45.0 million of the Alpine Development Milestones. Following the
exercise of the License Option, AbbVie has agreed to make cash payments of up to $205.0 million upon AbbVie’s achievement of certain development and
commercial milestones and additional cash payments of up to $450.0 million upon AbbVie’s achievement of certain sales-based cash milestones. AbbVie
has further agreed to pay royalties from a high-single digit percentage to a low double-digit percentage of net sales of any pharmaceutical product that
contains a Compound, or a Licensed Product, with the specific royalty rate depending on the aggregate net sales. AbbVie’s obligations to pay royalties with
respect to a Licensed Product and country will expire upon the latest of the expiration of the last to expire valid patent claim applicable to such Licensed
Product in such country, 10 years from the first commercial sale of the Licensed Product in such country, and the expiration of regulatory exclusivity for
such Licensed Product in such country. Royalty payments are subject to reduction in specified circumstances, including expiration of patent rights, if
average net sales decrease by a certain percentage after the introduction of a generic product, or if AbbVie is required to pay amounts to a third party in
order commercialize a Licensed Product in a particular country.
Development Activities
Prior to the exercise of the License Option, we will conduct acazicolcept development efforts as per a development plan providing for, among other
things, the generation of a data package in order for AbbVie to evaluate exercising the License Option and an itemized budget for such activities, including
all activities reasonably necessary to conduct a Phase 2 clinical study of acazicolcept for the treatment of systematic lupus erythematosus; all non-clinical
activities; and all CMC activities agreed to under the development plan. We will be fully responsible for all costs incurred to conduct our activities,
provided that, AbbVie may be responsible for increased costs under the development plan in connection with certain material amendments agreed upon
with AbbVie.
Prior to the exercise of the License Option, we will be solely responsible, at our sole cost and expense, for preparing, filing and maintaining
regulatory documentation, which AbbVie will be entitled to access and review. We will also be responsible for any and all correspondence with the
applicable regulatory authorities and for maintaining all data related to acazicolcept. We will be solely responsible, at our sole cost and expense, for
manufacturing the compounds necessary to complete the development activities consistent with the development plan.
Governance
The parties will establish a joint governance committee, or JGC, composed of an equal number of representatives from each of Alpine and AbbVie,
which will, among other responsibilities, coordinate and oversee the development activities,
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approve amendments to the development plan and discuss interactions with regulatory authorities. The chairperson of the JGC will be appointed by
AbbVie. AbbVie may disband the JGC, at its sole discretion, following the exercise of the License Option.
Commercialization
Upon AbbVie’s exercise of the License Option, AbbVie and its affiliates will be solely responsible, at AbbVie’s sole cost and expense, for the
development, manufacture, commercialization, and regulatory compliance of any Licensed Product. Following exercise of the License Option, AbbVie
shall use commercially reasonable efforts to develop and seek regulatory approval for one of the compounds in one indication in each of the United States
and one of the United Kingdom, Germany, France, Spain, or Italy, or the Major Markets, and, following receipt of any such regulatory approval,
commercialize the compound in such country.
Changes in Control
We will notify AbbVie immediately upon the closing of any change in control (as defined in the AbbVie Agreement) during the term of the AbbVie
Agreement. Following the delivery of such notice, AbbVie may, in its sole and absolute discretion, elect to continue the AbbVie Agreement subject to
certain modifications as set forth in the AbbVie Agreement, including the assumption by AbbVie of responsibility to perform certain activities previously
assigned to us.
Term and Termination
Unless earlier terminated, the AbbVie Agreement shall terminate either: (i) in the event that the License Option is not exercised by AbbVie, the first
day following the last day of the License Option exercise period; or (ii) in the event that the License Option is exercised by AbbVie, the date of the
expiration of the last Royalty Term for the last Licensed Product.
Both us and AbbVie may terminate the AbbVie Agreement upon written notice in the event of a material breach by the other party that has not been
cured within a 90-day cure period. However, if the uncured material breach is with respect to AbbVie’s obligation to use commercially reasonable efforts to
obtain regulatory approval for and commercialize a Licensed Product with respect to any Major Market (but not all Major Markets), then we will only be
entitled to terminate the AbbVie Agreement with respect to such Major Market(s). Both AbbVie and us may also terminate the AbbVie Agreement upon
written notice if the other party voluntarily or involuntarily files for bankruptcy or insolvency, makes an assignment for the benefit of creditors, has a
receiver or trustee appointed over substantially all of such other party’s property, proposes or is party to any dissolution or liquidation, or admits in writing
its inability generally to meet such other party’s obligations as they fall due in the general course.
AbbVie may terminate the AbbVie Agreement in its entirety or on a country-by-country basis, for any or no reason, by providing at least 90 days’
prior written notice to us. AbbVie may also terminate the AbbVie Agreement upon notice to us if (i) either we or AbbVie receives a second request for
additional information under the HSR Act, provided AbbVie’s notice of termination is delivered within ten business days after AbbVie becomes aware of
such request or receives notice from us regarding such request or (ii) the License Option has not been exercised or clearance under the HSR Act, if
required, has not occurred within 180 days of submission of the parties’ request for such clearance, provided AbbVie’s notice of termination is delivered
within ten business days after the end of such 180-day period.
Upon the termination of the AbbVie Agreement in its entirety for any reason, all licenses and other rights granted (i) to AbbVie by us and (ii) to us
by AbbVie shall terminate. Upon termination in certain circumstances, AbbVie has agreed to grant to us licenses to certain intellectual property that is
reasonably necessary, and that was actually used by AbbVie for the development, manufacturing or commercialization of the terminated products, to
research, develop and commercialize the terminated products in the terminated countries.
In lieu of terminating the AbbVie Agreement in connection with an uncured material breach or the bankruptcy or insolvency of the Company,
AbbVie may alternatively elect to continue the AbbVie Agreement subject to certain modifications, including that AbbVie will be entitled to conduct
activities allocated to us under the Development Plan, subject to reimbursement by us for AbbVie’s out-of-pocket expenses in connection with such
activities. If AbbVie’s right to terminate in connection with an uncured material breach or the bankruptcy or insolvency of the Company arises before
exercise of the License Option, then the License Option exercise payment amount will be reduced by half and the amount of any then-unearned milestone
payments will be reduced by half. If AbbVie’s right to terminate arises after exercise of the License Option, then the amount of any then-unearned
milestone payments will be reduced by 25%.
The AbbVie Agreement includes certain other customary terms and conditions, including mutual representations and warranties, indemnification
and confidentiality provisions.
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Collaboration with Adaptimmune Therapeutics (May 2019)
In May 2019, we entered into a collaboration and license agreement with Adaptimmune, or the Adaptimmune Agreement, to develop next-
generation SPEAR™ T cell products which incorporate our secreted and transmembrane immunomodulatory protein (termed SIP™ and TIP™)
technology. We and Adaptimmune will collaborate on a specified number of programs to develop SIP and TIP candidates with tailored affinities and
modulatory activities that may enhance the anti-tumor responses seen with Adaptimmune’s SPEAR™ T cells. For each program, Adaptimmune has an
option to take a worldwide exclusive license for development and commercialization of SPEAR™ T cell products incorporating the developed SIP or TIP
candidate for the treatment of cancer. Under the terms of the collaboration agreement, Adaptimmune provided an upfront payment and will provide
research funding for ongoing programs. In addition, we may be eligible for downstream development and commercialization milestones up to $288.0
million, if all pre-specified milestones for each program are achieved. In addition, we are eligible to receive low-single digit royalties on worldwide net
sales of the applicable products. In February 2022, Adaptimmune selected an additional research program, triggering a $1.0 million upfront payment,
which will be recorded as deferred revenue upon receipt and recognized to revenue based on employee hours contributed.
Manufacturing
We have established in-house non-current good manufacturing practices, recombinant protein generation capabilities enabling our scientific
platform, including validation of new scientific discoveries in vitro and in vivo. Having protein production capabilities in-house allows more rapid
progression for vIgDs and vTDs generated by our scientific platform.
We have chosen U.S.-based contract drug substance and U.S. and Australian drug product manufacturers for our initial current good manufacturing
practices, or cGMP, clinical trial supplies of acazicolcept, davoceticept and ALPN-303. We believe these contract manufacturers’ particular expertise in
protein production, analytical development and fill/finish provide us with the capability to meet rapid timelines encompassing the development of
production cell-lines to manufacturing of clinical trial quantities of the biopharmaceutical product.
We have successfully completed two cGMP manufacturing campaigns for acazicolcept and one cGMP campaign each for davoceticept and ALPN-
303 and believe we have produced sufficient quantities of drug product necessary to execute our stated Synergy, NEON-1, NEON-2, and ALPN-303
Healthy volunteer clinical trials. We have not yet manufactured any of our proteins at commercial scale.
Competition
We participate in the highly competitive sector of biotechnology and pharmaceuticals and in the subsector of immune modulation. This subsector
has undergone tremendous technological advancement over the last decade due to advancements in understanding the role of the immune system across
multiple therapeutic areas, including oncology and autoimmune/inflammatory disease. While we believe our novel technology platform, discovery
programs, knowledge, experience, and scientific resources offer competitive advantages, we face competition from major pharmaceutical and
biotechnology companies, academic institutions, governmental agencies, public and private research institutions, and others.
Any products we successfully develop and commercialize will face competition from currently approved therapies and new therapies potentially
available in the future.
The availability of reimbursement from government and other third-party payors will also significantly affect the pricing and competitiveness of our
products. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for our products,
which could result in our competitors establishing a strong market position before we are able to enter the market.
Many of the companies we compete against may have significantly greater financial resources and expertise in research and development,
manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products. Smaller or early-stage
companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These
competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient
registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
Specifically, our competitors include companies developing therapies with the same target(s) as acazicolcept, davoceticept and ALPN-303 as well
as companies building novel platforms to generate immunomodulatory multi-specific antibody or non-antibody-based targeting proteins, particularly in the
area of oncology or autoimmunity.
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See the risk factor “We face competition from entities that have developed or may develop therapeutic candidates for our target disease indications,
including companies developing novel treatments and technology platforms based on modalities and technology similar to us. If these companies develop
technologies or therapeutic candidates more rapidly than we do, or their technologies, including delivery technologies, are more effective, our ability to
develop and successfully commercialize therapeutic candidates may be adversely affected.” in Part I, Item 1A of this report for more discussion of the
effects of competition and competitors on our business.
Acazicolcept Program Competitors (ICOSL/CD28)
The competitors listed below have programs targeting either ICOS or CD28 (or one of their ligands) for autoimmune and inflammatory diseases. To
our knowledge, there are currently no competitors with a single molecule targeting ICOS and CD28 simultaneously.
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an anti-BAFF, anti-ICOSL bispecific antibody being developed by Amgen, Inc. (rozibafusp alfa (AMG570/MEDI0700));
an anti-CD28 monoclonal antibody fragment being developed by OSE ImmunoTherapeutics SA and Veloxis Pharmaceuticals Inc., a
subsidiary of Asahi Kasei (FR104);
an anti-CD28 peptide being developed by AtoxBio, Inc. (reltecimod (AB-103));
an anti-CD28 monoclonal antibody being development by TheraMAB (TAB08); and
CTLA-4-Fc fusion proteins targeting CD80 and CD86 being marketed Bristol Myers Squibb (abatacept and belatacept).
Davoceticept Program Competitors
There are numerous clinical trials for immuno-oncology products used as a single agent or in combination. One of the potentially novel attributes of
the davoceticept program is that it has exhibited conditional CD28 costimulation and dual checkpoint inhibition in a single molecule interacting with
multiple immune targets.
Examples of additional multi-target compounds for immuno-oncology are highlighted below. To our knowledge, there are currently no competitors
with a single molecule capable of dual PD-L1/CTLA-4 antagonism and PD-L1-dependent CD28 agonism.
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wild-type CD80-Fc being developed by Five Prime Therapeutics, Inc., which was purchased by Amgen Inc. (FPT155);
bispecific antibodies being developed by Regeneron targeting tumor specific antigens and CD28 (REGN5678 anti-PSMAxCD28, REGN5668
anti-MUC16xCD28, and REGN7075 anti-EGFRxCD28);
trispecific antibodies being developed by Sanofi (CD3xCD38xCD28) (SAR442257) and SAR443216 (CD3xCD28xHER2);
bifunctional fusion protein composed of monoclonal antibody against PD-L1 fused to the extracellular domain of human transforming growth
factor-ß, or TGF-ß, receptor II being developed by EMD Serono, Inc. (bintrafusp alfa, or M7824);
bifunctional fusion protein composed of PD-1 and OX40L developed by Shattuck Labs, Inc. (SL-279252);
bispecific fusion protein targeting 4-1BBL and PD-1 being developed by Shattuck Labs, Inc. (SL-279137);
bispecific fusion protein targeting 4-1BB and PD-L1 being developed by Pieris Pharmaceuticals, Inc. and Servier Laboratories (PRS-
344/S095012);
bispecific monoclonal antibody targeting 4-1BB and PD-L1 being developed by Genmab A/S and BioNTech SE (GEN1046);
trispecific monoclonal antibody/fusion targeting 4-1BB and PD-L1 being developed by Numab Therapeutics AG and CStone Pharmaceuticals
Co., Ltd. (NM021/NM21-1480);
bispecific monoclonal antibody targeting 4-1BB and PD-L1 being developed by Merus NV and Incyte Corporation (MCLA-145);
bispecific antibody 4-1BB and PD-L1 being developed by Inhibrx, Inc. and Elpiscience Biopharma Ltd. (INBRX-105);
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bispecific monoclonal antibody targeting 4-1BB and PD-L1 being developed by F-star Biotechnology Ltd. (FS-222);
bispecific fusion protein targeting 4-1BB and PD-L1 being developed by Kahr Medical Ltd., (DSP105);
bispecific monoclonal antibody/fusion protein targeting 4-1BB and PD-L1 being developed by ABL, Inc., and I-Mab Biopharma Co., Ltd.
(ABL503/TJ-L14B);
bispecific monoclonal antibody targeting PD-L1 and LAG-3 being developed by F-star Biotechnology Ltd. (FS118);
bispecific monoclonal antibodies being developed by Xencor, Inc. including XmAb808 targeting CD28 and B7-H3, Vudalimab/XmAb20717
targeting CTLA-4 and PD-1, XmAb841/XmAb22841 targeting CTLA-4 and LAG-3, XmAb104/XmAb23104 targeting PD-1 and ICOS, and
additional preclinical CD28 bispecific antibody programs;
bispecific constructs called “DARTs” being developed by Macrogenics Inc., including Tebotelimab (MGD013) targeting PD-1 and LAG-3
and Lorigerlimab MGD019) targeting PD-1 and CTLA-4;
DARPin® therapeutic candidate targeting 4-1BB and FAP being developed by Molecular Partners AG and Amgen, Inc (MP0310/AMG 506);
bispecific monoclonal antibody targeting 4-1BB and FAP being developed by Tesaro, Inc., which was purchased by GlaxoSmithKline plc,
targeting PD-1 and LAG-3;F. Hoffmann-La Roche AG (RO7122290);
bispecific monoclonal antibody targeting 4-1BB and HER-2 being developed by Pieris Pharmaceuticals, Inc. (cinrebafusp alfa or PRS-343);
small molecule antagonists being developed by Aurigene Ltd. and Curis, Inc., including CA-170 targeting PD-L1 and VISTA and CA-327
targeting PD-L1 and TIM-3;
various combinations of separate anti PD-1/L1 and anti-CTLA-4 monoclonal antibodies; and
various combinations of separate anti PD-1/L1 and costimulatory monoclonal antibodies such as OX-40, 4-1BB, and others.
ALPN-303 Program Competitors
The competitors listed below have programs targeting either the TACI, BCMA, or BAFF pathway for autoimmune disease.
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Anti-BAFF antibody marketed by GSK plc (belimumab);
TACI-Fc being developed by Vera Therapeutics (atacicept);
TACI-Fc being developed by RemeGen Ltd. (telitacicept (RC18));
Anti-BAFF-R IgG1 being developed by Novartis AG (Ianalumab (VAY736));
Anti-APRIL antibody being developed by Visterra, Inc., a subsidiary of Otsuka Pharmaceutical Co., Ltd. (sibeprenlimab (VIS649));
Anti-BAFF, anti-ICOSL bispecific antibody being developed by Amgen, Inc. (rozibafusp alfa (AMG570/MEDI0700));
Anti-APRIL antibody being developed by Chinook Therapeutics, Inc. (BION-1301); and
a recombinant Fc fusion protein designed to block BAFF and APRIL cytokines being developed by Aurinia Pharmaceuticals Inc. (AUR200).
Novel Platform Competitors
Multifunctional therapeutic protein platforms potentially competitive with our platform include:
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Amgen Inc. (BiTE®): fusion proteins consisting of two single-chain variable fragments to link T cells to tumors;
Macrogenics, Inc. (DART®): Dual-Affinity Re-Targeting and Trident technology platforms bind multiple targets with a single molecule;
Xencor, Inc. (XmAb Bispecific): Optimized Fc domains for improved potency, half-life and stability;
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Zymeworks, Inc. (Azymetric™): Proprietary amino acid modifications to facilitate interaction of distinct heavy chains;
Pieris Pharmaceuticals, Inc. (Anticalin®): Engineered proteins derived from natural lipocalins found in blood plasma;
Compass Therapeutics, LLC (Targeted Immunomodulation™, StitchMabs™): Antibody discovery targeting the tumor-immune synapse;
Harpoon Therapeutics, Inc.: TriTAC™ (Tri-specific T cell Activating Construct) contain CD3 binding domain, half-life extension domain,
and antigen-binding domain;
Shattuck Labs, Inc.: Agonist Redirected Antibody platform claimed to bind tumor-necrosis factor (“TNF”) and checkpoint targets;
Ablynx NV (Nanobody®), purchased by Sanofi Pharma, Inc.: Platform technology of single-domain, heavy-chain antibody fragments derived
from camelidae (e.g., camels and llamas);
Regeneron, Inc.: VEGF Trap and VelociSuite® antibody technology platforms;
Five Prime Therapeutics, Inc., purchased by Amgen Inc.: Proprietary protein library and rapid protein production and testing platform; and
Merus N.V. (Merus Multiclonics® including Biclonics® and Triclonics®): Discovery, screening, and identification platform for bispecific
and trispecific antibodies.
Intellectual Property
Our scientific platform and substantially all our intellectual property have been developed internally. As of December 31, 2021, our patent portfolio
consists of 47 granted patents and over 155 pending patent applications. Several of our initial patent applications are directed to our scientific platform
itself. Other patent applications in our portfolio are directed to various target domains and research programs under development. Each of these patent
applications is solely owned by us. As we continue the development of our scientific platform and target vIgDs, we intend to continue pursuing intellectual
property protection for these technologies.
We have in-licensed some intellectual property and trade secret materials on a non-exclusive basis. To date, such non-exclusive in-licenses are
solely related to commercially-available cell lines involved in the manufacture of our vIgD programs. To date, no other intellectual property related to our
scientific platform has been in-licensed. We have out-licensed two programs under our TIP/SIP technology to Adaptimmune on an exclusive basis.
Additionally, pursuant to the AbbVie Agreement, we have granted AbbVie an exclusive option to purchase an exclusive worldwide license to acazicolcept.
If AbbVie exercises the License Option, AbbVie will take over the future development and commercialization. Finally, pursuant to the Horizon Agreement,
we have granted Horizon an exclusive license of certain intellectual property and have entered into a collaboration for the development and
commercialization of up to four preclinical candidates generated from Alpine’s unique discovery platform. These candidates include previously undisclosed
multi-specific fusion protein-based therapeutic candidates for autoimmune and inflammatory diseases. No other out-licenses have been made.
Although we do not believe our technology infringes any intellectual property rights owned by third parties, we are aware of one or more patents
and patent applications that may relate to our technology. Third parties may assert claims against us alleging infringement of their intellectual property
rights regardless of whether their allegations have merit. Allegations of infringement could harm our reputation, may result in the expenditure of significant
resources to defend and resolve such allegations, and could require us to pay monetary damages if we are found to have infringed any third-party
intellectual property rights.
Government Regulation
The FDA and comparable regulatory authorities in state and local jurisdictions and in other countries impose substantial and burdensome
requirements on the clinical development, manufacture, marketing, and distribution of therapeutic candidates. These agencies and other federal, state, and
local entities regulate research and development activities and the testing, manufacture, quality control, safety, effectiveness, labeling, storage, record
keeping, approval, advertising and promotion, and export and import of therapeutic candidates and products.
In the U.S., the FDA regulates drugs, medical devices, and biologic products under the Federal Food, Drug, and Cosmetic Act, or FFDCA, its
implementing regulations and other laws, including, in the case of biologics, the Public Health
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Service Act. Our potential therapeutic candidates and products will be subject to regulation by the FDA as biologics. Biologics require the submission of a
Biologics License Application, or BLA, and approval by the FDA before being marketed in the U.S. None of our therapeutic candidates have been
approved by the FDA for marketing in the U.S., and we currently have no BLAs pending. If we fail to comply with applicable FDA or other requirements
at any time during the product development process, clinical testing, the approval process, or after approval, we may become subject to administrative or
judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, license suspension or revocation, withdrawal of an
approval, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, or
criminal prosecution. Any FDA enforcement action could have a material adverse effect on us. The process required by the FDA before biologic
therapeutic candidates may be marketed in the U.S. generally involves the following:
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completion of extensive preclinical laboratory tests, preclinical animal studies, and formulation studies all performed in accordance with the
FDA’s current good laboratory practice, or cGLP, regulations;
submission to the FDA of an Investigational New Drug, or IND, application which must become effective before human clinical trials in the
U.S. may begin;
performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug candidate for each proposed
indication;
submission to the FDA of a BLA;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance
with cGMP regulations; and
FDA review and approval of the BLA prior to any commercial marketing, sale, or shipment of the therapeutic product.
The testing and approval process requires substantial time, effort, and financial resources, and we cannot be certain any approvals for our
therapeutic candidates will be granted on a timely basis, if at all.
Once a therapeutic candidate is identified for development, it enters the preclinical testing stage. Preclinical studies include laboratory evaluations
of protein chemistry, formulation, and stability, as well as studies to evaluate toxicity in animals. The results of the preclinical studies, together with
manufacturing information and analytical data, are submitted to the FDA as part of an IND application. Currently, the IND automatically becomes effective
30 days after receipt by the FDA, unless the FDA, within the 30-day period, raises concerns or questions about the conduct of the clinical trial, including
concerns that human research subjects will be exposed to unreasonable health risks. In such a case, the IND sponsor and the FDA must resolve any
outstanding concerns before the clinical trial can begin. Submission of an IND may result in the FDA not allowing the clinical trials to commence or not
allowing the clinical trials to commence on the terms originally specified in the IND. A separate submission to an existing IND must also be made for each
successive clinical trial conducted during drug development, and the FDA must grant permission, either explicitly or implicitly by not objecting, before
each clinical trial can begin.
Clinical trials involve the administration of the therapeutic candidate to human subjects under the supervision of qualified investigators. Clinical
trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety, and the
effectiveness criteria to be used. Each protocol must be submitted to the FDA as part of the IND. For each medical center proposing to conduct a clinical
trial, an institutional review board, or IRB, must also review and approve a plan for any clinical trial before it can begin at that center and the IRB must
monitor the clinical trial until it is completed. The FDA, an IRB, or the sponsor may suspend or discontinue a clinical trial at any time on various grounds,
including a finding that the subjects are being exposed to an unacceptable health risk. Clinical testing also must satisfy extensive Good Clinical Practice
requirements, including the requirements for informed consent.
All clinical research performed in the U.S. in support of a BLA must be authorized in advance by the FDA under the IND regulations and
procedures described above. However, a sponsor who wishes to conduct a clinical trial outside the U.S. 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 so long as the clinical trial is conducted in compliance with an international guideline for the ethical conduct of clinical research
known as the Declaration of Helsinki and/or the laws and regulations of the country or countries in which the clinical trial is performed, whichever
provides the greater protection to the participants in the clinical trial.
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Clinical Trials
For purposes of BLA submission and approval, clinical trials are typically conducted in three sequential phases, which may overlap or be combined.
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Phase 1 clinical trials are initially conducted in a limited population of subjects to test the therapeutic candidate for safety, dose tolerance,
absorption, metabolism, distribution, and excretion in healthy humans or, on occasion, in patients with severe problems or life-threatening
diseases to gain an early indication of its effectiveness.
Phase 2 clinical trials are generally conducted in a limited patient population to evaluate preliminary efficacy of the therapeutic candidate for
specific targeted indications in patients with the disease or condition under study, evaluate dosage tolerance and appropriate dosage, determine
a dosage schedule, and identify possible adverse effects and safety risks.
Phase 3 clinical trials are commonly definitive efficacy studies of the experimental medication. Phase 3 trials are typically conducted when
Phase 2 clinical trials demonstrate a dose range of the therapeutic candidate is effective and has an acceptable safety profile. Phase 3 clinical
trials are generally undertaken with large numbers of patients, such as groups of several hundred to several thousand, to provide substantial
evidence of clinical efficacy and to further test for safety in an expanded patient population at multiple, geographically-dispersed clinical trial
sites.
In some cases, the FDA may condition approval of a BLA on the sponsor’s agreement to conduct additional post-approval clinical trials to further
assess the biologic’s safety and effectiveness after BLA approval. Such post-approval clinical trials are typically referred to as Phase 4 clinical trials.
Concurrent with clinical trials, companies usually complete additional animal trials and must also develop additional information about the
chemistry and physical characteristics of the biologic and finalize a process for manufacturing the biologic in commercial quantities in accordance with
cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the therapeutic candidate and, among other
things, the manufacturer must develop methods for testing the identity, strength, quality, and purity of the final biologic product. Additionally, appropriate
packaging must be selected and tested, and stability studies must be conducted to demonstrate the therapeutic candidate does not undergo unacceptable
deterioration over its shelf life.
Further, as a result of the COVID-19 pandemic, we may be required to develop and implement additional clinical trial policies and procedures
designed to help protect subjects from the COVID-19 virus. For example, the FDA has issued guidance on conducting clinical trials during the pandemic,
which describes a number of considerations for sponsors of clinical trials impacted by the pandemic, including certain reporting requirements, and
additional guidance on the good manufacturing practice considerations for responding to COVID-19 infection and other topics. We may be required to
make further adjustments to our clinical trials or business operations based on current or future guidance and regulatory requirements as a result of the
COVID-19 pandemic.
Biologics License Applications
The results of preclinical studies and of the clinical trials, together with other detailed information, including extensive manufacturing information
and information on the chemistry, pharmacology, clinical pharmacology, and the clinical effects of the biologic, are submitted to the FDA in the form of a
BLA requesting approval to market the biologic for one or more specified indications. The FDA reviews a BLA to determine, among other things, whether
a biologic is safe, pure, and potent and whether the facility in which the biological product is manufactured, processed, packed, or held meets standards
designed to assure the biological product continues to be safe, pure, and potent.
Once a BLA has been accepted for filing, by law the FDA will review the application and respond to the applicant, but the review process may be
significantly delayed by FDA’s requests for additional information or clarification. Under the Prescription Drug User Fee Act, the FDA evaluates a standard
original BLA submission within the first 60 days of its receipt to determine if it is sufficiently complete to conduct a full review, and the FDA has a goal of
responding to the submission within ten months of the 60-day filing date, but this timeframe is often extended. The FDA may refer the application to an
advisory committee for review, evaluation, and/or recommendation as to whether the application should be approved. The FDA is not bound by the
recommendation of an advisory committee, but it generally follows such recommendations. The FDA may deny approval of a BLA if the applicable
statutory and regulatory criteria are not satisfied, or for any reason, or it may require additional clinical data. Even if such data are submitted, the FDA may
ultimately decide the BLA does not satisfy the criteria for approval. Data from clinical trials are not always conclusive and the FDA may interpret data
differently than we interpret data. Once the FDA approves a BLA, or supplement thereto, the FDA may withdraw the approval if ongoing regulatory
requirements are not met or if safety problems are identified after the biologic reaches the market. Where a withdrawal may not
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be appropriate, the FDA still may seize existing inventory of such biologic or require a recall of any biologic already on the market. In addition, the FDA
may require testing, including Phase 4 clinical trials and surveillance programs to monitor the effect of approved biologics which have been
commercialized. The FDA has the authority to prevent or limit further marketing of a biologic based on the results of these post-marketing programs.
A sponsor may also seek approval of its therapeutic candidates under programs designed to accelerate FDA review and approval of BLAs. For
instance, a sponsor may seek FDA designation of a therapeutic candidate as a “fast track product.” Fast track products are those products intended for the
treatment of a serious or life-threatening disease or condition and which demonstrate the potential to address unmet medical needs for such diseases or
conditions. If fast track designation is obtained, the FDA may initiate review of sections of a BLA before the application is complete. This “rolling review”
is available if the applicant provides, and the FDA approves, a schedule for the remaining information. In some cases, a fast track product may be approved
on the basis of either 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, under the FDA’s accelerated approval
program. Approvals of this kind typically include requirements for appropriate post-approval confirmatory clinical trials to validate the surrogate endpoint
or otherwise confirm the effect of the clinical endpoint.
In addition, the Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted and signed into law in 2012, established
a new category of drugs referred to as “breakthrough therapies” that may be subject to accelerated approval. A sponsor may seek FDA designation of a
drug candidate as a “breakthrough therapy” if the drug is intended, alone or in combination with one or more other drugs, to treat a serious or life-
threatening disease or condition and preliminary clinical evidence indicates the drug may demonstrate substantial improvement over existing therapies on
one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.
Therapeutic candidates may also be eligible for “priority review,” or review within a six-month timeframe from the 60-day filing date, if a sponsor
provides sufficient clinical data demonstrating its therapeutic candidate provides a significant improvement compared to marketed products. Even if a
therapeutic candidate qualifies for one or more of these programs, the FDA may later decide the therapeutic candidate no longer meets the conditions for
qualification or that the period for FDA review or approval will be lengthened. When appropriate, we intend to seek fast track designation and/or
accelerated approval for our biologics. We cannot predict whether any of our therapeutic candidates will obtain a fast track and/or accelerated approval
designation and, if so, whether such designation will be maintained or rescinded by FDA, or the ultimate impact, if any, of the fast track or the accelerated
approval process on the timing or likelihood of FDA approval of any of our proposed biologics.
Biologics may be marketed only for the FDA approved indications and in accordance with the provisions of the approved labeling. Further, if there
are any modifications to the biologic, including changes in indications, labeling, or manufacturing processes, equipment, or facilities, the applicant may be
required to submit and obtain FDA approval of a new BLA or BLA supplement, which may require us to develop additional data or conduct additional
preclinical studies and clinical trials.
Before approving an application, the FDA will inspect the facility or the facilities at which the biologic product is manufactured and will not
approve the product unless cGMP compliance is satisfactory. The FDA may also inspect the sites at which the clinical trials were conducted to assess their
compliance and will not approve the biologic unless compliance with Good Clinical Practice requirements is satisfactory.
The testing and approval processes require substantial time, effort, and financial resources, and each may take several years to complete. The FDA
may not grant approval on a timely basis, or at all. Even if we believe a clinical trial has demonstrated safety and efficacy of one of our therapeutic
candidates for the treatment of a disease, the results may not be satisfactory to the FDA. Preclinical and clinical data may be interpreted by the FDA in
different ways, which could delay, limit, or prevent regulatory approval. We may encounter difficulties or unanticipated costs in our efforts to secure
necessary governmental approvals which could delay or preclude us from marketing our therapeutic candidates. The FDA may limit the indications for use
or place other conditions on any approvals restricting the commercial application of the products. After approval, certain changes to the approved biologic,
such as adding new indications, change in personnel, manufacturing changes, or additional labeling claims, are subject to further FDA review and approval.
Depending on the nature of the change proposed, a BLA supplement which may require additional studies to evaluate the effect of such change on the
identity, strength, quality, purity, or potency of the product as they may relate to the safety or effectiveness of the product—must be filed and approved
before the change may be implemented. As with new BLAs, the review process for BLA supplements may be delayed by the FDA through requests for
additional information or clarification.
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We believe any of our therapeutic products approved as a biological product under a BLA might qualify for a 12-year period of exclusivity currently
permitted by the Biologics Price Competition and Innovation Act, or BPCIA. Specifically, the BPCIA established an abbreviated pathway for the approval
of biosimilar and interchangeable biological products. The new abbreviated 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 existing brand product.
Under the BPCIA, an application for a biosimilar product cannot be submitted by an applicant until four years after the date the reference product was first
licensed and cannot be approved by the FDA until 12 years after the original branded product was first licensed under a BLA. There is a risk the U.S.
Congress could amend the BPCIA to significantly shorten this exclusivity period or the FDA will not consider our therapeutic candidates to be reference
products for competing products, potentially creating the opportunity for competition sooner than anticipated. Moreover, the extent to which a biosimilar,
once approved, will be substituted for any one of our reference products in a way 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 BPCIA is complex and is only beginning to
be interpreted and implemented by the FDA and the courts. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While
it is uncertain when any such processes may be fully adopted by the FDA, any such processes operating to limit the scope or length of exclusivity afforded
by the BPCIA could have a material adverse effect on the future commercial prospects for our biological products. In addition, foreign regulatory
authorities may also provide for exclusivity periods for approved biological products or for abbreviated pathways for follow on biological products. For
example, biological products in Europe may be eligible for a 10-year period of exclusivity.
Under the Orphan Drug Act, the FDA may grant orphan drug designation to therapeutic candidates intended to treat a rare disease or condition,
which is generally a disease or condition affecting fewer than 200,000 individuals in the U.S. or more than 200,000 individuals in the U.S. and for which
there is no reasonable expectation the cost of developing and making available in the U.S. a therapeutic candidate for this type of disease or condition will
be recovered from sales in the U.S. for that therapeutic candidate. Orphan drug designation must be requested before submitting a marketing application for
the therapeutic for that particular rare disease or condition. After the FDA grants orphan drug designation, the identity of the therapeutic agent 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. The FDA may revoke orphan drug designation, and if it does, it will publicize the drug is no longer designated as
an orphan drug. If a therapeutic candidate with orphan drug designation subsequently receives the first FDA approval for the disease for which it has such
designation, the therapeutic candidate is entitled to orphan product exclusivity, which means the FDA may not approve any other applications to market the
same therapeutic candidate for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, could also
block the approval of one of our therapeutic candidates for seven years if a competitor obtains approval of the same therapeutic candidate as defined by the
FDA or if our therapeutic candidate is determined to be contained within the competitor’s therapeutic candidate for the same indication or disease.
Under the Best Pharmaceuticals for Children Act, certain therapeutic candidates may obtain an additional six months of exclusivity if the sponsor
submits information requested in writing by the FDA, referred to as a “Written Request,” relating to the use of the active moiety of the therapeutic
candidate in children. The FDA may not issue a Written Request for studies on unapproved or approved indications where it determines information
relating to the use of a therapeutic candidate in a pediatric population, or part of the pediatric population, may not produce health benefits in that
population. In addition, the Pediatric Research Equity Act, or PREA, requires a sponsor to conduct pediatric studies for most therapeutic candidates and
biologics, for a new active ingredient, new indication, new dosage form, new dosing regimen, or new route of administration. Under PREA, original or
New Drug Applications, or NDAs, BLAs and supplements thereto must contain a pediatric assessment unless the sponsor has received a deferral or waiver.
The required assessment must assess the safety and effectiveness of the therapeutic candidate for the claimed indications in all relevant pediatric
subpopulations and support dosing and administration for each pediatric subpopulation for which the therapeutic candidate is safe and effective. The
sponsor or the FDA may request a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several
reasons, including a finding that the drug or biologic is ready for approval for use in adults before pediatric studies are complete or additional safety or
effectiveness data needs to be collected before the pediatric studies begin. The FDA must send a noncompliance letter to any sponsor that fails to submit
the required assessment, keep a deferral current, or fails to submit a request for approval of a pediatric formulation.
Other Regulatory Requirements
Any biologics manufactured or distributed by us or our collaborators pursuant to FDA approvals would be subject to continuing regulation by the
FDA, including recordkeeping requirements and reporting of adverse experiences associated with the product. Manufacturers and their subcontractors are
required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and
certain state agencies for compliance with ongoing regulatory requirements, including cGMPs, which impose certain procedural and documentation
requirements upon us and third-party manufacturers. Failure to comply with the statutory and regulatory requirements can subject a manufacturer to
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possible legal or regulatory action, such as warning letters, suspension of manufacturing, seizure of product, injunctive action or possible civil penalties.
Our company cannot be certain it or its present or future third-party manufacturers or suppliers will be able to comply with the cGMP regulations and other
ongoing FDA regulatory requirements. If our company or its present or future third-party manufacturers or suppliers are not able to comply with these
requirements, the FDA may halt our clinical trials, require us to recall a drug from distribution, or withdraw approval of the BLA for the therapeutic
product.
The FDA closely regulates the post-approval marketing and promotion of biologics, including standards and regulations for direct-to-consumer
advertising, off-label promotion, industry-sponsored scientific and educational activities, and promotional activities involving the Internet. A company can
make only those claims relating to safety and efficacy approved by the FDA. Failure to comply with these requirements can result in adverse publicity,
warning letters, corrective advertising, and potential civil and criminal penalties. Physicians may prescribe legally available biologics for uses not described
in the product’s labeling and different from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties.
Physicians may believe such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of
physicians in their choice of treatments. The FDA does, however, impose stringent restrictions on manufacturers’ communications regarding off-label use.
Healthcare Reform
In 2010, Congress passed the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, which
we refer to as the ACA, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of health spending, enhance
remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the
health industry, and impose additional policy reforms. The ACA contains a number of provisions, including those governing enrollment in federal
healthcare programs, reimbursement changes, and fraud and abuse, impacting existing government healthcare programs and resulting in the development of
new programs, including Medicare payment for performance initiatives, and improvements to the physician quality reporting system and feedback
program. The Affordable Care Act also does, among other things, the following:
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Increases pharmaceutical manufacturer rebate liability under the Medicaid Drug Rebate Program due to an increase in the minimum basic
Medicaid rebate on most branded prescription drugs, and the application of Medicaid rebate liability to drugs used in risk-based Medicaid
managed care plans.
Expands the 340B Drug Pricing Program to require discounts for “covered outpatient drugs” sold to certain children’s hospitals, critical
access hospitals, freestanding cancer hospitals, rural referral centers, and sole community hospital.
Requires pharmaceutical companies to offer discounts on brand-name drugs to patients who fall within the Medicare Part D coverage gap,
commonly referred to as the “Donut Hole.”
Requires pharmaceutical companies to pay an annual non-tax-deductible fee to the federal government based on each company’s market share
of prior year total sales of branded drugs to certain federal healthcare programs, such as Medicare, Medicaid, Department of Veterans Affairs,
and Department of Defense.
Establishes the Patient-Centered Outcomes Research Institute to identify priorities in, and conduct comparative clinical effectiveness research,
along with funding for such research. The research conducted by the Patient-Centered Outcomes Research Institute may affect the market for
certain pharmaceutical products.
Establishes the Center for Medicare and Medicaid Innovation within the Centers for Medicare and Medicaid Services, or CMS to test
innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
From time to time, legislation is drafted, introduced, and passed in Congress that could significantly change the statutory provisions governing the
sale, marketing, coverage, and reimbursement of products regulated by the CMS or other government agencies. In addition to new legislation, CMS
regulations and policies are often revised or interpreted by the agency in ways significantly affecting our business and our products.
Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and we expect there will be additional
challenges and amendments to the ACA in the future. For example, in June 2021, the United States Supreme Court held that Texas and other challengers
had no legal standing to challenge the ACA, dismissing the case without specifically ruling on the constitutionality of the ACA. Accordingly, the ACA
remains in effect in its current form. It is unclear how this Supreme Court decision, future litigation, or healthcare measures promulgated by the Biden
administration will impact our business, financial condition and results of operations. Complying with any new legislation or changes in healthcare
regulation could be time-intensive and expensive, resulting in material adverse effect on our business.
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Additionally, at the federal level, in 2020, the HHS and CMS issued various rules that are expected to impact, among others, price reductions from
pharmaceutical manufacturers to plan sponsors under Part D, fee arrangements between pharmacy benefit managers and manufacturers, importation of
prescription drugs from Canada and other countries, manufacturer price reporting requirements under the Medicaid Drug Rebate Program, including
regulations that affect manufacturer-sponsored patient assistance programs subject to pharmacy benefit manager accumulator programs and Best Price
reporting related to certain value-based purchasing arrangements. Multiple lawsuits have been brought against the HHS challenging various aspects of the
rules implemented during the Trump administration. As a result, the Biden administration and HHS have delayed the implementation or published rules
rescinding some of these Trump-era policies. In January 2021, President Biden also issued an executive order to initiate a special enrollment period for
people to obtain health insurance coverage through the ACA marketplace, and instructs certain governmental agencies to review and reconsider their
existing policies and rules that limit access to healthcare, among others. Under the American Rescue Plan Act of 2021, effective January 1, 2024, the
statutory cap on Medicaid Drug Rebate Program rebates that manufacturers pay to state Medicaid programs will be eliminated. Elimination of this cap may
require pharmaceutical manufacturers to pay more in rebates than it receives on the sale of products, which could have a material impact on our business.
Additionally, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple
provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing
High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as
potential administrative actions HHS can take to advance these principles. Although no legislation or administrative actions have been finalized to
implement these principles, Congress is considering legislation that, if passed, could have significant impact on prices of prescription drugs covered by
Medicare, including limitations on drug price increases and allowing Medicare to negotiate pricing for certain drugs. The implementation of cost
containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product
candidates if approved. Complying with any new legislation and regulatory changes could be time-intensive and expensive, resulting in a material adverse
effect on our business.
Further, many states have proposed or enacted legislation that seeks to indirectly or directly regulate pharmaceutical drug pricing, such as by
requiring biopharmaceutical manufacturers to publicly report proprietary pricing information or to place a maximum price ceiling on pharmaceutical
products purchased by state agencies. For example, a number of states are considering or have recently enacted state drug price transparency and reporting
laws that could substantially increase our compliance burdens and expose us to greater liability under such state laws once we begin commercialization
after obtaining regulatory approval for any of our products candidates. We cannot be sure to what extent these and future legislative and regulatory efforts,
whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product
candidates, if any, may be. In addition, increased scrutiny by Congress of the FDA’s approval process may significantly delay or prevent marketing
approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements. These measures could reduce the
ultimate demand for our products, once approved, or put pressure on our product pricing. We expect that additional state and federal healthcare reform
measures will 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 affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with
which any such product candidate, if approved, is prescribed or used.
Furthermore, political, economic, and regulatory influences are subjecting the health care industry in the U.S. to fundamental change. Initiatives to
reduce the federal budget and debt and to reform health care coverage are increasing cost-containment efforts. We anticipate federal agencies, Congress,
state legislatures, and the private sector will continue to review and assess alternative health care benefits, controls on health care spending, and other
fundamental changes to the healthcare delivery system. Any proposed or actual changes could limit coverage for, or the amounts federal and state
governments will pay for, health care products and services, which could also result in reduced demand for our products or additional pricing pressures, and
limit or eliminate our spending on development projects and affect our ultimate profitability.
Third-Party Payor Coverage and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any products for which we may obtain regulatory approval. In the U.S.,
sales of any products for which we may receive regulatory approval for commercial sale will depend in part on the availability of coverage and
reimbursement from third-party payors. Third-party payors include government authorities such as Medicare, Medicaid, TRICARE, and the Veterans
Administration, managed care providers, private health insurers and other organizations.
The Medicaid Drug Rebate Program, which is part of the federal Medicaid program, a program for financially needy patients, among others,
requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the Secretary of the Department of Health and
Human Services as a condition for states to receive federal matching funds for the manufacturer’s outpatient drugs furnished to Medicaid patients.
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In order for a pharmaceutical product to receive federal reimbursement under Medicare Part B, part of the federal Medicare program covering
outpatient items and services for the aged and disabled, and Medicaid programs or to be sold directly to U.S. government agencies, the manufacturer must
extend discounts to entities eligible to participate in the 340B drug pricing program, a federal program requiring manufacturers to provide discounts to
certain safety-net providers. The required 340B discount on a given product is calculated based upon certain Medicaid Drug Rebate Program metrics
reported by the manufacturer.
The process for determining whether a payor will provide coverage for a product is typically separate from the process for setting the
reimbursement rate a payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list or formulary which
might not include all of the FDA-approved products for a particular indication. Also, third-party payors may refuse to include a particular branded product
on their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or other alternative is available. However,
under Medicare Part D - Medicare’s outpatient prescription drug benefit - there are protections in place to ensure coverage and reimbursement for oncology
products and all Part D prescription drug plans are required to cover substantially all anti-cancer agents. Furthermore, a payor’s decision to provide
coverage for a product does not imply an adequate reimbursement rate will be available. 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.
Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and
services, in addition to their safety and efficacy. In order to obtain coverage and reimbursement for any product approved for sale, we may need to pursue
compendia listings or conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of any products,
in addition to the costs required to obtain regulatory approvals. Our drug candidates may not be considered medically necessary or cost-effective. If third-
party payors do not consider a product to be cost-effective compared to other available therapies, they may not cover an approved product as a benefit
under their plans or, if they do, the level of payment may not be sufficient to allow a company to sell its products at a profit.
Other Healthcare Laws and Regulations
In the United States, the research, manufacturing, distribution, sale and promotion of drug products are subject to regulation by various federal, state
and local authorities in addition to the FDA, including the Centers for Medicare & Medicaid Services, other divisions of the U.S. Department of Health and
Human Services (e.g., the Office of Inspector General), the U.S. Department of Justice, state attorneys general, and other state and local government
agencies.
If we obtain regulatory approval of our products, we may be subject to various federal and state laws targeting fraud and abuse in the healthcare
industry. These laws may impact, among other things, our proposed sales and marketing strategies. In addition, we may be subject to patient privacy
regulation by both the federal government and the states in which we conduct our business. The laws affecting our ability to operate include, but are not
limited to:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering,
or paying remuneration (a term interpreted broadly to include anything of value, including, for example, gifts, discounts, and credits), directly
or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order, or
recommendation of, an item or service reimbursable under a federal health care program, such as the Medicare and Medicaid programs;
federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from
knowingly presenting, or causing to be presented, claims for payment to Medicare, Medicaid, or other third-party payors that are false or
fraudulent, or making a false statement or record material to payment of a false claim or avoiding, decreasing, or concealing an obligation to
pay money owed to the federal government;
provisions of HIPAA, prohibiting knowingly and willfully executing a scheme to defraud any health care benefit program and making false
statements relating to health care matters;
provisions of HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing
regulations, which imposes certain requirements relating to the privacy, security, and transmission of individually identifiable health
information;
the federal transparency laws, including the federal Physician Payment Sunshine Act, which was part of the Affordable Care Act, requiring
applicable manufacturers of certain drugs and biologics, among other covered medical products for which payment is available under
Medicare, Medicaid or the Children’s Health Insurance Program, with certain exceptions, to track and report annually certain payments and
other transfers of value they
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make to covered recipients, including U.S. physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors, other
health care professionals (such as nurse practitioners and physician assistants, among others) and teaching hospitals, as defined by law, as well
as physicians’ and physicians’ immediate family members’ ownership and investment interests in the applicable manufacturer, which are
subsequently made publicly available in a searchable format on the CMS Open Payments website; and
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state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services
reimbursed by any third-party payor, including commercial insurers, state transparency reporting and compliance laws, and state and foreign
laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant
ways and may not have the same effect, thus complicating compliance efforts.
The ACA broadened the reach of the fraud and abuse laws by, among other things, amending the intent requirement of the federal Anti-Kickback
Statute and the applicable criminal healthcare fraud statutes contained within 42 U.S.C. § 1320a-7b. Pursuant to the statutory amendment, a person or entity
no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the ACA provides
the government may assert a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or
fraudulent claim for purposes of the civil False Claims Act or the civil monetary penalties statute. Many states have adopted laws similar to the federal
Anti-Kickback Statute, some of which apply to the referral of patients for healthcare items or services reimbursed by any source, not only the Medicare and
Medicaid programs.
If our operations are found to be in violation of any of the U.S. federal and state laws described above or any other governmental regulations that
apply to us, we may be subject to penalties, including criminal and significant civil monetary penalties, damages, fines, disgorgement, imprisonment,
exclusion from participation in government healthcare programs, injunctions, recall or seizure of products, total or partial suspension of production, denial
or withdrawal of pre-marketing product approvals, private qui tam actions brought by individual whistleblowers in the name of the government or refusal
to allow us to enter into supply contracts, including government contracts, 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. We may also be subject to additional reporting requirements and oversight
if we become subject to a corporate integrity agreement or similar agreement with a governmental entity to resolve allegations that we have violated these
laws. To the extent that any of our product candidates, once approved, are sold in a foreign country, we may be subject to similar foreign laws and
regulations, which may include, for instance, applicable post-approval requirements, including safety surveillance, anti-fraud and abuse laws, and
implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.
Human Capital
Our employees share a passion for meaningful work and are committed to solving the most complex problems in creating immunotherapies to treat
cancer and autoimmune and inflammatory diseases. Our culture is guided by our core values of innovative thinking, collaboration, flexibility, bias for
action, and healthy debate. As of December 31, 2021, we had 85 employees, of which 67 are engaged in research and development activities and 18 in
general and administrative. 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 believe that we provide competitive compensation and benefits for our personnel and that our compensation and benefit packages are designed
to attract and retain highly qualified personnel essential to our business. In addition to salary compensation, our compensation includes new equity grants, a
401(k) retirement plan, healthcare and insurance benefits and a flexible paid time off policy.
We are committed to diversity, equity and inclusion. We recruit the best qualified employees regardless of gender, ethnicity or other protected traits
and it is our policy to comply with all applicable laws related to discrimination in the workplace.
Finally, in response to the COVID-19 pandemic, we continue to provide many employees with the ability to work from home and have implemented
additional safety and infection prevention measures including enhanced cleaning, additional personal protective equipment, testing, and contact tracing
protocols for employees who have transitioned back to critical work on site.
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Corporate Information
On July 24, 2017, Alpine Immune Sciences, Inc., or Private Alpine, completed its business combination with Nivalis Therapeutics, Inc., a publicly
held company. In connection with the merger, Nivalis Therapeutics, Inc. changed its name to Alpine Immune Sciences, Inc. Nivalis Therapeutics, Inc. was
incorporated in Delaware in March 2007. Alpine Immune Sciences, Inc. (prior to its business combination with Nivalis Therapeutics, Inc.) was
incorporated in Delaware on December 30, 2014.
Our principal executive office is located at 188 East Blaine Street, Suite 200, Seattle WA, 98102. Our telephone number is (206) 788-4545. Our
website is www.alpineimmunesciences.com. Information contained in, or that can be accessed through, our website is not a part of, and is not incorporated
into, this report.
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Item 1A. Risk Factors
You should carefully consider the following risk factors, in addition to the other information contained in this Annual Report on Form 10-K, including
Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7, and our consolidated financial
statements and related notes. If any of the events described in the following risk factors and the risks described elsewhere in this report occurs, our
business, operating results and financial condition could be seriously harmed. Our Risk Factors are not guarantees that no such conditions exist as of the
date of this report and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part. This
report on Form 10-K also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this report.
Risks Related to Our Pipeline and Product Development
Our approach to the discovery and development of innovative therapeutic treatments based on our technology is unproven and may not result in
marketable products.
We plan to develop novel protein-based immunotherapies in part via our proprietary directed evolution platform for the treatment of cancer and
autoimmune/inflammatory diseases. The potential to create therapies capable of working within and/or modulating an immune synapse, forcing a synapse
to occur, or preventing a synapse from occurring is an important, novel attribute of the majority of our approaches. However, the scientific research
forming the basis of our efforts to develop therapeutic candidates based on our platform is relatively new. Further, the scientific evidence to support the
feasibility of developing therapeutic treatments based on our platform is both preliminary and limited.
Relatively few therapeutic candidates based on immunoglobulin superfamily, or IgSF, domains, or tumor necrosis factor receptor super family, or
TNFRSF, domains, have been tested in humans. We may discover the therapeutic candidates developed using our scientific platform do not possess certain
properties required for the therapeutic candidate to be effective. We currently have only limited data to suggest we can introduce these necessary
therapeutic properties into variant Ig domain, or vIgD or variant TNF(R) domain, or vTD, based therapeutic candidates. In addition, vIgDs or vTDs may
demonstrate different chemical and pharmacological properties in human subjects or patients than they do in laboratory studies. Even if our programs have
successful results in animal studies, they may not demonstrate the same chemical and pharmacological properties in humans and may interact with human
biological systems in unforeseen, ineffective, or harmful ways. While we continue to evaluate our vIgDs and vTDs preclinically and clinically, the risk
profile in humans is still being fully assessed. Undesirable side effects that may be caused by our therapeutic 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 authorities. Such side effects could also affect patient recruitment or the ability of enrolled patients to complete clinical trials or
result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly. As a result, we
may never succeed in developing a marketable therapeutic, we may not become profitable, and the value of our common stock may decline.
Further, we believe that the FDA has little prior experience with vIgDs or vTDs, which may increase the complexity, uncertainty, and length of the
regulatory approval process for our therapeutic candidates. Our company and our current collaborators, or any future collaborators, may never receive
approval to market and commercialize any therapeutic candidate. Even if our company or a collaborator obtains regulatory approval, the approval may be
for disease indications or patient populations not as broad as we intended or desired or may require labeling, including significant use or distribution
restrictions or safety warnings. Our company or a collaborator may be required to perform additional or unanticipated clinical trials to obtain approval or be
subject to post-marketing testing requirements to maintain regulatory approval. If therapeutic candidates we develop using our scientific platform prove to
be ineffective, unsafe, or commercially unviable, our entire platform and pipeline would have little, if any, value, which could have a material adverse
effect on our business, financial condition, results of operations, and prospects.
The market may not be receptive to our therapeutic products based on a novel therapeutic modality, and we may not generate any future revenue from
the sale or licensing of therapeutic products.
Even if approval is obtained for a therapeutic candidate, we may not generate or sustain revenue from sales of the therapeutic product due to factors
such as whether the therapeutic product can be sold at a competitive price and otherwise accepted in the market. Therefore, any revenue from sales of the
therapeutic product may not offset the costs of development. The therapeutic candidates we are developing are based on new technologies and therapeutic
approaches. Market participants with significant influence over acceptance of new treatments, such as physicians and third-party payors, may not adopt a
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treatment based on our therapeutic products, and we may not be able to convince the medical community and third-party payors to accept and use, or to
provide favorable coverage or reimbursement for, any therapeutic products developed by our company, our existing collaborator, or any future
collaborators. Market acceptance of our therapeutic products will depend on, among other factors:
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the timing of our receipt of any marketing and commercialization approvals;
the terms and scope of any approvals and the countries in which approvals are obtained;
the safety and efficacy of our therapeutic products;
the prevalence and severity of any adverse side effects associated with our therapeutic products;
the prevalence and severity of any adverse side effects associated with therapeutics of the same type or class as our therapeutic products;
limitations or warnings contained in any labeling approved by the FDA or other regulatory authority;
relative convenience and ease of administration of our therapeutic products;
the willingness of patients to accept, and the willingness of physicians to prescribe, any new methods of administration;
the success of our physician education programs;
the availability of adequate government and third-party payor coverage and reimbursement;
the willingness of patients to pay out-of-pocket in the absence of coverage by government and third-party payors;
the pricing of our products, particularly as compared to alternative treatments;
our ability to compliantly and effectively market and sell our products;
the timing of market introduction of our therapeutic products as well as alternative treatments; and
availability of alternative effective treatments for the disease indications our therapeutic products are intended to treat and the relative risks,
benefits, and costs of those treatments.
With our development focus, these risks may increase to the extent this field becomes more competitive or less favored in the commercial
marketplace. Additional risks apply in relation to any disease indications we pursue which are classified as rare diseases and allow for orphan drug
designation by regulatory agencies in major commercial markets, such as the United States, European Union, and Japan. Because of the small patient
population for a rare disease, if pricing is not approved or accepted in the market at an appropriate level for an approved therapeutic product with orphan
drug designation, such drug may not generate enough revenue to offset costs of development, manufacturing, marketing, and commercialization despite
any benefits received from the orphan drug designation, such as market exclusivity, assistance in clinical trial design, or a reduction in user fees or tax
credits related to development expense. Market size is also a variable in disease indications classified as rare. Our estimates regarding potential market size
for any rare indication may be materially different from what we discover to exist at the time we commence commercialization, if any, for a therapeutic
product, which could result in significant changes in our business plan and have a material adverse effect on our business, financial condition, results of
operations, and prospects.
If a therapeutic product with orphan drug designation subsequently receives the first FDA approval for the indication for which it has such
designation, the therapeutic product is entitled to orphan product exclusivity, which means the FDA may not approve any other applications to market the
same therapeutic product for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, could also block
the approval of one of our therapeutic products for seven years if a competitor obtains approval of the same therapeutic product as defined by the FDA or if
our therapeutic product is determined to be within the same class as the competitor’s therapeutic product for the same indication or disease.
As in the United States, we may apply for designation of a therapeutic product as an orphan drug for the treatment of a specific indication in the
European Union before the application for marketing authorization is made. Sponsors of orphan drugs in the European Union can enjoy economic and
marketing benefits, including up to ten years of market exclusivity for the approved indication unless another applicant can show its therapeutic product is
safer, more effective, or otherwise clinically superior to the orphan-designated therapeutic product. The respective orphan designation and exclusivity
frameworks in the United States and in the European Union are subject to change, and any such changes may affect our ability to obtain EU or U.S. orphan
designations in the future.
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Our therapeutic candidates are in early stages of development and may fail in development or suffer delays that materially and adversely affect their
commercial viability.
We have no products on the market and all of our therapeutic candidates are in early stages of development. Our ability to achieve and sustain
profitability depends on obtaining regulatory approval and Institutional Review Board, or IRB, approval to conduct clinical trials at particular sites,
obtaining regulatory approvals to market our therapeutic candidates and successfully commercializing our therapeutic candidates, either alone or with third
parties, such as our collaborators. Before obtaining regulatory approval for the commercial distribution of our therapeutic candidates, we or a collaborator
must conduct extensive preclinical tests and clinical trials to demonstrate the safety and efficacy in humans of our therapeutic candidates. Preclinical testing
and clinical trials are expensive, difficult to design and implement, can take many years to complete, and are uncertain as to outcome. For example, we are
currently advancing the development of acazicolcept, davoceticept and ALPN-303; however, even with the significant investment of time and funding to
advance these product candidates, we cannot guarantee that our clinical and preclinical development efforts will be successful. The start or end of a clinical
study is often delayed or halted due to delays in or failure to obtain regulatory approval to commence the study, delays in or failure to reach agreement on
acceptable terms with prospective contract research organizations, or CROs, or clinical trial sites, delays in or failure to obtain IRB approval at each site,
changing regulatory requirements, manufacturing challenges, clinical sites or CROs deviating from the trial protocol or failing to comply with regulatory
requirements or meet contractual obligations, slower than anticipated patient enrollment, changing standards of care, availability or prevalence of use of a
comparative therapeutic or required prior therapy, clinical outcomes, failure of patients to complete the trial or return for post-treatment follow-up, or
financial constraints. For instance, delays or difficulties in patient enrollment or difficulties in retaining trial participants can result in increased costs,
longer development times, or termination of a clinical trial. Clinical trials of a new therapeutic candidate require the enrollment of a sufficient number of
patients, which may include patients who are suffering from the disease the therapeutic candidate is intended to treat and who meet other eligibility criteria.
Rates of patient enrollment are affected by many factors, including the size of the patient population, the eligibility criteria for the clinical trial, the age and
condition of the patients, the stage and severity of disease, the nature of the protocol, the proximity of patients to clinical sites, and the availability of
effective treatments or competing academic and other clinical trials for the relevant disease.
A therapeutic candidate can unexpectedly fail at any stage of preclinical and clinical development. The historical failure rate for therapeutic
candidates is high due to scientific feasibility, safety, efficacy, changing standards of medical care, and other variables. The novelty of our platform may
mean our failure rates are higher than historical norms. The results from preclinical testing or early clinical trials of a therapeutic candidate may not predict
the outcome of later phase clinical trials of the therapeutic candidate, particularly in immuno-oncology and autoimmune/inflammatory disorders. We will
have to conduct additional trials in our proposed indications to verify the results obtained to date in our preclinical and clinical studies and to support any
future regulatory submissions. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due
to lack of efficacy or adverse safety profiles despite promising results in earlier, smaller clinical trials. Moreover, clinical data are often susceptible to
varying interpretations and analyses. We do not know whether Phase 1, Phase 2, Phase 3, or other clinical trials we may conduct will demonstrate
consistent or adequate efficacy and safety with respect to the proposed indication for use sufficient to receive regulatory approval or market our therapeutic
candidates.
We, the FDA, an IRB, an independent ethics committee, or other applicable regulatory authorities may suspend clinical trials of a therapeutic
candidate at any time for various reasons, including a belief that subjects participating in such trials are being exposed to unacceptable health risks or
adverse side effects. Similarly, an IRB or ethics committee may suspend a clinical trial at a particular trial site. We may not have the financial resources to
continue development of, or to enter into collaborations for, a therapeutic candidate if we experience any problems or other unforeseen events delaying or
preventing clinical development or regulatory approval of, or our ability to commercialize, therapeutic candidates, including:
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negative or inconclusive results from our clinical trials, or the clinical trials of others for therapeutic candidates similar to ours, leading to a
decision or requirement to conduct additional preclinical testing or clinical trials or abandon a program;
serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using therapeutics similar
to our therapeutic candidates;
serious drug-related side effects experienced in the past by individuals using therapeutics similar to our therapeutic candidates;
delays in submitting IND applications or clinical trial applications, or comparable foreign applications, or delays or failure in obtaining the
necessary approvals from regulators or IRBs to commence a clinical trial, or a suspension or termination of a clinical trial once commenced;
conditions imposed by the FDA or comparable foreign authorities, such as the European Medicines Agency, or EMA, regarding the scope or
design of our clinical trials;
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delays in enrolling research subjects in clinical trials;
high drop-out rates of research subjects;
inadequate supply or quality of therapeutic candidate or therapeutic candidate components, or materials or other supplies necessary for the
conduct of our clinical trials, including those owned, manufactured, or provided by companies other than ours;
greater than anticipated clinical trial costs, including the cost of any approved drugs used in combination with our therapeutic candidates;
poor effectiveness of our therapeutic candidates during clinical trials;
unfavorable FDA or other regulatory agency inspection and review of a clinical trial site;
failure of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations in
a timely manner, or at all;
delays and changes in regulatory requirements, policies, and guidelines, including the imposition of additional regulatory oversight around
clinical testing generally or with respect to our technology in particular; or
varying interpretations of data by the FDA and similar foreign regulatory agencies.
Because we have limited financial and operational resources, we must prioritize our research programs and will need to focus our discovery and
development on select product candidates and indications. Correctly prioritizing our research and development activities is particularly important for us due
to the breadth of potential product candidates and indications that we intend to utilize with our clinical development strategy. As a result, we may forego or
delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource
allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future
research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not
accurately evaluate the commercial potential or target market for a particular product candidate, we may also relinquish valuable rights to that product
candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole
development and commercialization rights to such product candidate.
Product development involves a lengthy and expensive process with an uncertain outcome, and results of earlier preclinical and clinical trials may not
be predictive of future clinical trial results.
Clinical testing is expensive and generally takes many years to complete, and the outcome is inherently uncertain. Failure can occur at any time
during the clinical trial process. The results of preclinical trials and early clinical trials of our product candidates may not be predictive of the results of
larger, later-stage controlled clinical trials. Product candidates showing promising results in early-stage clinical trials may still suffer significant setbacks in
subsequent clinical trials. We have evaluated acazicolcept in a Phase 1 healthy volunteer trial and previously initiated a Phase 1b/2 study of acazicolcept in
patients with steroid-resistant or steroid-refractory active acute graft-versus-host disease, or SR-aGVHD. We terminated this Phase 1b/2 SR-aGVHD study
in June 2020. Our Phase 2 study in SLE will materially increase our anticipated research and development spending. SLE is a challenging indication and a
number of trials conducted by other companies have failed after significant investment of time and funding. We cannot predict whether our efforts in this
indication will be successful. If we are unsuccessful, it is unlikely that AbbVie would exercise its option for acazicolcept pursuant to our option and license
agreement and, as a result, we would not receive the option payment pursuant to this agreement and we would not be eligible for future milestones and
royalties. In addition, we have initiated our Phase 1 studies of davoceticept as well as our Phase 1 study of ALPN-303 in healthy volunteers. We will have
to conduct additional preclinical studies and human trials in our proposed indications to verify the results obtained to date and to support any regulatory
submissions for further clinical development. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced
clinical trials due to lack of efficacy or adverse safety profiles despite promising results in earlier, smaller clinical trials. Moreover, clinical data are often
susceptible to varying interpretations and analyses. We do not know whether Phase 1, Phase 2, Phase 3, or other clinical trials we may conduct will
demonstrate consistent or adequate efficacy and safety with respect to the proposed indication for use sufficient to receive regulatory approval or market
our therapeutic candidates.
Additionally, disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed by necessary government
agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down multiple times and
certain regulatory agencies, such as the FDA, have had to furlough critical FDA and other government employees. In response to the COVID-19 public
health emergency, the FDA has postponed some inspections and continues to conduct “mission-critical” inspections on a case-by-case basis, or, where
possible to do so safely,
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has resumed prioritized domestic inspections, such as pre-approval and surveillance inspections. In 2020 and 2021, a number of companies announced
receipt of complete response letters due to the FDA’s inability to complete required inspections for their applications. While the FDA continues to ensure
timely reviews of applications for medical products during the ongoing COVID-19 pandemic in line with its user fee performance goals and conducting
mission critical domestic and foreign inspections to ensure compliance of manufacturing facilities with FDA Good Manufacturing Practices, the FDA may
not be able to continue its current inspection pace or be unable to complete required inspections during the review period, or the review timelines could be
extended. Regulatory authorities outside the U.S. 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 or other disruption occurs, or if global health or other concerns
continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities in a timely
manner, 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.
If we encounter delays or difficulties enrolling patients in our clinical trials and/or retention of patients in 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 supply chain disruptions, staffing
shortages and other business and economic disruptions resulting from geopolitical actions, including war and terrorism, natural disasters, including
earthquakes, typhoons, floods and fires, as well as other disruptions resulting from the impact of public health factors, including the COVID-19 pandemic,
business disruptions of our strategic partners, third-party manufacturers, suppliers and other third parties upon which we rely. The timely completion of
clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the trial
until completion of treatment and adequate follow-up. The enrollment of patients depends on many factors, including:
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Inability to enroll, or delay in enrollment of, patients due to outbreaks and public health crises, such as the COVID-19 global pandemic, as
further described under “Risk Factors — Risks Related to COVID-19 and Other Health Epidemics”;
The patient eligibility criteria defined in the protocol;
The perceived risks and benefits of the product candidate being studied;
The size of the patient population required for analysis of the trial’s primary endpoints;
The proximity of patients to trial 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 consent;
Geopolitical events in countries where we have or seek to have clinical trial sites;
Reporting of the preliminary results of any of our clinical trials; and
The risk that patients enrolled in clinical trials will drop out of the trials before completion of treatment and adequate follow-up.
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 investigation sites is limited, we
expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who
are available for our clinical trials at such clinical trial sites. Geopolitical events in countries where we have or seek to have clinical trial sites can also
negatively impact our ability to enroll patients in our trials. For example, we had intended to open trial sites in Russia for both our ongoing Synergy trial
and our planned Phase 2 trial in SLE with ALPN-303. Following the start of the Russia-Ukraine conflict, we have decided to abandon our plans to open
these sites. Although no sites in Russia had been opened, we must revise our plans and locate alternative trial sites in order to achieve targeted enrollment
numbers for these trials. Any resulting delays in patient enrollment may increase our costs or may affect the timing or outcome of our ongoing and planned
clinical trials, which could prevent completion or commencement of these trials and adversely affect our ability to advance the development of our product
candidates.
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Our product candidates may cause undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory
approval, require expansion of the trial size, limit their commercial potential, or result in significant negative consequences.
Clinical trials that involve cancer patients with significant co-morbidities are associated with increased risks as such participants may be particularly
susceptible to safety and toxicity risks. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff, as
safety and toxicity monitoring may be complicated and difficult to manage, which could result in patient death or other significant issues. Additionally, it
can be difficult to determine if the serious adverse or unexpected side effects were caused by the product candidate or another factors, especially in
oncology subjects who may suffer from other medical conditions and take other medications. Such risks are increased in clinical trials that evaluate
combination therapies.
If serious adverse events or undesirable side effects arise, we could be required to suspend, delay, or halt our clinical trials and regulatory authorities
could deny approval or require us to limit development of that product candidate to certain uses or subpopulations in which the undesirable side effects or
other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Undesirable side effects could also result in an
expansion in the size of our clinical trials, increasing the expected costs and timeline of our clinical trials. Side effects that are observed during the trial,
whether treatment related or not, could also affect patient recruitment for future trials or the ability of enrolled patients to complete the trial or result in
potential product liability claims.
Further, if serious adverse events or undesirable side effects are identified during development or after approval and are determined to be attributed
to any of our product candidates, we may be required to develop Risk Evaluation and Mitigation Strategies, or REMS, to ensure that the benefits of
treatment with such product candidate outweigh the risks for each potential patient, which may include, among other things, a communication plan to
health care practitioners, patient education, extensive patient monitoring or distribution systems and processes that are highly controlled, restrictive and
more costly than what is typical for the industry.
Any of these occurrences may harm our business, financial condition and prospects significantly. As discussed further in the risk factor below, FDA
placed a partial clinical hold on the NEON-2 trial evaluating davoceticept in combination with Merck’s pembrolizumab in adults with advanced
malignancies. This partial clinical hold was prompted by the death of a study participant in the NEON-2 trial. We are working closely with the FDA,
Merck, the Safety Monitoring Committee, and the study investigators to further understand this event. FDA must lift the partial clinical hold before we can
continue to enroll additional patients in this study. We can provide no assurances that FDA will lift the partial clinical hold for this study, or will do so in a
timely manner. At this time, the full extent of this event on the NEON-2 trial is unclear.
Development of product candidates in combination with other therapies could expose us to additional risks.
Development of any of our product candidates in combination with one or more other therapies that have either been approved or not yet been
approved for marketing by the FDA, EMA or comparable foreign regulatory authorities could expose us to additional risks, as combination therapies may
increase the rate of serious or unexpected adverse events, which could result in a clinical hold as well as pre-approval and post-approval restrictions by the
FDA or other regulatory authorities on the proposed combination therapy, including narrowing of the indication, warnings, additional safety data collection
and monitoring procedures, and REMS, even if the cause of such serious or unexpected adverse events are not directly attributed to our product candidate.
Any of these events or restrictions could have a material adverse effect on our business, development of our product candidates, delay our regulatory
approval, and decrease the market acceptance and profitability of our product candidate if approved for a combination therapy.
We will not be able to market and sell any product candidate in combination with any unapproved therapies that do not ultimately obtain marketing
approval. If the FDA, EMA or other comparable foreign regulatory authorities do not approve or revoke their approval of other therapies used in
combination therapies, or if safety, efficacy, commercial adoption, manufacturing or supply issues arise with the therapies we choose to evaluate in
combination with any of our product candidate, we may be unable to obtain approval of or successfully market any one or all of the product candidates we
develop.
Even if any of our product candidates were to receive marketing approval or be commercialized for use in combination with other existing approved
therapies, we would continue to be subject to the risks that the FDA, EMA or other comparable foreign regulatory authorities could revoke approval of the
other therapy used in combination with any of our product candidates, or safety, efficacy, manufacturing or supply issues could arise with these existing
therapies. In addition, it is possible that existing therapies with which our product candidates are approved for use could themselves fall out of favor or be
relegated to later lines of treatment. This could result in the need to identify other combination therapies for our product candidates or our own products
being removed from the market or being less successful commercially.
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Additionally, if the third-party providers of therapies or therapies in development used in combination with our product candidates are unable to
produce sufficient quantities for clinical trials or for commercialization of our product candidates, or if the cost of combination therapies is prohibitive, our
development and commercialization efforts would be impaired, which would have an adverse effect on our business, financial condition, results of
operations and growth prospects.
On March 7, 2022, we announced that the FDA placed a partial clinical hold on the NEON-2 trial evaluating davoceticept in combination with
Merck’s pembrolizumab in adults with advanced malignancies. This partial clinical hold was prompted by the death of a study participant in the NEON-2
trial. The participant had choroidal melanoma previously treated with nivolumab and ipilimumab, and had received a single dose each of davoceticept and
pembrolizumab. The participant’s death was attributed to cardiogenic shock, considered by the treating physicians as likely related to immune-mediated
myocarditis, or possibly infection. We are working closely with the FDA, Merck, the Safety Monitoring Committee, and the study investigators to further
understand this event and to evaluate the appropriate safety precautions before we resume enrollment of additional participants. Participants who are
currently enrolled in the NEON-2 trial may continue to receive davoceticept and pembrolizumab, although no new participants may be enrolled until the
partial clinical hold is resolved. We can provide no assurances that FDA will lift the partial clinical hold for this study, or will do so in a timely manner.
This partial clinical hold does not affect the ongoing NEON-1 clinical trial of davoceticept as monotherapy (NCT04186637).
At this time, it is unclear what FDA will require before the partial hold can be removed or the full impact of this event. To the extent the FDA
requires additional safety data to be collected in the NEON-2 trial, impose further or more stringent exclusion criteria, expand the size of the trial, or
impose other restrictions or changes to our study protocol, or prolong the partial clinical hold for any reason, our clinical plans for the combination therapy
would be delayed substantially and incur additional costs, which could have an adverse effect on our business, financial condition, results of operations and
growth prospects. We may encounter further challenges with enrollment. If we fail to meet the additional requirements set by the FDA for resolving the
partial clinical hold, we may be required to abandon the development of davoceticept in combination with pembrolizumab. Continued safety concerns
could cause the FDA and other regulatory authorities or the IRB to terminate the NEON-2 trial, narrow the indication or impose other restrictions in the
labeling even if we obtain regulatory approval for the combination therapy, such as implementation of REMS and addition of a black box warning, among
other measures, any of which could decrease the demand, market acceptance and profitability of the combination therapy.
We face competition from entities that have developed or may develop therapeutic candidates for our target disease indications, including companies
developing novel treatments and technology platforms based on modalities and technology similar to us. If these companies develop technologies or
therapeutic candidates more rapidly than we do, or their technologies, including delivery technologies, are more effective, our ability to develop and
successfully commercialize therapeutic candidates may be adversely affected.
We participate in the highly competitive sector of biotechnology and pharmaceuticals and in the subsector of immune modulation. This subsector
has undergone tremendous technological advancement over the last decade due to advancements in understanding the role of the immune system across
multiple therapeutic areas, including oncology and autoimmune/inflammatory disease. While we believe our novel technology platform, discovery
programs, knowledge, experience, and scientific resources offer competitive advantages, we face competition from major pharmaceutical and
biotechnology companies, academic institutions, governmental agencies, public and private research institutions, and others.
Any products we successfully develop and commercialize will face competition from currently approved therapies and new therapies potentially
available in the future.
The availability of reimbursement from government and other third-party payors will also significantly affect the pricing and competitiveness of our
products. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for our products,
which could result in our competitors establishing a strong market position before we are able to enter the market.
Many of the companies we compete against may have significantly greater financial resources and expertise in research and development,
manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products. Smaller or early-stage
companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These
competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient
registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. For additional information regarding
our competitors and the competitive landscape, please refer to the section of this report titled “Business — Competition.”
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Many of our competitors have significantly greater financial, technical, manufacturing, marketing, sales, and supply resources or experience than
we have. If we successfully obtain approval for any therapeutic candidate, we will face competition based on many different factors, including safety and
effectiveness, ease with which our products can be administered and the extent to which patients accept relatively new routes of administration, timing and
scope of regulatory approvals, availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage, and patent position
of our products. Competing products could present superior treatment alternatives, including by being more effective, safer, less expensive, or marketed
and sold more effectively than any products we may develop. Competitive products may make any products we develop obsolete or noncompetitive before
we recover the expense of developing and commercializing our therapeutic candidates. Competitors could also recruit our employees, which could
negatively impact our ability to execute our business plan.
We believe our development programs and platform have a particular mechanism of action, but this mechanism of action has not been proven
conclusively.
Our scientific platform is novel, and the underlying science is not exhaustively understood nor conclusively proven. In particular, the interaction of
vIgDs with the immune synapse, the ability of vIgDs to slow, stop, restart, or accelerate immune responses, and the ability of vIgD domains to interact with
multiple counter structures is still largely theoretical. Graphical representations of proposed mechanisms of action of our therapies, the size, actual or
relative, of our therapeutics, and how our therapeutics might interface with other cells within the human body, inside the immune synapse, or inside the
disease and/or the tumor microenvironment are similarly theoretical and not yet conclusively proven. The lack of a proven mechanism of action may
adversely affect our ability to raise sufficient capital, complete preclinical studies, adequately manufacture drug product, obtain regulatory clearance for
clinical trials, gain marketing approval, or conclude collaborations, or interfere with our ability to market our product to patients and physicians or achieve
reimbursement from payors.
Any inability to present our data in scientific journals or at scientific conferences could adversely impact our business and stock price.
We may from time to time submit data related to our research and development activities in peer-reviewed scientific publications or apply to present
data related to our research and development activities at scientific or other conferences. We have no control over whether these submissions or
applications are accepted. Even if accepted for a conference, we have no control over whether presentations at scientific conferences will be accepted for
oral presentation, poster presentation, or abstract publication only. Even when accepted for publication, we have no control over the timing of the release of
the publication. Rejection by publications, delays in publication, rejection for presentation, or a less-preferred format for a presentation may adversely
impact our stock price, ability to raise capital, and business.
Our business may be affected by adverse scientific publications or editorial or discussant opinions.
We may from time to time publish data related to our research and development activities in peer-reviewed scientific publications or present data
related to our research and development activities at scientific or other conferences. Editorials or discussants unrelated to us may provide opinions on our
presented data unfavorable to us. In addition, scientific publications or presentations may be made which are critical of our science or research or the field
of immunotherapy in general. This may adversely affect our ability to raise necessary capital, complete clinical and preclinical studies, adequately
manufacture drug product, obtain regulatory clearance for clinical trials, or approval for marketing, or interfere with our ability to market our product to
patients and physicians or achieve reimbursement from payors.
Risks Related to Our Relationships with Third Parties
To date, our revenue has been primarily derived from our collaboration agreements, and our success will be dependent, in part, on our collaborators’
efforts to develop our therapeutic candidates.
Our success is dependent, in part, on our collaborators’ efforts to develop our therapeutic candidates and, historically, our revenue has been
primarily derived from our agreements with collaborators. For example, in June 2020, we entered into the AbbVie Agreement for the development of
acazicolcept and in December 2021, we entered into the Horizon Agreement pursuant to which we granted to Horizon rights to one of our existing
preclinical biologic therapeutic programs and we and Horizon agreed to collaborate in the discovery, research and preclinical development of up to three
additional autoimmune and inflammatory disease programs for other designated biological targets.
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Pursuant to the terms of the AbbVie Agreement, we received an upfront payment of $60.0 million in cash and are eligible to receive up to $75.0
million in development milestones (of which $45.0 million was achieved in the second quarter of 2021), an additional $75.0 million if AbbVie exercises its
option with respect to acazicolcept following our completion of certain development activities, additional development, commercial and sales-based
milestones up to an aggregate of $655.0 million and royalties on any future net sales. Pursuant to the AbbVie Agreement, we will conduct certain
development activities under a development plan that provides for, among other things, the generation of a data package in order for AbbVie to evaluate
exercising its exclusive option, including all activities reasonably necessary to complete our Phase 2 study of acazicolcept in SLE. If we successfully
complete these activities, AbbVie may not exercise its option, which would make achievement of future milestones and receipt of future royalties
unattainable. If AbbVie exercises its option, our realization of additional milestones and royalty payments will depend upon the efforts of AbbVie. If
AbbVie fails to develop, obtain regulatory approval for, or ultimately commercialize acazicolcept or if AbbVie terminates the collaboration, our business,
financial condition, results of operations, and prospects could be materially and adversely affected. For additional information regarding the AbbVie
Agreement, please refer to the Partnerships section within “Item 1. Business” of this report.
Pursuant to the terms of the Horizon Agreement, we received an upfront payment of $25.0 million as well as an equity investment for which they
paid $15.0 million. We are also eligible to receive milestone payments upon our achievement of certain preclinical, clinical and regulatory and
commercialization milestones, up to an aggregate amount of $381.0 million per program, or approximately $1.5 billion in total, if all milestones are met, as
well as royalties on future product sales. Pursuant to the Horizon Agreement, we will conduct certain research activities under a research program;
however, even if we successfully perform our obligations under the Horizon Agreement, there is no certainty that Horizon will continue the development of
any of the programs, or, if development is continued, if such programs will ultimately succeed and receive regulatory approval. Horizon will have
discretion in determining and directing its efforts and resources for future development activities and, if approval is obtained, commercialization and
marketing of the approved drug. As a result, there can be no assurances that we will achieve additional milestones pursuant to the Horizon Agreement. For
additional information regarding the Horizon Agreement, please refer to the Partnerships section within “Item 1. Business” of this report.
Our collaborations may also result in reduced royalty revenues if we are unable to obtain and maintain patent protection, as well as if we are unable
to obtain patent term extension, for therapeutic candidates or products developed under our agreements with collaborators. In the event of expiration or
invalidation of patents covering a therapeutic candidate or product, for example, our collaborators may be entitled to a significant decrease in royalty
revenues owed to us under the agreements. Invalidation of patents and failure to obtain patent term extension for one or more patents in our portfolio may
occur as a result of factors beyond our control due to the complex legal and factual questions surrounding pharmaceutical and biotechnology patents. If we
are unable to obtain and maintain patent protection, or if we unable to obtain patent term extension for therapeutic candidates or products developed under
our agreements with collaborators, our revenue derived from our collaborators may be less than the full amount anticipated, and our business, financial
condition, results of operations, and growth prospects could be materially harmed.
Continued advancement of our other product candidates and other development efforts depends, in part, upon the efforts of AbbVie, Horizon, and
our other current or future collaborators. If our collaborators do not dedicate sufficient resources to the development of product candidates that are the
subject of our agreements, such product candidates may never be successful and we may be ineligible to receive additional milestone payments or royalties
pursuant to the terms of our arrangements, which could have a material adverse impact on our financial results and operations. Even if we and our
collaborators dedicate sufficient resources to our collaboration agreements, neither we nor our collaborators may be effective in obtaining approvals for any
therapeutic candidates or, if approved, the successful commercialization of any approved products. Collaborators may change their strategic focus or pursue
alternative technologies after entering into a collaboration agreement with us, which could result in reduced, delayed or no revenue to us. Disputes
regarding collaboration agreements, including disputes pertaining to ownership of intellectual property, may also arise and if we and our collaborators are
unable to resolve such disputes, litigation proceedings may occur, which could further delay development programs, create uncertainty as to ownership of
intellectual property rights, distract management from other business activities and generate substantial expenses, any of which could materially and
negatively impact our business.
If third parties on which we depend to conduct our clinical or preclinical studies, or any future clinical trials, do not perform as expected, fail to satisfy
regulatory or legal requirements, or miss expected deadlines, our development program could be delayed, which may result in materially adverse effects
on our business, financial condition, results of operations, and prospects.
We rely, in part, on third-party clinical investigators, CROs, clinical data management organizations, and consultants to design, conduct, supervise,
and monitor clinical trials and preclinical studies of our therapeutic candidates and may do the same for future clinical trials. Because we rely on third
parties to conduct preclinical studies or clinical trials, we have less control
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over the timing, quality, compliance, and other aspects of preclinical studies and clinical trials than we would if we conducted all preclinical studies and
clinical trials on our own. These investigators, CROs, and consultants are not our employees and we have limited control over the amount of time and
resources they dedicate to our programs. These third parties may have contractual relationships with other entities, some of which may be our competitors,
which may draw their time and resources away from our programs. The third parties with which we contract might not be diligent, careful, compliant, or
timely in conducting our preclinical studies or clinical trials, resulting in the preclinical studies or clinical trials being delayed or unsuccessful. Further, if
any of our relationships with third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on
commercially reasonable terms.
If we cannot contract with acceptable third parties on commercially reasonable terms, or at all, or if these third parties do not carry out their
expected duties, satisfy legal and regulatory requirements for the conduct of preclinical studies or clinical trials, or meet expected deadlines, our clinical
development programs could be delayed and otherwise adversely affected. In all events, we are responsible for ensuring each of our preclinical studies and
clinical trials is conducted in accordance with the general investigational plan and protocols for the trial and with legal, regulatory and scientific standards.
The FDA and certain foreign regulatory authorities, such as the EMA, require preclinical studies to be conducted in accordance with applicable Good
Laboratory Practices, or GLPs, and clinical trials to be conducted in accordance with applicable FDA regulations and Good Clinical Practices, or GCPs,
including requirements for conducting, recording, and reporting the results of preclinical studies and clinical trials to assure data and reported results are
credible and accurate and the rights, integrity, and confidentiality of clinical trial participants are protected. Our reliance on third parties we do not control
does not relieve us of these responsibilities and requirements. If we or any of our CROs fail to comply with applicable GCPs, the clinical data generated in
our clinical trials may be deemed unreliable and the FDA, the EMA 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 by a given regulatory authority, such regulatory
authority will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with product
produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory
approval process. Any such event could have a material adverse effect on our business, financial condition, results of operations, and prospects.
In addition, switching or adding additional CROs involves additional cost and requires management time and focus. There is also a natural
transition period when a new CRO commences work. As a result, delays may occur, which could materially impact our ability to meet our desired clinical
development timelines. There can be no assurance that we will not encounter such challenges or delays in the future or that these delays or challenges will
not have a material adverse impact on our business, financial condition and prospects.
Because we rely on third-party manufacturing and supply partners, our supply of clinical trial materials may become limited or interrupted or may not
be of satisfactory quantity or quality, and our dependence on these third parties may impair the advancement of our research and development
programs.
We have established in-house recombinant protein generation capabilities for producing sufficient protein materials to enable a portion of our
current preclinical studies. We rely on third-party supply and manufacturing partners to supply the materials, components, and manufacturing services for a
portion of preclinical studies and also rely on such third parties for all our clinical trial drug supplies. We do not own manufacturing facilities or supply
sources for such components and materials for clinical trial supplies and our current manufacturing facilities are insufficient to supply such components and
materials for all of our preclinical studies. Certain raw materials necessary for the manufacture of our therapeutic products, such as cell lines, are available
from a single or limited number of source suppliers on a purchase order basis. There can be no assurance our supply of research and development,
preclinical study, and clinical trial drugs and other materials will not be limited, interrupted, restricted in certain geographic regions, of satisfactory quality
or quantity, or continue to be available at acceptable prices. In particular, any replacement of our therapeutic substance manufacturer could require
significant effort and expertise and could result in significant delay of our preclinical or clinical activities because there may be a limited number of
qualified replacements. In addition, disruptions to ports and other shipping infrastructure, due in part to the impact of the ongoing COVID-19 pandemic,
may result in shortages or delays impacting the availability of materials and other supplies, which could negatively impact our manufacturers, suppliers and
other third parties on whom we rely. While we have not yet suffered any direct, material negative impacts from these ongoing supply chain disruptions, we
cannot be certain that we will not be impacted, which could increase our costs or negatively impact our development timelines.
The manufacturing process for a therapeutic candidate is subject to FDA and foreign regulatory authority review, and the facilities used by our
contract manufacturers to manufacture our therapeutic candidates must be approved by the FDA pursuant to inspections that will be conducted after we
submit our marketing application(s) to the FDA. Suppliers and manufacturers must meet applicable manufacturing requirements and undergo rigorous
facility and process validation tests required by regulatory authorities in order to comply with cGMP regulations or other regulatory standards. In the event
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our suppliers or manufacturers fails to comply with such requirements or to perform its obligations to us in relation to quality, timing, or otherwise, or if our
supply of components or other materials becomes limited or interrupted for other reasons, we may experience shortages resulting in delayed shipments,
supply constraints, and/or stock-outs of our products, be forced to manufacture the materials alone, for which we currently do not have the capabilities or
resources, or enter into an agreement with another third party, which we may not be able to do on reasonable terms, if at all. In some cases, the technical
skills or technology required to manufacture our therapeutic candidates may be unique or proprietary to the original manufacturer and we may have
difficulty, or there may be contractual and intellectual property restrictions prohibiting us from, transferring such skills or technology to another third party
and a feasible alternative may not exist. These factors may increase our reliance on such manufacturer or require us to obtain a license from such
manufacturer in order to have another third party manufacture our therapeutic candidates. If we are required to change manufacturers for any reason, we
will be required to verify the new manufacturer maintains facilities and procedures complying with quality standards and with all applicable regulations.
The delays associated with the verification of a new manufacturer could negatively affect our ability to develop therapeutic candidates in a timely manner,
within budget, or at all.
We expect to continue to rely on third-party manufacturers if we receive regulatory approval for any therapeutic candidate. To the extent we have
existing, or enter into future, manufacturing arrangements with third parties, we will depend on these third parties to perform their obligations in a timely
manner consistent with contractual and regulatory requirements, including those related to quality control and assurance. If we are unable to obtain or
maintain third-party manufacturing for therapeutic candidates, or to do so on commercially reasonable terms, we may not be able to develop and
commercialize our therapeutic candidates successfully. Our, or a third party’s, failure to execute on our manufacturing requirements could adversely affect
our business in a number of ways, including as a result of:
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an inability to initiate or continue preclinical studies or clinical trials of therapeutic candidates under development;
delay in submitting regulatory applications, or receiving regulatory approvals, for therapeutic candidates;
the loss of the cooperation of a collaborator;
subjecting manufacturing facilities of our therapeutic candidates to additional inspections by regulatory authorities;
requirements to cease distribution or to recall batches of our therapeutic candidates; and
in the event of approval to market and commercialize a therapeutic candidate, an inability to meet commercial demands for our products.
As product candidates progress from preclinical studies to late-stage clinical trials to marketing approval and commercialization, it is common that
various aspects of the development program, such as manufacturing methods, materials and processes, are altered along the way in an effort to optimize
yield, manufacturing batch size, minimize costs and achieve consistent purity, identity, potency, quality and results. Such changes carry the risk that they
will not achieve these intended objectives. Any of these changes could cause our product candidates to perform differently and could affect planned or
other clinical trials conducted with product candidates produced using the modified manufacturing methods, materials, and processes. This could delay
completion of clinical trials and could require non-clinical or clinical bridging and comparability studies, which could increase costs, delay approval of our
product candidates and jeopardize our ability to commercialize our product candidates, if approved.
We may not successfully engage in strategic transactions, including any additional collaborations we seek, which could adversely affect our ability to
develop and commercialize therapeutic candidates, impact our cash position, increase our expenses, and present significant distractions to our
management.
From time to time, we consider strategic transactions, such as collaborations, acquisitions of companies, asset purchases or divestitures, and out- or
in-licensing of therapeutic candidates or technologies. In particular, we intend to evaluate and, if strategically attractive, seek to enter into additional
collaborations, including with major biotechnology or pharmaceutical companies. The competition for collaborative partners is intense, and the negotiation
process is time-consuming and complex. Any new collaboration may be on suboptimal terms for us, and ultimately may not maximize value for our
stockholders. In addition, we may be unable to maintain any new or existing collaboration if, for example, development or approval of a therapeutic
candidate is delayed, sales of an approved therapeutic product do not meet expectations, or the collaborator terminates the collaboration. Any such
collaboration, or other strategic transaction, may require us to incur non-recurring or other charges, increase our near- and long-term expenditures and pose
significant integration or implementation challenges or disrupt our management or business.
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These transactions would entail numerous operational and financial risks, including:
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exposure to unknown liabilities;
disruption of our business and diversion of our management’s time and attention in order to manage a collaboration or develop acquired
therapeutic candidates, or technologies;
incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs;
higher than expected collaboration, acquisition, or integration costs;
write-downs of assets, or incurring impairment charges or increased amortization expenses; and
difficulty and cost in facilitating the collaboration or combining the operations and personnel of any acquired business or impairment of
relationships with key suppliers, manufacturers, or customers of any acquired business due to changes in management and ownership and the
inability to retain key employees of any acquired business.
Accordingly, although there can be no assurance we will undertake or successfully complete any transactions of the nature described above, any
transactions we do complete may be subject to the foregoing or other risks and have a material adverse effect on our business, results of operations,
financial condition, and prospects. Conversely, any failure to enter any collaboration or other strategic transaction beneficial to us could delay the
development and potential commercialization of our therapeutic candidates and have a negative impact on the competitiveness of any therapeutic candidate
reaching market.
Risks Related to Our Ability to Commercialize Product Candidates
If any of our therapeutic candidates are approved for marketing and commercialization and we are unable to develop sales, marketing and distribution
capabilities on our own or enter into agreements with third parties to perform these functions on acceptable terms, we may be unable to successfully
commercialize any such future products.
We currently have no sales, marketing, or distribution capabilities or experience. If any of our therapeutic candidates are approved, we will need to
develop internal sales, marketing, and distribution capabilities to commercialize such products, which may be expensive and time-consuming, or enter into
collaborations with third parties to perform these services. If we decide to market our products directly, we will need to commit significant financial, legal,
and managerial resources to develop a marketing and sales force with technical expertise and supporting distribution, administration, and compliance
capabilities. If we rely on third parties with such capabilities to market our approved products, or decide to co-promote products with collaborators, we will
need to establish and maintain marketing and distribution arrangements with third parties, and there can be no assurance we will be able to enter into such
arrangements on acceptable, compliant terms or at all. In entering into third-party marketing or distribution arrangements, any revenue we receive will
depend upon the efforts of the third parties and there can be no assurance such third parties will establish adequate sales and distribution capabilities or be
successful in gaining market acceptance of any approved therapeutic. If we are not successful in commercializing any therapeutic approved in the future,
either on our own or through third parties, our business, financial condition, results of operations, and prospects could be materially and adversely affected.
If we fail to comply with U.S. and foreign regulatory requirements, regulatory authorities could limit or withdraw any marketing or commercialization
approvals we may receive and subject us to other penalties that could materially harm our business.
Our company, our therapeutic candidates, our suppliers, and our contract manufacturers, distributors, and contract testing laboratories are subject to
extensive regulation by governmental authorities in the European Union, the United States, and other countries, with regulations differing from country to
country.
Even if we receive marketing and commercialization approval of a therapeutic candidate, we and our third-party service providers will be subject to
continuing regulatory requirements, including a broad array of regulations related to establishment registration and product listing, manufacturing
processes, risk management measures, quality and pharmacovigilance systems, post-approval clinical studies, labeling and packaging, advertising and
promotional activities, record keeping, distribution, adverse event reporting, import and export of pharmaceutical products, pricing, sales, and marketing,
and fraud and abuse requirements.
Furthermore, the FDA strictly regulates manufacturers’ promotional claims of drug products. In particular, a drug product may not be promoted by
manufacturers for uses that are not approved by the FDA, as reflected in the FDA-approved labeling, although healthcare professionals are permitted to use
drug products for off-label uses. The FDA, the Department of
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Justice, the Inspector General of the Department of Health and Human Services, among other government agencies, actively enforce the laws and
regulations prohibiting manufacturers’ promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject
to significant liability, including large civil and criminal fines, penalties, and enforcement actions. The FDA has also imposed consent decrees or permanent
injunctions under which specified promotional conduct is changed or curtailed for companies that engaged in such prohibited activities. If we cannot
successfully manage the promotion of our approved product candidates, we could become subject to significant liability, which would materially adversely
affect our business and financial condition.
We are required to submit safety and other post market information and reports, and are subject to continuing regulatory review, including in
relation to adverse patient experiences with the product and clinical results reported after a product is made commercially available, both in the United
States and in any foreign jurisdiction in which we seek regulatory approval. The FDA and certain foreign regulatory authorities, such as the EMA, have
significant post-market authority, including the authority to require labeling changes based on new safety information and to require post-market studies or
clinical trials to evaluate safety risks related to the use of a product or to require withdrawal of the product from the market.
The FDA also has the authority to require a REMS plan either before or after approval, which may impose further requirements or restrictions on
the distribution or use of an approved therapeutic. The EMA now routinely requires risk management plans, or RMPs, as part of the marketing
authorization application process, and such plans must be continually modified and updated throughout the lifetime of the product as new information
becomes available. In addition, the relevant governmental authority of any EU member state can request an RMP whenever there is a concern about the
risk/benefit balance of the product.
The manufacturers and manufacturing facilities we use to make a future product, if any, will also be subject to periodic review and inspection by the
FDA and other regulatory agencies, including for continued compliance with cGMP requirements. The discovery of any new or previously unknown
problems with our third-party manufacturers, manufacturing processes or facilities may result in restrictions on the product, manufacturers or facilities,
including withdrawal of the product from the market. If we rely on third-party manufacturers, we will have limited control over compliance with applicable
rules and regulations by such manufacturers.
If we or our collaborators, manufacturers, or service providers fail to comply with applicable continuing regulatory requirements in the U.S. or
foreign jurisdictions in which we seek to market our products, we may be subject to, among other things, fines, warning and untitled letters, clinical holds,
a requirement to conduct additional clinical trials, delay or refusal by the FDA or foreign regulatory authorities to approve pending applications or
supplements to approved applications, suspension, refusal to renew or withdrawal of regulatory approval, product recalls, seizures, or administrative
detention of products, refusal to permit the import or export of products, operating restrictions, inability to participate in government programs including
Medicare and Medicaid, and total or partial suspension of production or distribution, injunction, restitution, disgorgement, debarment, civil penalties, and
criminal prosecution.
Imposed price controls may adversely affect our future profitability.
In most countries, the pricing of prescription drugs is subject to governmental control. In these countries, pricing negotiations with governmental
authorities can take considerable time after receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and
other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic, and regulatory developments
may further complicate pricing and reimbursement negotiations, and pricing negotiations may continue after reimbursement has been obtained.
Reference pricing used by various EU member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can
further reduce prices. In some countries, we or our collaborators may be required to conduct a clinical trial or other studies comparing the cost-
effectiveness of our therapeutic candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval. Publication of
discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other
countries. If reimbursement of any product candidate approved for marketing is unavailable or limited in scope or amount, or if pricing is set at
unsatisfactory levels, our business, financial condition, results of operations, or prospects could be adversely affected.
Our business may become subject to economic, political, regulatory and other risks associated with international operations.
Our business is subject to risks associated with conducting business internationally, including our use of foreign clinical trial sites. Some of our
suppliers, collaborators and clinical trial relationships are located outside the United States. Accordingly, our future results could be harmed by a variety of
factors, including:
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economic instability or weakness, including inflation, reduced growth, diminished credit availability, weakened consumer confidence or
increased unemployment;
sociopolitical instability in particular foreign economies and markets;
difficulties in compliance with non-U.S. laws and regulations;
changes in non-U.S. regulations and customs, tariffs and trade barriers, including any changes that China may impose as a result of political
tensions between the United States and China;
changes in non-U.S. currency exchange rates and currency controls;
trade protection measures, import or export licensing requirements or other restrictive actions by U.S. or non-U.S. governments;
workforce uncertainty in countries where labor unrest is more common than in the United States;
production shortages resulting from any events affecting raw material supply or manufacturing capabilities outside the United States; and
business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons,
floods and fires.
Risks Related to Our Personnel and Operations
We will need to raise substantial additional funds to advance development of our therapeutic candidates, and we cannot guarantee we will have
sufficient funds available in the future to develop and commercialize our current or future therapeutic candidates.
We will need to raise substantial additional funds to expand our development, regulatory, manufacturing, marketing, and sales capabilities or
contract with other organizations to provide these capabilities to us. We have used substantial funds to develop our therapeutic candidates and will require
significant funds to conduct further research and development, preclinical testing, and clinical trials of our therapeutic candidates, to seek regulatory
approvals for our therapeutic candidates, and to manufacture and market products, if any are approved for commercial sale. As of December 31, 2021, we
had $215.4 million in cash and cash equivalents, restricted cash, and investments. Based on our current operating plan, we believe our available cash and
cash equivalents, and investments will be sufficient to fund our planned level of operations, including anticipated capital expenditures, for at least the next
12 months. Our future capital requirements and the period for which we expect our existing resources to support our operations may vary significantly from
what we expect. Our monthly spending levels vary based on new and ongoing development and corporate activities. Because the length of time and
activities associated with successful development of our therapeutic candidates are highly uncertain, we are unable to estimate the actual funds we will
require for development and any approved marketing and commercialization activities. To execute our business plan, we will need, among other things:
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to obtain the human and financial resources necessary to develop, test, obtain regulatory approval for, manufacture, and market our
therapeutic candidates;
to build and maintain a strong intellectual property portfolio and avoid infringing intellectual property of third parties;
to establish and maintain successful licenses, collaborations, and alliances;
to satisfy the requirements of clinical trial protocols, including patient enrollment;
to establish and demonstrate the clinical efficacy and safety of our therapeutic candidates;
to obtain regulatory approvals;
to manage our spending as costs and expenses increase due to preclinical studies, clinical trials, regulatory approvals, manufacturing scale-up,
and commercialization;
to obtain additional capital to support and expand our operations; and
to market our products to achieve acceptance and use by the medical community in general.
If we are unable to obtain necessary funding on a timely basis or on acceptable terms, we may have to delay, reduce, or terminate our research and
development programs, preclinical studies, or clinical trials, if any, limit strategic opportunities, or undergo reductions in our workforce or other corporate
restructuring activities. We also could be required to seek funds through
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arrangements with collaborators or others requiring us to relinquish rights to some of our technologies or therapeutic candidates we would otherwise pursue
on our own. We do not expect to realize revenue from product sales, or royalties in the foreseeable future, if at all. Our revenue sources are, and will
remain, extremely limited unless and until our therapeutic candidates are clinically tested, approved for commercialization, and successfully marketed.
To date, we have financed our operations primarily through the sale of equity securities, debt, and payments received under our collaboration
agreements. We will be required to seek additional funding in the future and intend to do so through a combination of public or private equity offerings,
debt financings, credit and loan facilities, research collaborations, and license agreements. Our ability to raise additional funds from these or other sources
will depend on financial, economic, and other factors, many of which are beyond our control. Additional funds may not be available to us on acceptable
terms or at all.
If we raise additional funds by issuing equity securities, our stockholders will suffer dilution, and the terms of any financing may adversely affect
the rights of our stockholders. For example, in January 2019, we issued in a private placement 4,706,700 shares of common stock and warrants to purchase
an additional 1,835,610 shares of common stock for gross proceeds of approximately $25.3 million. In July 2020, we issued in a private placement
5,139,610 shares of common stock, prefunded warrants to purchase 790,710 shares of common stock and warrants to purchase an additional 1,779,096
shares of common stock for gross proceeds of approximately $60.0 million. In September 2021, we issued in a private placement 6,489,357 shares of
common stock and prefunded warrants to purchase an additional 3,191,487 shares of common stock for gross proceeds of approximately $91.0 million. In
December 2021, in connection with the Horizon Agreement, we sold 951,980 shares of our common stock to Horizon for which they paid $15.0 million.
We also have a sales agreement in place with Cowen and Company, LLC, or Cowen, to sell up to $75.0 million of our common stock from time to time
through an “at the market” equity offering under which Cowen will act as sales agent.
In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing
stockholders. Debt financing, if available, may involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the
event of a liquidation or insolvency, debt holders would be repaid before holders of equity securities receive any distribution of corporate assets. Our failure
to raise capital or enter into such other arrangements within a reasonable timeframe would have a negative impact on our financial condition, and we may
have to delay, reduce, or terminate our research and development programs, preclinical or clinical trials, or undergo reductions in our workforce or other
corporate restructuring activities.
We are an early stage biopharmaceutical company with a history of losses, we expect to continue to incur significant losses for the foreseeable future,
we may never achieve or maintain profitability, and we have a limited operating history that may make it difficult for investors to evaluate the potential
success of our business.
We are a clinical-stage immunotherapy company, with a limited operating history, focused on developing treatments for autoimmune/inflammatory
diseases and cancer. Since inception, we have devoted our resources to developing novel protein-based immunotherapies primarily using our proprietary
directed evolution platform, which converts native immune system proteins into potential differentiated, multi-targeted therapeutics designed to modulate
the immune system. We have had significant operating losses since inception. For the year ended December 31, 2021, our net loss was $50.3 million.
Substantially all of our losses have resulted from expenses incurred in connection with our research programs and from general and administrative costs
associated with our operations. In addition, inflationary pressure could adversely impact our financial results. Our operating costs have increased, and may
continue to increase, due to the recent growth in inflation. Our technologies and therapeutic candidates are in early stages of development, and we are
subject to the risks of failure inherent in the development of therapeutic candidates based on novel technologies.
We have historically generated revenue primarily from the receipt of research funding and upfront and other payments under our collaboration
agreements. We have not generated, and do not expect to generate, any revenue from product sales for the foreseeable future, and we expect to continue to
incur significant operating losses for the foreseeable future due to the cost of research and development, preclinical studies, clinical trials, and the
regulatory approval process for therapeutic candidates. The amount of future losses is uncertain. Our ability to achieve profitability, if ever, will depend on,
among other things, our or our existing collaborators, or any future collaborators, successfully developing therapeutic candidates, obtaining regulatory
approvals to market and commercialize therapeutic candidates, manufacturing any approved products on commercially reasonable terms, establishing a
sales and marketing organization or suitable third-party alternatives for any approved product, and raising sufficient funds to finance business activities. If
we or our existing collaborators, or any future collaborators, are unable to develop and commercialize one or more of our therapeutic candidates or if sales
revenue from any therapeutic candidate receiving approval is insufficient, we will not achieve profitability, which could have a material adverse effect on
our business, financial condition, results of operations, and prospects.
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Interim, preliminary or topline data from our clinical trials that we announce or publish from time to time may change as more patient data become
available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publish interim, preliminary or topline data from clinical trials. Interim data from clinical trials that we may complete
are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become
available. Interim or preliminary data from clinical trials that we may conduct may not be indicative of the final results of the trial and are subject to the
risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data becomes available. Interim or
preliminary data also remains subject to audit and verification procedures that may result in the final data being materially different from the interim or
preliminary data. As a result, interim or preliminary data should be viewed with caution until the final data are available. Adverse differences between
interim, preliminary or topline data and final data could significantly harm our reputation and business prospects. We do not know whether any clinical
trials we may conduct will demonstrate consistent or adequate efficacy and safety sufficient to obtain marketing approval to market our product candidates.
Moreover, preliminary, interim and topline data are subject to the risk that one or more of the clinical outcomes may materially change as more
patient data become available when patients mature on study, patient enrollment continues or as other ongoing or future clinical trials with a product
candidate further develop. Past results of clinical trials may not be predictive of future results. In addition, the information we choose to publicly disclose
regarding a particular study or clinical trial is based on what is typically more extensive information, and you or others may not agree with what we
determine is the material or otherwise appropriate information to include in our disclosure. Any information we determine not to disclose may ultimately be
deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product candidate or our business.
Similarly, even if we are able to complete our planned and ongoing preclinical studies and clinical trials of our product candidates according to our current
development timeline, the positive results from such preclinical studies and clinical trials of our product candidates may not be replicated in subsequent
preclinical studies or clinical trial results. Moreover, preclinical, nonclinical and clinical data are often susceptible to varying interpretations and analyses,
and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain
FDA or other regulatory approval.
Any inability to attract and retain qualified key management and technical personnel would impair our ability to implement our business plan.
Our success largely depends on the continued service of key management and other specialized personnel, including Mitchell H. Gold, M.D., our
Executive Chairman and Chief Executive Officer, Stanford Peng, M.D., Ph.D., our President and Head of Research and Development, and Paul Rickey, our
Senior Vice President and Chief Financial Officer.
The loss of one or more members of our management team or other key employees or advisors could delay our research and development programs
and materially harm our business, financial condition, results of operations, and prospects. The relationships our key managers have cultivated within our
industry make us particularly dependent upon their continued employment with us. We are dependent on the continued service of our technical personnel
because of the highly technical nature of our therapeutic candidates and technologies, and the specialized nature of the regulatory approval process.
Because our management team and key employees are not obligated to provide us with continued service, they could terminate their employment with us at
any time without penalty. We do not maintain key person life insurance policies on any of our management team members or key employees. Our future
success will depend in large part on our continued ability to attract and retain other highly qualified scientific, technical, and management personnel, as
well as personnel with expertise in clinical testing, manufacturing, governmental regulation, and commercialization. We face competition for personnel
from other companies, universities, public and private research institutions, government entities, and other organizations, including significant competition
in the Seattle employment market.
As our therapeutic candidates advance into clinical trials, we may experience difficulties in managing our growth and expanding our operations.
We have limited experience in therapeutic development and very limited experience with clinical trials of therapeutic candidates. As our therapeutic
candidates enter and advance through preclinical studies and clinical trials, we will need to expand our development, regulatory, and manufacturing
capabilities or contract with other organizations to provide these capabilities for us. For example, as we continue enrollment in our Phase 2 study in SLE
and continue with the development of our other product candidates, we will need to hire additional personnel in clinical operations. We also must manage
relationships with collaborators or partners, suppliers, and other organizations. Our ability to manage our operations and future growth will require us to
continue to improve our operational, financial, and management controls, reporting systems, and
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procedures. We may not be able to implement improvements to our management information and control systems in an efficient or timely manner and may
discover deficiencies in existing systems and controls.
Our business entails a significant risk of product liability and our inability to obtain sufficient insurance coverage could harm our business, financial
condition, results of operations, or prospects.
Our business exposes us to significant product liability risks inherent in the development, testing, manufacturing, and marketing of therapeutic
treatments. Product liability claims could delay or prevent completion of our development programs. If we succeed in marketing products, such claims
could result in an investigation by certain regulatory authorities, such as FDA or foreign regulatory authorities, of the safety and effectiveness of our
products, our manufacturing processes and facilities, or our marketing programs and potentially a recall of our products or more serious enforcement
action, limitations on the approved indications for which they may be used, or suspension or withdrawal of approvals. Regardless of the merits or eventual
outcome, liability claims may also result in decreased demand for our products, injury to our reputation, costs to defend the related litigation, a diversion of
management’s time and our resources, substantial monetary awards to trial participants or patients, and a decline in our valuation. We currently have
product liability insurance we believe is appropriate for our stage of development and may need to obtain higher levels of product liability insurance prior
to marketing any therapeutic candidates. Any insurance we have or may obtain may not provide sufficient coverage against potential liabilities.
Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance
at a reasonable cost to protect us against losses caused by product liability claims with a potentially material adverse effect on our business.
Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which
could have a material adverse effect on our business.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include, but is not limited to:
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intentional failures to comply with FDA or U.S. health care laws and regulations, or applicable laws, regulations, guidance, or codes of
conduct set by foreign governmental authorities or self-regulatory industry organizations;
a provision of inaccurate information to any governmental authorities such as FDA;
noncompliance with manufacturing standards we may establish;
noncompliance with federal and state healthcare fraud and abuse laws and regulations;
noncompliance with the U.S. Foreign Corrupt Practices Act (the FCPA) and similar anti-bribery or anti-corruption laws, regulations or rules
of other countries in which we operate; and
a failure to report financial information or data accurately or a failure to disclose unauthorized activities to us.
In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws, regulations, guidance and codes of
conduct intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws, regulations, guidance statements, and codes of conduct
may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive program, health care
professional, and other business arrangements. As our business is heavily regulated, it involves significant interaction with government officials, including
potentially officials of non-U.S. governments. Additionally, in many countries, healthcare providers are employed by the government, and the purchasers of
biopharmaceuticals are government entities. As a result, our dealings with are subject to regulation and such healthcare providers and employees of such
purchasers may be considered “foreign officials” as defined in the FCPA. Recently, the Securities and Exchange Commission, or SEC, and Department of
Justice have increased their FCPA enforcement activities with respect to biotechnology companies. We also may be subject to U.S. and foreign export
controls, trade sanctions and import laws and regulations and if we fail to comply with these laws and regulations, we may face significant penalties, finds
and/or denial of certain export privileges.
Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory
sanctions, including debarment or disqualification of those employees from participation in FDA regulated activities and serious harm to our reputation.
This could include violations of provisions of the U.S. federal Health Insurance Portability and Accountability Act, or HIPAA, as amended by the Health
Information Technology for Economic and Clinical Health Act, or HITECH, other U.S. federal and state law, and requirements of non-U.S. jurisdictions,
including the European Union General Data Protection Regulation.
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It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity 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, regulations, guidance or codes of conduct. Furthermore, we may be held liable under the FCPA and
similar laws in other jurisdictions for the corrupt or other illegal activities of our employees, our third-party business partners, representatives and agents,
even if we do not explicitly authorize such activities. If any such governmental investigations or other actions or lawsuits are instituted against us, and we
are not successful in defending such actions or asserting our rights, those actions could have a significant impact on our business, including the imposition
of significant fines, exclusion from government programs, or other sanctions.
Our business involves the use of hazardous materials and we and our third-party manufacturers must comply with environmental laws and regulations,
which may be expensive and restrict how we conduct business.
Our third-party manufacturers’ activities and our own activities involve the controlled storage, use and disposal of hazardous and flammable
materials, including the components of our pharmaceutical product candidates, test samples and reagents, biological materials and other hazardous
compounds. We and our manufacturers are subject to federal, state, local, and foreign laws and regulations governing the use, generation, manufacture,
storage, handling, and disposal of these hazardous materials. Although we believe our safety procedures for handling and disposing of these materials and
waste products comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from
the use, storage, handling, or disposal of hazardous materials. In the event of an accident, state, or federal or other applicable authorities may curtail our use
of these materials and/or interrupt our business operations. In addition, if an accident or environmental discharge occurs, or if we discover contamination
caused by prior operations, including by prior owners and operators of properties we acquire, we could be liable for cleanup obligations, damages, and
fines. If such unexpected costs are substantial, this could significantly harm our financial condition and results of operations.
Compliance with governmental regulations regarding the treatment of animals used in research could increase our operating costs, which would
adversely affect the commercialization of our technology.
The Animal Welfare Act, or AWA, is the federal law covering the treatment of certain animals used in research. Currently, the AWA imposes a wide
variety of specific regulations governing the humane handling, care, treatment, and transportation of certain animals by producers and users of research
animals, most notably relating to personnel, facilities, sanitation, cage size and feeding, watering, and shipping conditions. Third parties with whom we
contract are subject to registration, inspections, and reporting requirements under the AWA. Furthermore, some states have their own regulations, including
general anti-cruelty legislation, which establish certain standards in handling animals. Comparable rules, regulations, and or obligations exist in many
foreign jurisdictions. If we or our contractors fail to comply with regulations concerning the treatment of animals used in research, we may be subject to
fines and penalties and adverse publicity, and our operations could be adversely affected.
Our current operations are concentrated in one location and any events affecting this location may have material adverse consequences.
Our current operations are located in facilities situated in Seattle, Washington. Any unplanned event, such as flood, fire, explosion, earthquake,
extreme weather condition, medical epidemics, power shortage, power outage, telecommunication failure, or other natural or man-made accidents or
incidents resulting in our company being unable to fully utilize the facilities, may have a material adverse effect on our ability to operate our business,
particularly on a daily basis, and have significant negative consequences on our financial and operating conditions. Loss of access to these facilities may
result in increased costs, delays in the development of our therapeutic candidates, or interruption of our business operations. As part of our risk
management policy, we maintain insurance coverage at levels we believe are appropriate for our business. However, in the event of an accident or incident
at these facilities, we cannot assure you the amounts of insurance will be sufficient to satisfy any damages and losses or that the insurance covers all risks.
If our facilities are unable to operate because of an accident or incident or for any other reason, even for a short period of time, any or all of our research
and development programs may be harmed. Any business interruption may have a material adverse effect on our business, financial position, results of
operations, and prospects.
Our business may be affected by litigation and government investigations.
We may from time to time receive inquiries and subpoenas and other types of information requests from government authorities and others and we
may become subject to claims and other actions related to our business activities. While the ultimate outcome of investigations, inquiries, information
requests, and legal proceedings is difficult to predict, defense of
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litigation claims can be expensive, time-consuming and distracting, and adverse resolutions or settlements of those matters may result in, among other
things, modification of our business practices, costs, and significant payments, any of which could have a material adverse effect on our business, financial
condition, results of operations, and prospects.
Risks Related to Our Financial Position and Capital Needs
The investment of our cash and cash equivalents, in fixed income and other marketable securities is subject to risks which may cause losses and affect
the liquidity of these investments.
As of December 31, 2021, we had $215.4 million in cash and cash equivalents, restricted cash, and investments. We expect to invest our excess cash
in fixed income and other marketable securities. These investments are subject to general credit, liquidity, market and interest rate risks. We may realize
losses in the fair value of these investments, an inability to access cash in these investments for a potentially meaningful period, or a complete loss of these
investments, which would have a negative effect on our financial statements.
Our business may be materially affected by changes to fiscal and tax policies. Negative or unexpected tax consequences could adversely affect our
results of operations.
New tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations, and our
business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied
adversely to us. For example, the Tax Cuts and Jobs Act of 2017, or TCJA, enacted in December 2017, as modified by the Coronavirus Aid, Relief, and
Economic Security Act, or the CARES Act, enacted in April 2020, significantly changed the U.S. Internal Revenue Code. Such changes include a
reduction in the corporate tax rate and limitations on certain corporate deductions and credits, among other changes. We have generally accounted for
changes related to the TCJA in accordance with our understanding of the legislation and guidance available as of the date of this filing as described in more
detail in our financial statements and will continue to monitor and assess the impact of the federal legislation on our business and the extent to which
various states conform to the newly enacted federal tax law. In addition, adverse changes in the financial outlook of our operations or further changes in tax
laws or regulations could lead to changes in our valuation allowances against deferred tax assets on our accompanying Consolidated Balance Sheets, which
could materially affect our results of operations.
Nivalis’ pre-merger net operating loss carryforwards and certain other tax attributes are likely subject to limitations. The pre-merger net operating loss
carryforwards and certain other tax attributes of Alpine and of the combined organization may also be subject to limitations as a result of ownership
changes resulting from the merger.
In general, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating loss
carryforwards, or NOL carryforwards, to offset future taxable income. In general, an ownership change occurs if the aggregate stock ownership of certain
stockholders, generally stockholders beneficially owning five percent or more of a corporation’s common stock, applying certain look-through and
aggregation rules, increases by more than 50 percentage points over such stockholders’ lowest percentage ownership during the testing period, generally
three years. Nivalis may have experienced ownership changes in the past and may experience ownership changes in the future. In addition, the closing of
the merger in 2017 likely resulted in an ownership change for Nivalis. It is likely that, due to the method by which limitations on the utilization of NOL
carryforwards are calculated, we will not be able to utilize any of Nivalis’ NOL carryforwards and certain other tax attributes. It is also possible that
Alpine’s NOL carryforwards and certain other tax attributes may be subject to limitation as a result of ownership changes in the past and/or the closing of
the merger. Consequently, even if we achieve profitability, we may not be able to utilize a material portion of Alpine’s, or any of Nivalis’ NOL
carryforwards and certain other tax attributes, which could have a material adverse effect on cash flow and results of operations.
Provisions of our debt instruments may restrict our ability to pursue our business strategies.
Our term loan agreement requires us, and any debt financing we may obtain in the future may require us, to comply with various covenants that
limit our ability to, among other things:
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complete mergers or acquisitions;
incur indebtedness;
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encumber assets;
pay dividends or make other distributions to holders of our capital stock;
make specified investments;
engage in any new line or business; and
engagement in certain transactions with our affiliates.
These restrictions could inhibit our ability to pursue our business strategies. If we default under our term loan agreement, including a material
adverse change in our business, operations or condition (financial or otherwise), and such event of default is not cured or waived, the lenders could
terminate commitments to lend and cause all amounts outstanding with respect to the debt to be due and payable immediately, which in turn could result in
cross defaults under other debt instruments. Our assets and cash flow may not be sufficient to fully repay borrowings under our outstanding debt
instruments if some or all of these instruments are accelerated upon a default. We may incur additional indebtedness in the future. The debt instruments
governing such indebtedness could contain provisions that are as, or more, restrictive than our existing debt instruments. If we are unable to repay,
refinance or restructure our indebtedness when payment is due, the lenders could proceed against the collateral granted to them to secure such indebtedness
or force us into bankruptcy or liquidation.
Risks Related to COVID-19 and Other Health Epidemics
The COVID-19 coronavirus could adversely impact our business, including our clinical trials.
In December 2019, a novel strain of coronavirus, SARS-CoV-2, the causative agent of coronavirus disease 2019, or COVID-19, was first reported.
Since then, SARS-CoV-2 has spread globally, including countries in which we have planned or active clinical trial sites. We have experienced and will
likely continue to experience disruptions that could severely impact our business and clinical trials, including:
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delays or difficulties in enrolling patients in our clinical trials;
delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;
diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites
and hospital staff supporting the conduct of our clinical trials;
interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by
federal or state governments, employers and others;
limitations in employee resources that would otherwise be focused on the conduct of our clinical trials, including because of sickness of
employees or their families or the desire of employees to avoid contact with large groups of people;
delays in receiving approval from local regulatory authorities and ethics committees to initiate our planned clinical trials;
delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials;
interruption in global shipping that may affect the transport of clinical trial materials, such as investigational drug product used in our clinical
trials;
changes in local regulations as part of a response to the COVID-19 coronavirus outbreak which may require us to change the ways in which
our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;
delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in
employee resources or forced furlough of government employees; and
refusal of the FDA to accept data from clinical trials whose conduct has been affected by the COVID-19 outbreak, such as due to missing
data.
Further, we may be required to develop and implement additional clinical trial policies and procedures designed to help protect subjects from the
COVID-19 virus. For example, in March 2020, the FDA issued a guidance, which the FDA subsequently updated, on conducting clinical trials during the
pandemic, which describes a number of considerations for sponsors of clinical trials impacted by the pandemic. The FDA has also published other COVID-
19-related industry guidance,
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including updates to previous guidance documents, regarding Good Manufacturing Practices, remote interactive evaluations of drug manufacturing and
bioresearch monitoring facilities, and drug product manufacturing and supply chain inspections, among others. It is possible that additional governmental
action will be taken to address the COVID-19 pandemic. The ultimate impact of the COVID-19 pandemic on our business operations is highly uncertain
and subject to change and will depend on future developments, including new regulatory requirements and changes to existing regulations.
The global outbreak of the COVID-19 coronavirus continues to rapidly evolve. The extent to which the COVID-19 coronavirus may impact our
business and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of
the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the
effectiveness of actions taken in the United States and other countries to contain and treat the disease. For example, with the increased availability of
vaccines in North America and certain countries around the world, the rate of additional COVID-19 infections and hospitalizations declined in certain
locations for periods of time, resulting in relaxed restrictions and a general reopening of the economy and travel across many jurisdictions, however some
jurisdictions continue to maintain or reimpose restrictions in view of increased hospitalization rates and cases due to COVID-19 variants. While certain of
these developments are positive, reduced vaccine availability, resistance to vaccination by certain persons or ineffectiveness of vaccines against certain
variants may result in increasing infection and hospitalization rates, which could be further complicated by the emergence of more virulent or infectious
variants of the virus.
We face risks related to health epidemics and other outbreaks, which could significantly disrupt our operations and/or business.
Our business could be adversely impacted by the effects of the COVID-19 outbreak originating in China, or by other epidemics. Our supply chain
for raw materials, drug substance or drug product is worldwide, including China, and accordingly could be subject to disruption. There may be restrictions
on the export or shipment of raw materials, drug substance or drug product that could materially delay our business or clinical trials.
Certain of our research and development efforts are also conducted globally, for example the NEON-1 clinical trial and ALPN-303 healthy
volunteer study include investigative sites in Australia and our Synergy trial includes investigative sites in Korea and Poland. A health epidemic or other
outbreak, including the current COVID-19 outbreak, may materially and adversely affect our business, financial condition and results of operations. The
extent to which the outbreak impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new
information which may emerge concerning the severity of the outbreak and the actions to contain the outbreak or treat its impact, among others.
Risks Related to Cybersecurity
Our computer systems, or those of any of our CROs, manufacturers, other contractors or consultants or potential future collaborators, may fail or
suffer security or data privacy breaches or incidents or other unauthorized or improper access to, use of, or destruction of our proprietary or
confidential data, employee data, or personal data, which could result in additional costs, loss of revenue, significant liabilities, harm to our brand and
material disruption of our operations.
Despite the implementation of security measures in an effort to protect systems that store our information, given their size and complexity and the
increasing amounts of information maintained on our internal information technology systems, and those of our third-party CROs, other contractors
(including sites performing clinical trials) and consultants, these systems are potentially vulnerable to breakdown or other damage or interruption from
service interruptions, system malfunction, natural disasters, terrorism, war and telecommunication and electrical failures, as well as security breaches and
incidents from inadvertent or intentional actions by our employees, contractors, consultants, business partners, and/or other third parties, or from cyber-
attacks by malicious third parties (including supply chain cyber-attacks or the deployment of harmful malware, ransomware, denial-of-service attacks,
social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information), which may
compromise our system infrastructure or lead to the loss, destruction, alteration, prevention of access to, disclosure, or dissemination of, or damage or
unauthorized access to, our data (including trade secrets or other confidential information, intellectual property, proprietary business information, and
personal information) or data that is processed or maintained on our behalf, or other assets, which could result in financial, legal, business and reputational
harm to us. Companies have experienced an increase in phishing and social engineering attacks from third parties in connection with the COVID-19
pandemic, and the increase in remote working further increases security threats. To the extent that any disruption or security incident were to result in any
loss, destruction, unavailability, alteration, disclosure, or dissemination of, or damage or unauthorized access to, our applications, any other data processed
or maintained on our behalf or other assets, or for it to be believed or reported that any of these occurred, we could incur liability, financial harm and
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reputational damage and the development and commercialization of our product candidates could be delayed. We cannot assure you that our data protection
efforts and our investment in information technology, or the efforts or investments of CROs, consultants or other third parties, will prevent significant
breakdowns or breaches in systems or other cyber incidents that cause loss, destruction, unavailability, alteration or dissemination of, or damage or
unauthorized access to, our data and other data processed or maintained on our behalf or other assets that could have a material adverse effect upon our
reputation, business, operations or financial condition. For example, if such an event were to occur and cause interruptions in our operations, it could result
in a material disruption of our programs and the development of our product candidates could be delayed. In addition, the loss of clinical trial data for our
product candidates could result in delays in our marketing approval efforts and significantly increase our costs to recover or reproduce the data. Further,
any such event that leads to loss, damage, or unauthorized access to, or use, alteration, or disclosure or dissemination of, personal information, including
personal information regarding our clinical trial subjects or employees, could harm our reputation directly, compel us to comply with federal and/or state
breach notification laws and foreign law equivalents, subject us to mandatory corrective action, and otherwise subject us to liability under laws and
regulations that protect the privacy and security of personal information, which could result in significant legal and financial exposure and reputational
damages that could potentially have an adverse effect on our business.
Notifications and follow-up actions related to a security breach or incident could impact our reputation and cause us to incur significant costs,
including legal expenses and remediation costs. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in
our regulatory approval efforts and significantly increase our costs to recover or reproduce the lost data. We expect to incur significant costs in an effort to
detect and prevent security breaches and incidents, and we may face increased costs and requirements to expend substantial resources in the event of an
actual or perceived security breach or incident. We also rely on third parties to manufacture our product candidates, and similar events relating to their
computer systems could also have a material adverse effect on our business. To the extent that any disruption or security incident were to result in any loss,
destruction, or alteration of, unavailability of, or damage or unauthorized access to, our data or other information that is processed or maintained on our
behalf, or inappropriate disclosure of or dissemination of any such information, or if any of these were perceived or reported to have occurred, we could be
exposed to litigation and governmental investigations, the further development and commercialization of our product candidates could be delayed, and we
could be subject to significant fines or penalties for any noncompliance with certain state, federal and/or international privacy and security laws.
Our insurance policies may not be adequate to compensate us for the potential losses arising from any such disruption in or, failure or security
breach or incident of or impacting our systems or third-party systems where information important to our business operations or commercial development
is stored. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not
cover all claims made against us and could have high deductibles in any event, and defending a suit, regardless of its merit, could be costly and divert
management attention.
Our information technology systems could face serious disruptions adversely affecting our business.
Our information technology and other internal infrastructure systems, including corporate firewalls, servers, leased lines, and connection to the
Internet, face the risk of systemic failure potentially disruptive to our operations. A significant disruption in the availability of our information technology
and other internal infrastructure systems, or those of third parties that perform services or supply materials to us, could cause interruptions in our
collaborations with our partners and delays in our research and development work.
Our facility is located in Seattle, Washington. We have not undertaken a systematic analysis of the potential consequences to our business and
financial results from a major flood, blizzard, fire, earthquake, power loss, terrorist activity, pandemics or other disasters and do not have a recovery plan
for such disasters. Also, our contract development and manufacturing organizations’ and suppliers’ facilities are located in multiple locations where other
natural disasters or similar events which could severely disrupt our operations, could expose us to liability and could have a material adverse effect on our
business. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and
expenses.
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Risks Related to Our Intellectual Property
If we are not able to obtain and enforce patent protection for our technology, including therapeutic candidates, therapeutic products, and platform
technology, development of our therapeutic candidates and platform, and commercialization of our therapeutic products may be materially and
adversely affected.
Our success depends in part on our ability to obtain and maintain patents and other forms of intellectual property rights, including in-licenses of
intellectual property rights of others, for our technology, including platform technology and therapeutic candidates and products, methods used to
manufacture our therapeutic candidates and products, and methods for treating patients using our therapeutic candidates and products, as well as our ability
to preserve our trade secrets, to prevent third parties from infringing upon our proprietary rights, and to operate without infringing upon the proprietary
rights of others. Our scientific platform and substantially all of our intellectual property have been developed internally. As of December 31, 2021, our
patent portfolio consists of 47 granted patents and over 155 pending patent applications. We may not be able to apply for patents on certain aspects of our
technology, including therapeutic candidates and products, in a timely fashion or at all. Any future patents we obtain may not be sufficiently broad to
prevent others from using our technology or from developing competing therapeutics and technology. There is no guarantee that any of our pending patent
applications will result in issued or granted patents, any of our issued or granted patents will not later be found to be invalid or unenforceable, or any issued
or granted patents will include claims sufficiently broad to cover our technology, including platform technology and therapeutic candidates and products, or
to provide meaningful protection from our competitors. Moreover, the patent position of pharmaceutical and biotechnology companies can be highly
uncertain because it involves complex legal and factual questions. We will be able to protect our proprietary rights from unauthorized use by third parties
only to the extent our current and future technology, including platform technology and therapeutic candidates and products, are covered by valid and
enforceable patents or are effectively maintained as trade secrets. If third parties disclose or misappropriate our proprietary rights, it may materially and
adversely impact our competitive position in the market.
The U.S. Patent and Trademark Office, or USPTO, and various foreign governmental patent agencies require compliance with a number of
procedural, documentary, fee payment, and other provisions during the patent process. There are situations in which noncompliance can result in
abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Patent offices may
be affected by COVID-19 or other health epidemic shut-downs, resulting in, for example, non-essential administrative tasks being delayed or eliminated.
This could affect patent rights, including the partial or complete loss of patent rights in jurisdictions such as the USPTO and international patent offices. In
such an event, competitors might be able to enter the market earlier than would otherwise have been the case. Further, the standards applied by the USPTO
and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding
patentable subject matter or the scope of claims allowable in biotechnology and pharmaceutical patents. As such, we do not know the degree of future
protection we will have on our technology, including platform technology and therapeutic candidates and products. While we will endeavor to try to protect
our technology, including platform technology and therapeutic candidates and products, with intellectual property rights such as patents, as appropriate, the
process of obtaining patents is time-consuming, expensive, and sometimes unpredictable, and we can provide no assurances our technology, including our
platform technology, therapeutic candidates and products, will be adequately protected in the future against unauthorized uses or competing claims by third
parties.
In addition, recent and future changes to the patent laws and to the rules of the USPTO or other foreign patent offices may have a significant impact
on our ability to protect our technology, including therapeutic candidates and products, and enforce our intellectual property rights. For example, the
Leahy-Smith America Invents Act enacted in 2011 involves significant changes in patent legislation. In addition, we cannot assure that court rulings or
interpretations of any court decision will not adversely impact our patents or patent applications. In addition to increasing uncertainty with regard to our
ability to obtain patents in the future, there also may be uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S.
Congress, the federal courts, the USPTO, or made in foreign jurisdictions, 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 we might obtain in the future.
The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability. Once granted, patents may remain open to
opposition, interference, re-examination, post-grant review, inter partes review, revocation, nullification, or derivation action in court or before patent
offices or similar proceedings before or after allowance or grant, during which time third parties can raise objections against such initial grant. In the course
of such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit the scope of the pending, allowed or
granted claims thus attacked or may lose the allowed or granted claims altogether. Our patent risks include that:
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others may, or may be able to, make, use, offer to sell, or sell compounds that are the same as or similar to our therapeutic candidates and
products but that are not covered by the claims of the patents we own or license;
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we or our licensors, collaborators, or any future collaborators may not be the first to file patent applications covering certain aspects of our
technology, including our platform technology, therapeutic candidates and products;
others may independently develop similar or alternative technology or duplicate any of our technology without infringing our intellectual
property rights;
a third party may challenge our patents and, if challenged, a court may not hold that our patents are valid, enforceable, or that a third party is
infringing;
a third party may challenge our patents in various patent offices and, if challenged, we may be compelled to limit the scope of our pending,
allowed or granted claims or lose the allowed or granted claims altogether;
any issued patents we own or have licensed may not provide us with any competitive advantages, or may be challenged by third parties;
we may not develop additional proprietary technologies that are patentable;
the patents of others could harm our business; and
our competitors could conduct research and development activities in countries where we do not or will not have enforceable patent rights and
then use the information learned from such activities to develop competitive products for sale in major commercial markets where we do not
or will not have enforceable patent rights.
We may license patent rights from third-party owners or licensors. If such owners or licensors do not properly or successfully obtain, maintain or
enforce the patents underlying such licenses, or if they retain or license to others any competing rights, our competitive position and business prospects
may be materially and adversely affected.
We may rely upon intellectual property rights licensed from third parties to protect our technology, including platform technology and therapeutic
candidates and products. To date, we have in-licensed some intellectual property on a non-exclusive basis relating to commercially-available cell lines
involved in the manufacture of our vIgD programs; however, we may also license additional third-party intellectual property in the future, to protect our
technology, including intellectual property relating to our platform technology and therapeutic candidates and products. Our success will depend in part on
the ability of our licensors to obtain, maintain, and enforce patent protection for our licensed intellectual property, in particular those patents to which we
have secured exclusive rights. Our licensors may elect not to prosecute, or may be unsuccessful in prosecuting, any patent applications licensed to us. Even
if patents issue or are granted, our licensors may fail to maintain these patents, may determine not to pursue litigation against other companies infringing
these patents, or may pursue litigation less aggressively than we would. Further, any additional licenses we enter into may be non-exclusive and we may
not be able to obtain exclusive rights, which would potentially allow third parties to develop competing products or technology. Without protection for, or
exclusive right to, any intellectual property we may license, other companies might be able to offer substantially identical or similar product(s) for sale,
which could adversely affect our competitive business position and harm our business prospects. In addition, we may need to sublicense any rights we have
under third-party licenses to current or future collaborators or any future strategic partners. Any impairment of these sublicensed rights could result in
reduced revenue under or result in termination of an agreement by one or more of our collaborators or any future strategic partners.
Patent terms may be inadequate to protect our competitive position on our platform technology and therapeutic candidates and products for an
adequate amount of time.
Patents have a limited lifespan. In the United States and abroad, if all maintenance fees/annuity fees are timely paid, the natural expiration of a
patent is generally 20 years from its earliest non-provisional filing date. The protection a patent affords is limited. Even if patents covering our products are
obtained, once the patent life has expired, we may be open to competition from competitive products. Given the amount of time required for the
development, testing and regulatory review of new products, patents protecting such products might expire before or shortly after such products are
commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing
products similar or identical to ours.
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We may be unable to protect our patent intellectual property rights throughout the world.
Obtaining a valid and enforceable issued or granted patent covering our technology, including therapeutic candidates and products, in the United
States and worldwide can be extremely costly. In jurisdictions where we have not obtained patent protection, competitors may use our technology,
including our platform technology and therapeutic candidates and products, to develop their own products, and further, may commercialize such products
in those jurisdictions and export otherwise infringing products to territories where we have not obtained patent protection. In certain instances, a competitor
may be able to export otherwise infringing products in territories where we will obtain patent protection. In jurisdictions outside the United States where
we will obtain patent protection, it may be more difficult to enforce a patent as compared to the United States. Competitor products may compete with our
future products in jurisdictions where we do not or will not have issued or granted patents or where our issued or granted patent claims or other intellectual
property rights are not sufficient to prevent competitor activities in these jurisdictions. The legal systems of certain countries, particularly certain
developing countries, make it difficult to enforce patents and such countries may not recognize other types of intellectual property protection, particularly
relating to biopharmaceuticals. This could make it difficult for us to prevent the infringement of our patents or marketing of competing products in
violation of our proprietary rights generally in certain jurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in
substantial cost and divert our efforts and attention from other aspects of our business.
We generally file a provisional patent application first (a priority filing) at the USPTO. An international application under the Patent Cooperation
Treaty, or PCT, is usually filed within twelve months after the priority filing, at times with a United States filing. Based on the PCT filing, national and
regional patent applications may be filed in various international jurisdictions, such as in Europe, Japan, Australia, Canada, and the United States. We have
so far not filed for patent protection in all national and regional jurisdictions where such protection may be available. In addition, we may decide to
abandon national and regional patent applications before they are granted. Finally, the grant proceeding of each national or regional patent is an
independent proceeding which may lead to situations in which applications might in some jurisdictions be refused by the relevant registration authorities,
while granted by others. It is also quite common that, depending on the country, various scopes of patent protection may be granted on the same therapeutic
candidate, product, or technology. The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws in the United
States, and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. If we or our licensors
encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in
such jurisdictions, the value of these rights may be diminished, and we may face additional competition from others in those jurisdictions. Many countries
have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the
enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which
could materially diminish the value of such patent. If we or any of our licensors are forced to grant a license to third parties with respect to any patents
relevant to our business, our competitive position in the relevant jurisdiction may be impaired and our business and results of operations may be adversely
affected.
We or our licensors, collaborators, or any future strategic partners may become subject to third-party claims or litigation alleging infringement of
patents or other proprietary rights or seeking to invalidate patents or other proprietary rights, and we may need to resort to litigation to protect or
enforce our patents or other proprietary rights, all of which could be costly, time consuming, delay or prevent the development of our therapeutic
candidates and commercialization of our therapeutic products, or put our patents and other proprietary rights at risk.
We or our licensors, licensees, collaborators, or any future strategic partners may be subject to third-party claims for infringement or
misappropriation of patent or other proprietary rights. We are generally obligated under our license or collaboration agreements to indemnify and hold
harmless our licensors, licensees, or collaborators for damages arising from intellectual property infringement by us. If we or our licensors, licensees,
collaborators, or any future strategic partners are found to infringe a third-party patent or other intellectual property rights, we could be required to pay
damages, potentially including treble damages, if we are found to have willfully infringed. In addition, we or our licensors, licensees, collaborators, or any
future strategic partners may choose to seek, or be required to seek, a license from a third party, which may not be available on acceptable terms, if at all.
Even if a license can be obtained on acceptable terms, the rights may be non-exclusive, which could give our competitors access to the same technology or
intellectual property rights licensed to or from us. If we fail to obtain a required license, we or our licensee or collaborator, or any future licensee or
collaborator, may be unable to effectively market therapeutic products based on our technology, which could limit our ability to generate revenue or
achieve profitability and possibly prevent us from generating revenue sufficient to sustain our operations. In addition, we may find it necessary to pursue
claims or initiate lawsuits to protect or enforce our patent or other intellectual property rights. The cost to us in defending or initiating any litigation or other
proceeding relating to patent or other proprietary rights, even if resolved in our favor, could be substantial, and litigation would divert our management’s
attention. Some of our competitors may be able to
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sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Uncertainties resulting from
the initiation and continuation of patent litigation or other proceedings could delay our research and development efforts and limit our ability to continue
our operations.
Although we do not believe our technology infringes the intellectual property rights of others, we are aware of one or more patents or patent
applications that may relate to our technology, and third parties may assert against our products alleging infringement of their intellectual property rights
regardless of whether their claims have merit. Infringement claims could harm our reputation, may result in the expenditure of significant resources to
defend and resolve such claims, and could require us to pay monetary damages if we are found to have infringed the intellectual property rights of others.
If we were to initiate legal proceedings against a third party to enforce a patent covering our technology, including therapeutic candidates and
products, the defendant could counterclaim that our patent is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims
alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory
requirements, for example, patent ineligibility, lack of novelty, lack of written description, obviousness, or non-enablement. Grounds for an
unenforceability assertion could be an allegation someone connected with prosecution of the patent withheld relevant information from the USPTO, or
made a misleading statement, during prosecution. The outcome following legal assertions of invalidity and unenforceability during patent litigation is
unpredictable. With respect to the validity question, for example, we cannot be certain there is no invalidating prior art, of which we and the patent
examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part,
and perhaps all, of the patent protection on our technology, including our platform technology and therapeutic candidates and products. Such a loss of
patent protection could have a material adverse impact on our business. Patents and other intellectual property rights also will not protect our technology,
including our platform technology and therapeutic candidates and products, if competitors design around our protected technology, including our platform
technology and therapeutic candidates and products, without legally infringing our patents or other intellectual property rights.
It is also possible we have failed to identify relevant third-party patents or applications. For example, patent applications in the United States and
elsewhere are published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly
referred to as the priority date. Therefore, patent applications covering our technology, including our platform technology and therapeutic candidates and
products, could have been filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject to
certain limitations, be later amended in a manner that could cover our technology, including our platform technology and therapeutic candidates and
products. Third-party intellectual property rights holders may also actively bring infringement claims against us. We cannot guarantee we will be able to
successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be
required to engage in or continue costly, unpredictable, and time-consuming litigation and may be prevented from, or experience substantial delays in,
marketing our technology, including therapeutic candidates and products. If we fail in any such dispute, in addition to being forced to pay damages, we may
be temporarily or permanently prohibited from commercializing our technology, including a therapeutic product, held to be infringing. We might, if
possible, also be forced to redesign therapeutic candidates or products so we no longer infringe the third-party intellectual property rights. Any of these
events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources we would otherwise be able to
devote to our business.
If we fail to comply with our obligations under any license, collaboration, or other agreements, we may be required to pay damages and could lose
intellectual property rights necessary for developing and protecting our technology, including our platform technology, therapeutic candidates, and
therapeutic products, or we could lose certain rights to grant sublicenses, either of which could have a material adverse effect on our results of
operations and business prospects.
Our current licenses impose, and any future licenses we enter into are likely to impose, various development, commercialization, funding,
milestone, royalty, diligence, sublicensing, insurance, patent prosecution and enforcement, and other obligations on us. If we breach any of these
obligations, or use the intellectual property licensed to us in an unauthorized manner, we may be required to pay damages and the licensor may have the
right to terminate the license, which could result in us being unable to develop, manufacture, and sell or offer to sell products covered by the licensed
technology or enable a competitor to gain access to the licensed technology. Moreover, our licensors may own or control intellectual property that has not
been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensor’s rights.
In addition, while we cannot currently determine the amount of the royalty obligations we would be required to pay on future sales of licensed products, if
any, the amounts may be significant. The amount of our future royalty obligations will depend on the technology and intellectual property we use in
therapeutic products we successfully develop and commercialize, if any. Therefore, even if we successfully develop and commercialize therapeutic
products, we may be unable to achieve or maintain profitability.
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If we do not obtain patent term extension and data exclusivity for any therapeutic candidate or product we may develop, our business may be materially
harmed.
Depending upon the timing, duration, and specifics of any FDA marketing approval of any therapeutic candidate or product we may develop, one or
more of our or in-licensed U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration
Act of 1984 (Hatch-Waxman Act). The Hatch-Waxman Act permits a patent term extension of up to five years as compensation for patent term lost during
the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of
product approval, only one patent may be extended and only those claims covering the approved drug, a method for using it, or a method for manufacturing
it may be extended. Similar extensions as compensation for patent term lost during regulatory review processes are also available in certain foreign
countries and territories, such as in Europe under a Supplementary Patent Certificate. However, we may not be granted an extension in the United States
and/or foreign countries and territories because of, for example, failing to exercise due diligence during the testing phase or regulatory review process,
failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements.
Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term
extension or the term of any such extension is shorter than what we request, our competitors may obtain approval of competing products following our
patent expiration, and our business, financial condition, results of operations, and growth prospects could be materially harmed.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patent protection for certain aspects of our technology, including platform technology and therapeutic candidates and
products, we also consider trade secrets, including confidential and unpatented know-how, important to the maintenance of our competitive position. We
protect trade secrets and confidential and unpatented know-how, in part, by entering into non-disclosure and confidentiality agreements with parties who
have access to such knowledge, such as our employees, corporate collaborators, outside scientific collaborators, CROs, contract manufacturers, consultants,
advisors, and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants
obligating them to maintain confidentiality and assign their inventions to us. Despite these efforts, any of these parties may breach the agreements and
disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. We also cannot
guarantee that we have entered into such agreements with each party that may have or has had access to our trade secrets or proprietary technology and
processes. Enforcing a claim in the event of a party illegally disclosing or misappropriating a trade secret is difficult, expensive, and time-consuming, and
the outcome is unpredictable. In addition, some courts in the United States and certain foreign jurisdictions are less willing or unwilling to protect trade
secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from
using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our
competitive position would be harmed.
We are also subject both in the United States and outside the United States to various regulatory schemes regarding requests for the information we
provide to regulatory authorities, which may include, in whole or in part, trade secrets or confidential commercial information. While we are likely to be
notified in advance of any disclosure of such information and would likely object to such disclosure, there can be no assurance our challenge to the request
would be successful.
We may be in the future subject to claims we or our employees or consultants have wrongfully used or disclosed alleged trade secrets of our employees’
or consultants’ former employers or their clients. These claims may be costly to defend and if we do not successfully do so, we may be required to pay
monetary damages, may be prohibited from using some of our research and development and may lose valuable intellectual property rights or
personnel.
Many of our employees were previously employed at universities or biotechnology or pharmaceutical companies, including our current and
potential competitors. We may receive correspondence from other companies alleging the improper use or disclosure, and have received, and may in the
future receive, correspondence from other companies regarding the use or disclosure, by certain of our employees who have previously been employed
elsewhere in our industry, including with our competitors, of their former employer’s trade secrets or other proprietary information. Responding to these
allegations can be costly and disruptive to our business, even when the allegations are without merit, and can be a distraction to management. We may be
subject to claims in the future that our employees have, or we have, inadvertently or otherwise used or disclosed trade secrets or other proprietary
information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending current or future claims, in
addition to paying monetary damages, we may lose valuable intellectual property rights, personnel, or the ability to use some of our research and
development. A loss of intellectual property, key research personnel, or their work product could hamper our ability to commercialize, or prevent us from
commercializing, our
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therapeutic candidates, which could severely harm our business. Even if we are successful in defending against these claims, litigation could result in
substantial costs and be a distraction to management.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our
business may be materially and adversely affected.
Our trademarks or trade names may be challenged, infringed, circumvented, or declared generic or determined to be infringing on other marks. Any
trademark litigation could be expensive. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these
names, which we need for name recognition by potential partners or customers in our markets of interest. If we are unable to establish name recognition
based on our trademarks and trade names, we may not be able to compete effectively, and our business may be materially and adversely affected.
Third parties may independently develop similar or superior technology.
There can be no assurance others will not independently develop, or have not already developed, similar or more advanced technologies than our
technology or that others will not design around, or have not already designed around, aspects of our technology or our trade secrets developed therefrom.
If third parties develop technology similar or superior to our technology, or they successfully design around our current or future technology, our
competitive position, business prospects, and results of operations could be materially and adversely affected.
Breaches of our internal computer systems, or those of our contractors, vendors, or consultants, may place our patents or proprietary rights at risk.
The loss of clinical or preclinical data or data from any future clinical trial involving our technology, including therapeutic candidates and products,
could result in delays in our development and regulatory filing efforts and significantly increase our costs. In addition, theft or other exposure of data may
interfere with our ability to protect our intellectual property, including trade secrets, and other information critical to our operations. We have experienced
in the past, and may experience in the future, unauthorized intrusions into our internal computer systems, including portions of our internal computer
systems storing information related to our platform technology, therapeutic candidates and products, and we can provide no assurances that certain sensitive
and proprietary information relating to one or more of our therapeutic candidates or products has not been, or will not in the future be, compromised.
Although we have invested significant resources to enhance the security of our computer systems, there can be no assurances we will not experience
additional unauthorized intrusions into our computer systems, or those of our CROs, vendors, contractors, and consultants, that we will successfully detect
future unauthorized intrusions in a timely manner, or that future unauthorized intrusions will not result in material adverse effects on our financial
condition, reputation, or business prospects. Payments related to the elimination of ransomware may materially affect our financial condition and results of
operations.
Certain data breaches must also be reported to affected individuals and the government, and in some cases to the media, under provisions of HIPAA,
as amended by HITECH, other U.S. federal and state law, and requirements of non-U.S. jurisdictions, including the European Union General Data
Protection Regulation, and financial penalties may also apply.
Risks Related to Government Regulation
We may be unable to obtain U.S. or foreign regulatory approval and, as a result, may be unable to commercialize our therapeutic candidates.
Our therapeutic candidates are subject to extensive governmental regulations relating to, among other things, research, development, testing,
manufacture, quality control, approval, labeling, packaging, promotion, storage, record-keeping, advertising, distribution, sampling, pricing, sales and
marketing, safety, post-approval monitoring and reporting, and export and import of drugs. Rigorous preclinical testing and clinical trials and an extensive
regulatory approval process are required to be completed successfully in the United States and in many foreign jurisdictions before a new therapeutic can
be marketed. Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain, and subject to unanticipated delays. We have not
obtained regulatory approval for any therapeutic candidates, and it is possible none of the therapeutic candidates we may develop will obtain the regulatory
approvals necessary for us or our collaborators to begin selling them.
We have very limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval by the
FDA as well as foreign regulatory authorities, such as the EMA. The time required to obtain FDA and foreign regulatory approvals is unpredictable but
typically takes many years following the commencement of clinical trials,
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depending upon the type, complexity, and novelty of the therapeutic candidate, and at the substantial discretion of the regulatory authorities. The standards
the FDA and its foreign counterparts use when regulating us are not always applied predictably or uniformly and can change. Any analysis we perform of
data from preclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, who could delay, limit, or prevent
regulatory approval. We may also encounter unexpected delays or increased costs due to new government regulations, future legislation or administrative
action, or from changes in the policy of FDA or foreign regulatory authorities during the period of product development, clinical trials, and regulatory
review by the FDA or foreign regulatory authorities. It is impossible to predict whether legislative changes will be enacted, or whether FDA or foreign,
regulations, guidance, or interpretations will be changed, or what the impact of such changes, if any, may be.
Because the therapeutic candidates we are developing may represent a new class of therapeutics, we are not aware of any definitive policies,
practices, or guidelines that the FDA or its foreign counterparts have established in relation to these drugs. While we believe the therapeutic candidates we
are currently developing are regulated as new biological products under the Public Health Service Act, or PHSA, the FDA could decide to regulate them or
other products we may develop as drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA. The lack of policies, practices, or guidelines may
hinder or slow review by the FDA or foreign regulatory authorities of any regulatory filings we may submit. Moreover, the FDA or foreign regulatory
authorities may respond to these submissions by defining requirements we may not have anticipated. Such responses could lead to significant delays in the
clinical development of our therapeutic candidates.
Our therapeutic candidates could fail to receive regulatory approval for many reasons, including the following:
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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 a therapeutic candidate is
safe and effective for its proposed indication;
the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities
for approval;
we may be unable to demonstrate that a therapeutic candidate’s clinical and other benefits outweigh its 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 therapeutic candidates may not be sufficient to support the submission of a BLA or other
submission or to obtain regulatory approval in the United States, the European Union or elsewhere;
the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party
manufacturers with which we contract for clinical and commercial supplies; 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.
Any delay or failure in obtaining required approvals could have a material adverse effect on our ability to generate revenues from the particular
therapeutic candidate for which we are seeking approval. The FDA, the EMA and other regulatory authorities have substantial discretion in the approval
process, and in determining when or whether regulatory approval will be obtained for any of our therapeutic candidates. Even if we believe the data
collected from preclinical and clinical trials of our therapeutic candidates are promising, such data may not be sufficient to support approval by the FDA,
the EMA or any other regulatory authority. Furthermore, any regulatory approval to market a product may be subject to limitations on the approved uses for
which we may market the product or in the product labeling or be subject to other restrictions. Regulatory authorities also may impose requirements for
costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the therapeutic. In addition, the FDA has the authority to
require a REMS plan as part of the approval of a BLA or NDA, or after approval, which may impose further requirements or restrictions on the distribution
or use of an approved drug or biologic, such as limiting prescribing to certain physicians or medical centers that have undergone specialized training,
limiting treatment to patients who meet certain safe-use criteria, and requiring treated patients to enroll in a registry. These limitations and restrictions may
limit the size of the market for the therapeutic and affect coverage and reimbursement by third-party payors.
We are also subject to numerous foreign regulatory requirements governing, among other things, the conduct of clinical trials, manufacturing,
marketing authorization, pricing, and third-party reimbursement. The foreign regulatory approval process varies among countries and may include all of the
risks associated with FDA approval described above as well as risks
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attributable to the satisfaction of local regulations in foreign jurisdictions. Moreover, the time required to obtain approval may differ from that required to
obtain FDA approval. Approval by the FDA does not ensure approval by regulatory authorities outside the U.S. and vice versa.
If we fail to obtain orphan drug designation or obtain or maintain orphan drug exclusivity for certain of our products, our competitors may sell
products to treat the same conditions and our revenue may be reduced.
Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is intended to treat a rare disease or condition, defined as a
patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable
expectation that the cost of developing the drug will be recovered from sales in the United States. In the United States, 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. In addition, if a
therapeutic product with orphan drug designation subsequently receives the first FDA approval for the indication for which it has such designation, the
therapeutic product is entitled to orphan product exclusivity, which means the FDA may not approve any other applications to market the same therapeutic
product for the same indication for seven years, except in limited circumstances such as a showing of clinical superiority over the product with orphan
exclusivity or where the manufacturer is unable to assure sufficient product quantity.
As in the United States, we may apply for designation of a therapeutic candidate as an orphan drug for the treatment of a specific indication in the
European Union before the application for marketing authorization is made. In the European Union, the EMA’s Committee for Orphan Medicinal Products,
grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or
chronically debilitating condition affecting not more than five in 10,000 persons in the European Union. Additionally, designation is granted for products
intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition when, without incentives, it
is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biological product
or where there is no satisfactory method of diagnosis, prevention or treatment, or, if such a method exists, the medicine must be of significant benefit to
those affected by the condition. Sponsors of orphan drugs in the European Union can enjoy economic and marketing benefits, including reduction of fees or
fee waivers and up to ten years of market exclusivity for the approved indication unless another applicant can show its therapeutic product is safer, more
effective, or otherwise clinically superior to the orphan-designated therapeutic product. This period may be reduced to six years if the orphan drug
designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market
exclusivity.
We may seek orphan drug designation from the FDA and the EMA for certain of our product candidates. However, we may never receive such
designation. Even if we are able to obtain orphan designation, we may not be the first to obtain marketing approval for any particular orphan indication due
to the uncertainties associated with developing pharmaceutical products. In addition, exclusive marketing rights in the United States may be limited if we
seek approval for an indication broader than the orphan-designated indication or 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. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition
because different drugs with different active moieties can be approved for the same condition. Even after an orphan drug is approved, regulatory authorities
may subsequently approve the same drug with the same active moiety for the same condition if they conclude that the later drug is safer, more effective, or
makes a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review time of a product
candidate nor gives the product candidate any advantage in the regulatory review or approval process. In addition, orphan drug exclusivity could block the
approval of one of our therapeutic candidates if a competitor obtains approval of the same therapeutic product as defined by the FDA before we do, or if
our therapeutic candidate is determined to be within the same class as the competitor’s therapeutic product for the same indication or disease.
The respective orphan designation and exclusivity frameworks in the United States and in the European Union are subject to change, and any such
changes may affect our ability to obtain EU or U.S. orphan designations in the future.
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If we or our existing or future collaborators, manufacturers, or service providers fail to comply with healthcare laws and regulations, we or such other
parties could be subject to enforcement actions, which could adversely affect our ability to develop, market, and sell our therapeutics and may harm our
reputation.
Although we do not currently have any products on the market, once we begin commercializing our therapeutic candidates, if approved, we will be
subject to additional healthcare statutory and regulatory requirements and enforcement by the federal, state, and foreign governments of the jurisdictions in
which we conduct our business. Healthcare providers, physicians, and third-party payors play a primary role in the recommendation and prescription of any
therapeutic candidates for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly
applicable fraud, abuse, and other healthcare laws and regulations constraining the business or financial arrangements and relationships through which we
market, sell, and distribute the therapeutic candidates for which we obtain marketing approval. Restrictions under applicable federal and state healthcare
laws and regulations include the following:
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the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons from soliciting, receiving, offering, or providing
remuneration, directly or indirectly, to induce either the referral of an individual for a healthcare item or service, or the purchasing or ordering
of an item or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare or Medicaid;
the U.S. federal False Claims Act, which imposes criminal and civil penalties, including through civil whistleblower or qui tam actions,
against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, false or fraudulent claims for
payment or making a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government. In addition, the
government may assert a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false
or fraudulent claim for purposes of the False Claims Act;
state all-payor fraud laws, which impose criminal and civil liability for executing a scheme to defraud any healthcare benefit program, or
knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false statement in connection with the
delivery of or payment for healthcare benefits, items or services; similar to the federal Anti-Kickback Statute, a person or entity does not need
to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
HIPAA, HITECH, and their implementing regulations, which impose obligations on certain covered entity healthcare providers, health plans,
and healthcare clearinghouses as well as their business associates performing certain services involving the use or disclosure of individually
identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security, and transmission of
individually identifiable health information, and require notification to affected individuals and regulatory authorities of certain breaches of
security of individually identifiable health information;
the federal Physician Payment Sunshine Act and its implementing regulations, also referred to as “Open Payments,” require applicable
manufacturers of pharmaceutical and biological drugs, among other covered medical products, reimbursable under Medicare, Medicaid, or
Children’s Health Insurance Programs to track and report to the CMS certain payments and transfers of value made in the previous year,
including but not limited to, consulting fees, travel reimbursements, and research grants made to cover recipients, including physicians
(defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician healthcare professionals (such as
physician assistants and nurse practitioners, among others), and teaching hospitals, as well as information regarding physicians’ and their
immediate family members’ ownership and investment interests in the applicable manufacturer, with limited exceptions; and
analogous and similar state and foreign laws and regulations, such as, state anti-kickback and false claims laws potentially applicable to sales
or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including
private insurers; and some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance
guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report
information related to payments to physicians and other healthcare providers or marketing expenditures, and state and foreign laws governing
the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often
are not preempted by HIPAA, thus complicating compliance efforts.
Ensuring our future business arrangements with third parties comply with applicable healthcare laws and regulations could involve substantial costs.
If our operations are found to be in violation of any such requirements, we may be subject to penalties, including civil or criminal penalties, monetary
damages, the curtailment or restructuring of our operations, or exclusion from participation in government contracting, healthcare reimbursement, or other
government programs, including
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Medicare and Medicaid, any of which could adversely affect our financial results. Although effective compliance programs can mitigate the risk of
investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any action against us for an alleged or suspected
violation could cause our company to incur significant legal expenses and could divert our management’s attention from the operation of our business, even
if our defense is successful. In addition, achieving and sustaining compliance with applicable laws and regulations may be costly to us in terms of money,
time, and resources.
If we or our current or future collaborators, manufacturers, or service providers fail to comply with applicable federal, state, or foreign laws or
regulations, we could be subject to enforcement actions, which could affect our ability to develop, market, and sell our therapeutics successfully and could
harm our reputation and lead to reduced acceptance of our therapeutics by the market. These enforcement actions include, among others:
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adverse regulatory inspection findings;
warning or untitled letters;
voluntary product recalls with public notification or medical product safety alerts to healthcare professionals;
restrictions on, or prohibitions against, marketing our therapeutics;
restrictions on, or prohibitions against, importation or exportation of our therapeutics;
suspension of review or refusal to approve pending applications or supplements to approved applications;
exclusion from participation in government-funded healthcare programs;
exclusion from eligibility for the award of government contracts for our therapeutics;
FDA debarment;
suspension or withdrawal of therapeutic approvals;
seizures or administrative detention of therapeutics;
injunctions; and
restitution, disgorgement of profits, or civil and criminal penalties and fines.
Enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of our therapeutic candidates.
The policies of the FDA or similar regulatory authorities may change, and additional government regulations may be enacted that could prevent,
limit or delay regulatory approval of our product candidates. For example, in 2016, the 21st Century Cures Act, or Cures Act, was signed into law. The
Cures Act, among other things, is intended to modernize the regulation of drugs and biologics and spur innovation, but it is still being implemented and its
ultimate implementation is unclear. If we or our collaborators are slow or unable to adapt to changes in existing requirements or the adoption of new
requirements or policies, or if we or our collaborators are not able to maintain regulatory compliance, our therapeutic candidates may not obtain or maintain
regulatory approval, and we may not achieve or sustain profitability, which would adversely affect our business.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or executive or administrative
action, either in the United States or abroad. 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. 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. It is difficult to predict how current and future legislation, executive actions,
and litigation, including the executive orders, will be implemented, and the extent to which they will impact our business, our clinical development, and the
FDA’s and other agencies’ ability to exercise their regulatory authority, including FDA’s pre-approval inspections and timely review of any regulatory
filings or applications we submit to the FDA. To the extent any legislative or executive actions impose constraints on FDA’s ability to engage in oversight
and implementation activities in the normal course, our business may be negatively impacted.
Any therapeutics we develop may become subject to unfavorable pricing regulations, third-party coverage and reimbursement practices, or healthcare
reform initiatives, thereby harming our business.
The regulations governing marketing approvals, pricing, coverage, and reimbursement for new drugs and biologics vary widely from country to
country. Many countries require approval of the sale price of a drug before it can be marketed. In many
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countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical
pricing remains subject to continuing governmental control even after initial approval is granted. Although we intend to monitor these regulations, our
programs are currently in the early stages of development and we will not be able to assess the impact of price regulations for a number of years. As a
result, we might obtain regulatory approval for a product in a particular country but then be subject to price regulations delaying our commercial launch of
the product and negatively impacting the revenues we are able to generate from the sale of the product in that country.
Our ability to commercialize any therapeutics successfully also will depend in part on the extent to which coverage and reimbursement for these
products and related treatments will be available from government health administration authorities, private health insurers, and other organizations.
However, there may be significant delays in obtaining coverage for newly-approved therapeutics. Moreover, eligibility for coverage does not necessarily
signify a therapeutic will be reimbursed in all cases or at a rate covering our costs, including research, development, manufacture, sale, and distribution
costs. Also, interim payments for new therapeutics, if applicable, may be insufficient to cover our costs and may not be made permanent. Thus, even if we
succeed in bringing one or more therapeutics to the market, these products may not be considered cost-effective, and the amount reimbursed for any of
them may be insufficient to allow us to sell them on a competitive basis. Because our programs are in the early stages of development, we are unable at this
time to determine their cost effectiveness, coverage prospects, potential compendia listings, or the likely level or method of reimbursement, if covered. It is
equally difficult for us to predict how Medicare coverage and reimbursement policies will be applied to our products in the future, and coverage and
reimbursement under different federal healthcare programs are not always consistent. Medicare reimbursement rates may also reflect budgetary constraints
placed on the Medicare program.
Third-party payors often rely upon Medicare coverage policies and payment limitations in setting their own reimbursement rates. These coverage
policies and limitations may rely, in part, on compendia listings for approved therapeutics. Our inability to promptly obtain relevant compendia listings,
coverage, and adequate reimbursement from both government-funded and private payors for new therapeutics we develop and for which we obtain
regulatory approval could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products, and our
financial condition.
We believe the efforts of governments and third-party payors to contain or reduce the cost of healthcare, and legislative and regulatory proposals to
broaden the availability of healthcare, will continue to affect the business and financial condition of pharmaceutical and biopharmaceutical companies. A
number of legislative and regulatory changes in the healthcare system in the United States and other major healthcare markets have been proposed, and
such efforts have expanded substantially in recent years. These developments could, directly or indirectly, affect our ability to sell our products, if
approved, at a favorable price. In addition, third-party payors who reimburse patients or healthcare providers, such as government and private insurance
plans, are seeking greater upfront discounts, additional rebates, and other concessions to reduce the prices for therapeutics. If the price we are able to charge
for any therapeutics we develop, or the reimbursement provided for such products, is inadequate, our return on investment could be adversely affected.
Pursuant to health reform legislation and related initiatives, the Centers for Medicare and Medicaid Services, or CMS, are working with various
healthcare providers to develop, refine, and implement Accountable Care Organizations, or ACOs, and other innovative models of care for Medicare and
Medicaid beneficiaries, including the Bundled Payments for Care Improvement Initiative, the Comprehensive Primary Care Initiative, the Duals
Demonstration, and other models. The continued development and expansion of ACOs and other innovative models of care will have an uncertain impact
on any future reimbursement we may receive for approved therapeutics administered by such organizations.
In addition, in recent years, the U.S. Congress has enacted various laws seeking to reduce the federal debt level and contain healthcare expenditures.
For example, as a result of the Budget Control Act of 2011 and the Bipartisan Budget Act of 2015, an annual 2% reduction to Medicare payments that took
effect in 2013 and will remain in effect through 2031, with the exception of a temporary suspension implemented under various COVID-19 relief
legislation from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken. Under current legislation, the actual reduction in
Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester. These across-the-board spending cuts could adversely
affect our future revenues, earnings, and cash flows.
There has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically,
there have been several recent U.S. Congressional inquiries and proposed federal 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. At the federal level, the Trump administration used several means to
propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, in 2020, HHS
and CMS issued various rules that are expected to impact, among others, price reductions from pharmaceutical manufacturers to
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plan sponsors under Part D, fee arrangements between pharmacy benefit managers and manufacturers, manufacturer price reporting requirements under the
Medicaid Drug Rebate Program, including regulations that affect manufacturer-sponsored patient assistance programs subject to pharmacy benefit manager
accumulator programs and Best Price reporting related to certain value-based purchasing arrangements. Multiple lawsuits have been brought against the
HHS challenging various aspects of the rules implemented during the Trump administration. As a result, the Biden administration and HHS have delayed
the implementation or published rules rescinding some of these Trump-era policies.
Under the American Rescue Plan Act of 2021, effective January 1, 2024, the statutory cap on Medicaid Drug Rebate Program rebates that
manufacturers pay to state Medicaid programs will be eliminated. Elimination of this cap may require pharmaceutical manufacturers to pay more in rebates
than it receives on the sale of products, which could have a material impact on our business. In July 2021, the Biden administration released an executive
order, “Promoting Competition in the American Economy,” with multiple provisions aimed at increasing competition for prescription drugs. In response to
this executive order, the HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and potential
legislative policies that Congress could pursue to advance these principles. In addition, Congress is considering legislation that, if passed, could have
significant impact on prices of prescription drugs covered by Medicare, including limitations on drug price increases. The impact of these legislative,
executive, and administrative actions and any future healthcare measures and agency rules implemented by the Biden administration on us and the
pharmaceutical industry as a whole is unclear. Any reduction in reimbursement from Medicare or other government programs may result in a reduction in
payments from private payors. Additionally, a number of states are considering or have recently enacted state drug price transparency and reporting laws
that could substantially increase our compliance burdens and expose us to greater liability under such state laws once we begin commercialization after
obtaining regulatory approval for any of our products.
The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain
profitability or commercialize our product candidates. The impact of legislative, executive, and administrative actions of the Biden administration on us
and the biopharmaceutical industry as a whole is unclear. We expect that additional state and federal healthcare reform measures will 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 our product candidates or additional pricing pressures.
The healthcare industry is heavily regulated in the U.S. at the federal, state, and local levels and in other jurisdictions in which we may conduct trials
or other activities, and our failure to comply with applicable requirements may subject us to penalties and negatively affect our financial condition.
As a healthcare company, our operations, clinical trial activities, and interactions with healthcare providers will be subject to extensive regulation in
the United States, particularly if we receive FDA approval for any of our products in the future, and we may be subject to laws and regulations in other
jurisdictions as we conduct clinical trials or engage in other activities in foreign jurisdictions. For example, if we receive FDA approval for a therapeutic for
which reimbursement is available under a federal healthcare program, it would be subject to a variety of federal laws and regulations, including those
prohibiting the filing of false or improper claims for payment by federal healthcare programs, prohibiting unlawful inducements for the referral of business
reimbursable by federal healthcare programs, and requiring disclosure of certain payments and other transfers of value made to covered recipients in the
previous year, including U.S.-licensed physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician
healthcare professionals (such as physician assistants and nurse practitioners, among others), and teaching hospitals, as well as information regarding
certain physicians’ and their immediate family members’ ownership and investment interests in the applicable manufacturer, with limited exceptions. If our
past or present operations, or those of our contractors or agents who conduct business on our behalf, are found to be in violation of any of these laws, we
could be subject to enforcement action, government investigation, civil and criminal penalties, which could hurt our business, operations, and financial
condition. It is not always possible to identify and deter misconduct by parties we may contract with, including employees, contractors, collaborators,
CROs, and suppliers, and the precautions we take to detect and prevent misconduct 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 comply with these laws or regulations. If
any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant
impact on our business, including the imposition of significant penalties, including civil, criminal and administrative penalties, damages, fines,
disgorgement, imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, integrity oversight
and reporting obligations, contractual damages, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our
operations
Similarly, some state laws prohibit, among other offenses, knowingly and willfully executing a scheme to defraud any health care benefit program,
including private payors, or falsifying, concealing, or covering up a material fact or making any
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materially false, fictitious, or fraudulent statement in connection with the delivery of or payment for items or services under a health care benefit program.
We may also be subject to the privacy and security provisions of HIPAA, as amended by HITECH, which restricts the use and disclosure of patient-
identifiable health information, mandates the adoption of standards relating to the privacy and security of patient-identifiable health information, and
requires the reporting of certain security breaches to healthcare provider customers with respect to such information. Additionally, many states have
enacted similar laws imposing more stringent requirements on entities like us. Failure to comply with applicable laws and regulations could result in
substantial penalties and adversely affect our financial condition and results of operations. Complying with new regulatory requirements and changes in the
laws and regulations will increase our compliance cost and exposure to potential liability.
Additionally, the collection and use of health data in the EU is governed by the General Data Protection Regulation, or GDPR, which extends the
geographical scope of EU data protection law to non-EU entities under certain conditions and imposes substantial obligations upon companies and new
rights for individuals. Further, state and foreign laws may apply generally to the privacy and security of information we maintain, and may differ from each
other in significant ways, thus complicating compliance efforts, as discussed in the risk factor below titled, “Data collection is governed by restrictive
regulations governing the use, processing and cross-border transfer of personal information.”
Data collection is governed by restrictive regulations governing the use, processing and cross-border transfer of personal information.
In conducting and/or enrolling patients in our current or future clinical trials, we are subject to restrictions relating to privacy, data protection and
data security and may be subject to additional restrictions as our clinical operations expand. For example, the collection, use, storage, disclosure, transfer,
or other processing of personal data regarding individuals in the European Union, or EU, including personal health data, is subject to the GDPR. The
GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to
processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals
regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data
breaches (initially to supervisory authorities and, if the breach is serious enough, to individuals), and taking certain measures when engaging third-party
processors. The GDPR also imposes strict rules on the transfer of personal data to countries outside the EU, including the United States, and permits data
protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues,
whichever is greater, for the most serious of violations. The GDPR also confers a private right of action on data subjects and consumer associations to
lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. In
addition, the GDPR includes restrictions on cross-border data transfers. Certain aspects of cross-border data transfers under the GDPR are uncertain as the
result of legal proceedings in the EU, including a July 2020 decision by the Court of Justice for the European Union, or CJEU, that invalidated the EU-U.S.
Privacy Shield and, to some extent, called into question the efficacy and legality of using standard contractual clauses (SCCs). To address certain concerns
of the CJEU, the European Commission issued revised SCCs in June 2021. Regulatory guidance and other developments relating to cross-border personal
data transfers, including the necessity of putting in place those revised SCCs and the UK SCCs, as discussed below, may increase the complexity of
transferring personal data across borders and may require us to engage in additional contractual negotiations and to modify our policies and practices
relating to the transfer and other processing of personal data. The GDPR increased our responsibility and liability in relation to personal data that we
process where such processing is subject to the GDPR, and we may be required to put in place additional mechanisms to ensure compliance with the
GDPR, including as implemented by individual countries.
Further, the vote in the United Kingdom, or UK, in favor of exiting the EU, referred to as Brexit, has created uncertainty with regard to data
protection regulation in the UK. The Data Protection Act of 2018, which “implements” and complements the GDPR, achieved Royal Assent on May 23,
2018 and is now effective in the UK along with a version of the GDPR referred to as the UK GDPR. Collectively, the Data Protection Act of 2018 and the
UK GDPR authorize significant fines, up to the greater of £17.5 million or 4% of global turnover, and expose us to two parallel regimes and other
potentially divergent enforcement actions for certain violations. Further, aspects of data protection in the UK remain uncertain. On June 28, 2021, the
European Commission issued an adequacy decision under the GDPR and the Law Enforcement Directive, pursuant to which personal data generally may
be transferred from the EU to the UK without restriction; however, this adequacy decision is subject to a four-year “sunset” period, after which the
European Commission’s adequacy decision may be renewed, and this decision may be revoked or modified in the interim. Additionally, on February 2,
2022, the UK’s Information Commissioner’s Office issued new standard contractual clauses to support personal data transfers out of the UK. If approved
by the UK Parliament, these standard contractual clauses become effective March 21, 2022, and we may, in addition to other impacts, experience additional
costs associated with increased compliance burdens and be required to engage in new contract negotiations with third parties that aid in processing personal
data on our behalf or localize certain personal data.
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Other jurisdictions also increasingly maintain laws and regulations addressing privacy, data protection, and information security. We may incur
liabilities, expenses, costs, and other operational losses under GDPR and local laws of applicable EU member states, the UK, and other regions in
connection with any measures we take to comply with them. Working to comply with the GDPR and other laws and regulations to which we are subject in
Europe and other regions outside the United States relating to privacy, data protection, and information security will be a rigorous and time-intensive
process that may increase our cost of doing business or require us to change our business practices, and despite those efforts, there is a risk that we may be
subject to fines and penalties, litigation, and reputational harm in connection with our activities in those regions.
In addition, in California, the CCPA creates new individual privacy rights for California consumers (as 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
disclosure to consumers about such companies’ data collection, use and sharing practices, provide such consumers new ways to opt-out of certain sales or
transfers of personal information, and provide consumers with additional causes of action in data breach situations. While it exempts some data regulated
by HIPAA and certain clinical trials data, the CCPA, to the extent applicable to our business and operations, may increase our compliance costs and
potential liability with respect to other personal information we collect about California residents. The CCPA went into effect on January 1, 2020, and the
California Attorney General commenced enforcement actions for violations on July 1, 2020. Moreover, the CPRA was approved by California voters in the
November 3, 2020 election. The CPRA will significantly modify the CCPA, creating obligations beginning on January 1, 2022, with implementing
regulations expected on or before July 1, 2022, and enforcement commencing July 1, 2023. The CPRA creates further uncertainty and may require us to
incur additional costs and expenses. The CCPA and CPRA could mark the beginning of a trend toward more stringent privacy legislation in the United
States. The CCPA has prompted a number of proposals for federal and state privacy legislation. For example, in March 2021, Virginia enacted the Virginia
Consumer Data Protection Act (CDPA), a comprehensive privacy statute that becomes effective on January 1, 2023 and shares similarities with the CCPA.
In addition, on July 7, 2021, Colorado enacted the Colorado Privacy Act (CPA), becoming the third state to pass comprehensive consumer privacy
legislation in the United States. These and other new laws that may be proposed or enacted could increase our potential liability and adversely affect our
business.
Compliance with U.S. and international data protection laws and regulations could require us to take on more onerous obligations in our contracts,
restrict our ability to collect, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions. Any actual or alleged failure to
comply with U.S. or international laws and regulations relating to privacy, data protection, and data security could result in governmental investigations,
proceedings and enforcement actions (which could include civil or criminal penalties), private litigation or adverse publicity, harm to our reputation, and
could negatively affect our operating results and business. Moreover, clinical trial subjects about whom we or our potential collaborators obtain
information, as well as the providers who share this information with us, may contractually limit our ability to use and disclose the information or impose
other obligations or restrictions in connection with our use, retention and other processing of information, and we may otherwise face contractual
restrictions applicable to our use, retention, and other processing of information. Claims that we have violated individuals’ privacy rights, failed to comply
with data protection laws, or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and
could result in adverse publicity that could harm our business.
Our ability to obtain services, reimbursement, or funding from the federal government may be impacted by possible reductions in federal spending.
The U.S. federal budget remains in flux and could, among other things, cut Medicare payments to providers. The Medicare program is frequently
mentioned as a target for spending cuts. The full impact on our business of any future cuts in Medicare or other programs is uncertain. We cannot predict
the extent of legislative, executive, and administrative actions of the Biden administration will have on us and the biopharmaceutical industry as a whole. If
federal spending is reduced, anticipated budgetary shortfalls may also impact the ability of relevant agencies such as the FDA or the National Institutes of
Health to continue to function at current levels. Amounts allocated to federal grants and contracts may be reduced or eliminated. These reductions may also
impact the ability of relevant agencies to timely review and approve drug research and development, manufacturing, and marketing activities, which may
delay our ability to develop, market, and sell any therapeutics we may develop.
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If any of our therapeutic candidates receives marketing approval and we or others later identify undesirable side effects caused by the therapeutic
product, our ability to market and derive revenue from the therapeutic products could be compromised.
In the event any of our therapeutic candidates receive regulatory approval and we or others identify undesirable side effects, adverse events, or other
problems caused by one of our therapeutics, any of the following adverse events could occur, which could result in the loss of significant revenue to us and
materially and adversely affect our results of operations and business:
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regulatory authorities may withdraw their approval of the product and require us to take the product off the market or seize the product;
we may need to recall the therapeutic or change the way the therapeutic is administered to patients;
additional restrictions may be imposed on the marketing and promotion of the particular therapeutic or the manufacturing processes for the
therapeutic or any component thereof;
we may not be able to secure or maintain adequate coverage and reimbursement for our proprietary therapeutic products from government
(including U.S. federal health care programs) and private payors;
we may lose or see adverse alterations to compendia listings or treatment protocols specified by accountable care organizations;
we may be subject to fines, restitution, or disgorgement of profits or revenues, injunctions, or the imposition of civil penalties or criminal
prosecution;
regulatory authorities may require the addition of labeling statements, such as a “black box” warning, or equivalent, or a contraindication;
regulatory authorities may require us to implement a REMS plan, or to conduct post-marketing studies or clinical trials and surveillance to
monitor the safety or efficacy of the product;
we may be required to create a Medication Guide outlining the risks of such side effects for distribution to patients;
we could be sued and held liable for harm caused to patients;
the therapeutic may become less competitive; and
our reputation may suffer.
Our therapeutic candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.
The Patient Protection and Affordable Care Act, signed into law in 2010, includes a subtitle called the Biologics Price Competition and Innovation
Act of 2009, or BPCIA, which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-
licensed reference biological product. Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years
following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by
the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may
still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing the sponsor’s own
preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their product. The law is complex
and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While
it is uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse
effect on the future commercial prospects for our biological products.
We believe that any of our therapeutic candidates approved as a biological product under a BLA should qualify for the 12-year period of exclusivity.
However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our therapeutic
candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Other
aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to
which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for
non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.
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Significant developments stemming from the United Kingdom’s recent withdrawal from the European Union could have a material adverse effect on
us.
The United Kingdom’s recent withdrawal from the European Union and ongoing negotiations related to the United Kingdom’s trade and other
relationships with the European Union continue to create political and economic uncertainty, particularly in the United Kingdom and the European Union.
Any business we conduct, now and in the future, in the United Kingdom, the European Union, and worldwide could be affected as a result of this transition
and there are multiple ways in which our business could be negatively affected.
Brexit is expected to disrupt the operation of pre- and post-authorization clinical trial infrastructure. As of January 1, 2021, European Union law
applies only to the territory of Northern Ireland to the extent foreseen in the Protocol on Ireland / Northern Ireland. The rules around GMP and
pharmacovigilance in the UK currently remain similar to the EU requirements. However, the Falsified Medicines Directive will not apply in Great Britain
though it is likely that the UK will implement a procedure to minimize the risk of falsified medicines. Uncertainty in the regulatory framework and future
legislation can lead to disruption in the execution of international multi-center clinical trials, the monitoring of adverse events in through
pharmacovigilance programs, and determination of marketing authorization across different jurisdictions. There could also be disruption to the supply and
distribution as well as the import/export both of active pharmaceutical ingredients and finished product. Such a disruption could create supply difficulties
for ongoing clinical trials and may damage the integrity of the pharmacovigilance database for the safety of new products. The cumulative effects of the
disruption to the regulatory framework, uncertainty in future regulation, and changes to existing regulations may add considerably to the development lead
time to marketing authorization and commercialization of products in the European Union and/or the United Kingdom and increase our costs. We cannot
predict the impact of such changes and future regulation on our business or the results of our operations. Exposure to different and changing regulations in
multiple foreign jurisdictions may increase our liabilities, expenses, costs, and other operational losses.
Risks Related to Ownership of Our Common Stock
Our stock price may be volatile, and an active, liquid, and orderly trading market may not develop for our common stock. As a result, stockholders may
not be able to resell shares at or above their purchase price.
Although our common stock is listed on Nasdaq, an active trading market for our common stock may not be sustained. The lack of an active market
may impair the ability of our stockholders to sell their shares at the time they wish to sell them or at a price that they consider reasonable, which may
reduce the fair market value of their shares. Further, an inactive market may also impair our ability to raise capital by selling our common stock should we
determine additional funding is required.
The market price of our common stock could be subject to significant fluctuations. Market prices for securities of early-stage pharmaceutical,
biotechnology, and other life sciences companies have historically been particularly volatile. Some of the factors that may cause the market price of our
common stock to fluctuate include:
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our and our collaborators’ ability to obtain regulatory approvals for product candidates, and delays or failures to obtain such approvals;
the failure of any of our product candidates, if approved, to achieve commercial success;
issues in manufacturing our approved products, if any, or product candidates;
the results of current, and any future, preclinical or clinical trials of our product candidates;
our ability to achieve development milestones and receive associated milestone payments pursuant to the terms of our collaboration
agreements;
the entry into, or termination of, key agreements, including key licensing, collaboration or acquisition agreements;
the initiation or material developments in, or conclusion of, litigation to enforce or defend any of our intellectual property rights or defend
against the intellectual property rights of others;
announcements by commercial partners or competitors of new commercial products, clinical progress (or the lack thereof), significant
contracts, commercial relationships, or capital commitments;
adverse publicity relating to our markets, including with respect to other products and potential products in such markets;
adverse publicity about our company, employees, therapeutic candidates, and/or therapeutic products in the media or on social media;
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the impact of COVID-19 on our company or the economy generally;
the introduction of technological innovations or new therapies competing with our potential products;
the loss of key employees;
changes in estimates or recommendations by securities analysts, if any, who cover our common stock;
general and industry-specific economic conditions potentially affecting our research and development expenditures;
changes in the structure of health care payment systems;
unanticipated serious safety concerns related to the use of any of our product candidates;
failure to meet or exceed financial and development projections we may provide to the public;
failure to meet or exceed the financial and development projections of the investment community;
the perception of the pharmaceutical industry by the public, legislators, regulators, and the investment community;
adverse regulatory decisions;
disputes or other developments relating to proprietary rights, including patents, litigation matters, and our ability to obtain patent protection
for our technologies;
commencement of, or our involvement in, litigation;
sales of our common stock by us or our stockholders in the future;
trading volume of our common stock;
period-to-period fluctuations in our financial results; and
the other factors described in this “Risk Factors” section.
Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of
individual companies or the biotechnology sector. These broad market fluctuations may also adversely affect the trading price of our common stock.
In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities
litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources,
which could significantly harm our business and reputation.
Our officers and directors, and their respective affiliates, have a controlling influence over our business affairs and may make business decisions with
which stockholders disagree and which may adversely affect the value of their investment.
Our executive officers and directors together with their respective affiliates, beneficially own approximately 51% of our common stock as of
December 31, 2021. As a result, if some of these persons or entities act together, they will have the ability to exercise significant influence over matters
submitted to the stockholders for approval, including the election of directors, amendments to the certificate of incorporation and bylaws and the approval
of any strategic transaction requiring the approval of the stockholders. These actions may be taken even if they are opposed by other stockholders. This
concentration of ownership may also have the effect of delaying or preventing a change of control of our company or discouraging others from making
tender offers for our shares, which could prevent our stockholders from receiving a premium for their shares. Some of these persons or entities who make
up our principal stockholders may have interests different from other stockholders. The significant concentration of stock ownership may adversely affect
the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.
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Future sales, or the perception of future sales, of a substantial amount of our common stock could depress the trading price of our common stock.
Our stock price could decline as a result of sales of a large number of shares of our common stock or the perception that these sales could occur.
These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a
price that we deem appropriate.
For example, in connection with our July 2020 private placement, we entered into a registration rights agreement with the private placement
investors that required us to prepare and file a resale registration statement, which was declared effective by the SEC on August 18, 2020 and permits the
resale by the private placement investors of approximately 5.1 million shares of our common stock as well as approximately 2.6 million shares of common
stock issuable upon the exercise of prefunded warrants and warrants issued in the July 2020 private placement. Additionally, in connection with our
September 2021 private placement, we entered into a registration rights agreement with the private placement investors that required us to prepare and file
a resale registration statement, which was declared effective by the SEC on November 19, 2021 and permits the resale by the private placement investors of
approximately 6.5 million shares of our common stock as well as approximately 3.2 million shares of common stock issuable upon the exercise of
prefunded warrants issued in the September 2021 private placement. We have in the past and may again in the future sell shares of our common stock to
strategic partners in connection with collaboration agreements, as we did in December 2021 in connection with our agreement with Horizon. The shares
subject to outstanding options and warrants, of which options and warrants (including prefunded warrants) to purchase 3.0 million shares and 8.8 million
shares, respectively, were exercisable as of December 31, 2021, and the shares reserved for future issuance under our equity incentive plans will become
available for sale immediately upon the exercise of such options.
We also register the offer and sale of all shares of common stock that we may issue under our equity incentive plans. Once we register the offer and
sale of shares for the holders of registration rights and option holders, they can be freely sold in the public market upon issuance, subject to any related
lock-up agreements or applicable securities laws.
In addition, in the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in
connection with a financing, acquisition, litigation settlement, employee arrangements or otherwise. Any such future issuance, including any issuances
pursuant to our “at the market” equity offering program with Cowen, could result in substantial dilution to our existing stockholders and could cause our
stock price to decline.
We have broad discretion over the use of the proceeds to us from our financing activities and may apply the proceeds to uses that do not improve our
operating results or the value of your securities.
We have broad discretion over the use of proceeds to us from our financing activities and our stockholders rely solely on the judgment of our board
of directors and management regarding the application of these proceeds. Our use of proceeds may not improve our operating results or increase the value
of our common stock. Any failure to apply these proceeds effectively could have a material adverse effect on our business, delay the development of our
product candidates and cause the market price of our common stock to decline.
Anti-takeover provisions in our charter documents and under Delaware or Washington law could discourage, delay or prevent a change in control of
our company, limit attempts by our stockholders to replace or remove our current management and may affect the trading price of our common stock.
Our corporate documents contain provisions that may delay or discourage transactions involving an actual or potential change in our control or
change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our
stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our stock. Among other
things, our certificate of incorporation and bylaws:
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stagger the terms of our board of directors and require 66 and 2/3% stockholder voting to remove directors, who may only be removed for
cause;
provide that the authorized number of directors may be changed only by resolution of the board of directors;
provide that all vacancies, including newly-created directorships, may, except as otherwise required by law, be filled by the affirmative vote of
a majority of directors then in office, even if less than a quorum;
authorize our board of directors to issue “blank check” preferred stock and to determine the rights and preferences of those shares, which may
be senior to our common stock, without prior stockholder approval;
establish advance notice requirements for nominating directors and proposing matters to be voted on by stockholders at stockholders’
meetings;
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prohibit our stockholders from calling a special meeting and prohibit stockholders from acting by written consent;
require 66 and 2/3% stockholder voting to effect certain amendments to our certificate of incorporation and bylaws; and
prohibit cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law,
or DGCL, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested”
stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Likewise, because our principal
executive offices are located in Washington, the anti-takeover provisions of the Washington Business Corporation Act may apply to us under certain
circumstances now or in the future. These provisions prohibit a “target corporation” from engaging in any of a broad range of business combinations with
any stockholder constituting an “acquiring person” for a period of five years following the date on which the stockholder became an “acquiring person.”
These provisions could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage
proxy contests and make it more difficult for stockholders to elect directors of their choosing and cause us to take other corporate actions our stockholders
desire.
Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may
reduce the amount of available cash.
Our amended and restated certificate of incorporation provides that we will indemnify our directors to the fullest extent permitted by Delaware law.
In addition, as permitted by Section 145 of the DGCL, our amended and restated bylaws and our indemnification agreements that we have entered
into with our directors and officers provide that:
• We will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the
fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful.
• We may, in our discretion, indemnify other employees and agents in those circumstances where indemnification is permitted by applicable
law.
• We are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such
directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.
• We will not be obligated pursuant to our amended and restated bylaws to indemnify any director or officer in connection with any proceeding
(or part thereof) initiated by such person unless the proceeding was authorized in the specific case by our board of directors or such
indemnification is required to be made pursuant to our amended and restated bylaws.
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The rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements
with our directors, officers, employees and agents and to obtain insurance to indemnify such persons.
• We may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to our directors or
officers.
As a result, if we are required to indemnify one or more of our directors or officers, it may reduce our available funds to satisfy successful third-
party claims against us, may reduce the amount of available cash and may have a material adverse effect on our business and financial condition.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for
certain types of actions and proceedings that may be initiated by our stockholders, which could limit
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our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to an alternative forum, the Court of Chancery of
the State of Delaware will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of
breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, any action asserting a claim arising
pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws or any action asserting a
claim that is governed by the internal affairs doctrine, in each case subject to the Court of Chancery having personal jurisdiction over the indispensable
parties named as defendants therein and the claim not being one which is vested in the exclusive jurisdiction of a court or forum other than the Court of
Chancery or for which the Court of Chancery does not have subject matter jurisdiction. Any person purchasing or otherwise acquiring any interest in any
shares of our common stock shall be deemed to have notice of and to have consented to this provision of our amended and restated certificate of
incorporation. In addition, our amended and restated bylaws provide that the U.S. federal district courts will be the exclusive forum for resolving any
complaint asserting a cause of action arising under the Securities Act.
These choice of forum provision may limit our stockholders’ ability to bring a claim in a judicial forum that it finds favorable for disputes with us or
our directors, officers, employees or agents, which may discourage such lawsuits against us and our directors, officers, employees and agents even though
an action, if successful, might benefit our stockholders. Stockholders who do bring a claim in the Court of Chancery could face additional litigation costs in
pursuing any such claim, particularly if they do not reside in or near Delaware. The Court of Chancery may also reach different judgments or results than
would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such
judgments or results may be more favorable to us than to our stockholders. Alternatively, if a court were to find these choice of forum provisions in our
amended and restated certificate of incorporation and amended and restated bylaws inapplicable to, or unenforceable in respect of, one or more of the
specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could have a
material adverse effect on our business, financial condition or results of operations.
We do not expect to pay any dividends on our common stock for the foreseeable future.
We currently expect to retain all future earnings, if any, for future operations and expansion, and have no current plans to pay any cash dividends to
holders of our common stock for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our board
of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other
factors that our board of directors may deem relevant. As a result, stockholders may not receive any return on an investment in our common stock unless
stockholders sell our common stock for a price greater than that which they paid for it.
Nasdaq may delist our common stock from its exchange, which could limit investors’ ability to make transactions in our securities and subject us to
additional trading restrictions.
Our common shares are listed on Nasdaq under the trading symbol “ALPN.” Our securities may fail to meet the continued listing requirements to be
listed on Nasdaq. If Nasdaq delists our common shares from trading on its exchange, we could face significant material adverse consequences, including:
•
•
•
•
•
significant impairment of the liquidity for our common stock, which may substantially decrease the market price of our common stock;
a limited availability of market quotations for our securities;
a determination that our common stock qualifies as a “penny stock” which will require brokers trading in our common stock to adhere to more
stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock;
a limited amount of news and analyst coverage for our company; and
a decreased ability to issue additional securities or obtain additional financing in the future.
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Risks Related to Our Financial Reporting and Disclosure
We are a smaller reporting company, and any decision on our part to comply only with reduced reporting and disclosure requirements applicable to
such companies could make our common stock less attractive to investors.
We are a “smaller reporting company,” as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act. For as long as we
continue to be a smaller reporting company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public
companies that are not smaller reporting companies, including, but not limited to, reduced disclosure obligations regarding executive compensation in our
periodic reports and proxy statements.
We will remain a smaller reporting company so long as, as of June 30 of the preceding year, (i) the market value of our common shares held by non-
affiliates, or our public float, is less than $250 million; or (ii) we have annual revenues less than $100 million and either we have no public float or our
public float is less than $700 million.
If we take advantage of some or all of the reduced disclosure requirements available to smaller reporting companies, investors may find our
common stock less attractive, which may result in a less active trading market for our common stock and greater stock price volatility. For so long as we
are a smaller reporting company and not classified as an “accelerated filer” or “large accelerated filer” pursuant to SEC rules, we will continue to be
exempt from the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley.
If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of The Nasdaq Stock
Market LLC. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over
financial reporting. We must perform system and process evaluation and testing of our internal control over financial reporting to allow management to
report on the effectiveness of our internal controls over financial reporting in our Annual Report on Form 10-K filing for that year, as required by Section
404 of the Sarbanes-Oxley Act.
We may discover weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement
of our financial statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. An internal control system, no
matter how well designed and operated, can provide only reasonable, not absolute, assurance that the internal control system’s objectives will be met.
Because of the inherent limitations in all internal control systems, no evaluation of internal controls can provide absolute assurance that misstatements due
to error or fraud will not occur or that all internal control issues and instances of fraud will be detected.
If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, or if we are unable to maintain proper and effective
internal controls, we may not be able to produce timely and accurate financial statements. If that were to happen, the market price of our common stock
could decline and we could be subject to sanctions or investigations by The Nasdaq Stock Market LLC, the SEC, or other regulatory authorities.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
Our disclosure controls and procedures are designed to reasonably ensure that information required to be disclosed by us in reports we file or
submits under the Exchange Act is accumulated and communicated to management and recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures as well as internal controls and procedures, no
matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are and will be met.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or
mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized
override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be
detected.
We will continue to incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies.
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We will incur significant legal, accounting, and other expenses associated with public company reporting requirements. We will also incur costs
associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act, as well as new rules implemented by the SEC
and The Nasdaq Stock Market LLC. Although our status as a smaller reporting company may for a limited period of time somewhat lessen the cost of
complying with these additional regulatory and other requirements, we nonetheless expect that these rules and regulations will increase our legal and
financial compliance costs and to make some activities more time-consuming and costlier. Our executive officers and other personnel will need to devote
substantial time to oversee our operations as a public company and compliance with applicable laws and regulations. These rules and regulations may also
make it difficult and expensive for us to obtain directors and officer’s liability insurance. As a result, it may be more difficult for us to attract and retain
qualified individuals to serve on our board of directors or as executive officers of our company, which may adversely affect investor confidence in us and
could cause our business or stock price to suffer.
General Risk Factors
Changes in accounting rules and regulations, or interpretations thereof, could result in unfavorable accounting charges or require us to change our
compensation policies.
Accounting methods and policies for biopharmaceutical companies, including policies governing revenue recognition, research and development
and related expenses, and accounting for stock-based compensation, are subject to review, interpretation, and guidance from our auditors and relevant
accounting authorities, including the SEC. Changes to accounting methods or policies, or interpretations thereof, may require us to reclassify, restate, or
otherwise change or revise our financial statements.
If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about us, our business or our market, our
stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that equity research analysts publish about us and our
business. Equity research analysts may elect not to provide research coverage of our common stock or discontinue existing research coverage, and such
lack of research coverage may adversely affect the market price of our common stock. We do not have any control over the analysts, or the content and
opinions included in their reports. The price of our common stock could decline if one or more equity research analysts downgrade our stock or issue other
unfavorable commentary or research. If one or more equity research analysts ceases coverage of us or fails to publish reports regularly, demand for our
common stock could decrease, which in turn could cause our stock price or trading volume to decline.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
In March 2019, we entered into a lease for 27,164 square feet of office and laboratory space located at 188 East Blaine Street, Seattle, Washington.
The term of the lease is 10.8 years with one option to extend the term by 5.0 years. The lease term commenced in June 2019. We believe that our existing
facility is adequate for our current needs as the facility has sufficient space to house additional personnel as we expand.
Item 3. Legal Proceedings.
We are not engaged in any material legal proceedings. From time to time, we may become involved in litigation relating to claims arising from the
ordinary course of business. We believe that there are no claims or actions pending against us currently, the ultimate disposition of which would have a
material adverse effect on our consolidated results of operation, financial condition or cash flows.
Item 4. Mine Safety Disclosures.
Not applicable.
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
PART II
Market Information
From June 17, 2015 through July 24, 2017, our common stock was traded under the symbol “NVLS.” On July 24, 2017, in connection with the
business combination of Nivalis Therapeutics, Inc. and Alpine Immune Sciences, Inc., we completed a 1-for-4 reverse stock split. Commencing on July 25,
2017, our common stock began trading on The Nasdaq Global Market under the symbol “ALPN.” As of March 7, 2022, we have approximately 26
stockholders of record for our common stock, which excludes stockholders whose shares were held in nominee or street name accounts through brokers.
Dividends
We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings for use in the operation of our
business and do not intend to declare or pay any cash dividends in the foreseeable future. Any further determination to pay dividends on our capital stock
will be at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital
requirements, general business conditions and other factors that our board of directors considers relevant.
Stock Performance Graph
As a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, and pursuant to Instruction 6 to Item 201(e) of Regulation S-K
we are not required to provide the stock performance graph.
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial
statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. In addition to historical information, some of the information
contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business,
future financial performance, expense levels and liquidity sources, includes forward-looking statements that involve risks and uncertainties. You should
read Risk Factors in Part I, Item 1A of this report for a discussion of important factors that could cause actual results to differ materially from the results
described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage biopharmaceutical company dedicated to discovering and developing innovative, protein-based immunotherapies to treat
cancer and autoimmune and inflammatory diseases. Our approach includes a proprietary scientific platform that converts native immune system proteins
into differentiated, multi-targeted therapeutics. We believe our strategies are capable of meaningfully modulating the human immune system and
significantly improving outcomes in patients with serious diseases.
Autoimmune/Inflammatory Diseases
Acazicolcept, is a dual ICOS and CD28 antagonist intended for the treatment of autoimmune and inflammatory diseases. Preclinical studies with
acazicolcept have demonstrated efficacy in models of SLE, SjS, arthritis, inflammatory bowel disease, multiple sclerosis, type 1 diabetes, uveitis, and graft
versus host disease. We have evaluated acazicolcept in a Phase 1 healthy volunteer study and initiated patient dosing in Synergy, a global, randomized,
double-blind, placebo-controlled Phase 2 study of acazicolcept in adults with moderate-to-severe SLE. In June 2020, we entered into an Option and License
Agreement with AbbVie Ireland Unlimited Company, or AbbVie, which grants AbbVie an exclusive option to take an exclusive license to acazicolcept.
Through December 31, 2021, we have received $105.0 million in upfront and pre-option exercise development milestones as part of the AbbVie
Agreement.
ALPN-303 is a dual B cell cytokine antagonist, being developed for the treatment of B cell mediated inflammatory and autoimmune diseases.
Engineered using our proprietary directed evolution platform, ALPN-303 potently inhibits BAFF, BLyS and APRIL, which play key roles in B cell
development, differentiation, and survival, and together contribute to the pathogenesis of multiple autoimmune diseases such as SLE and many other
autoantibody-related inflammatory diseases. Data presented at the ACR Convergence 2021 Annual Meeting demonstrated that ALPN-303 inhibits the
activity of the B cell cytokines APRIL and BAFF more potently than wild-type TACI-Fc counterparts, as well as anti-BAFF and anti-APRIL monoclonal
antibodies. In addition, ALPN-303 has been well-tolerated in preclinical models and exhibited superior pharmacokinetics and pharmacodynamics over
wild-type TACI-Fc counterparts, including superior serum exposure, suppression of T-dependent antibody production, and/or serum immunoglobulins in
mice and/or cynomolgus monkeys. A first-in-human, Phase 1 study of ALPN-303 in healthy volunteers began in the fourth quarter of 2021, with top-line
results targeted by mid-2022. This randomized, placebo-controlled study is designed to evaluate the safety, tolerability, pharmacokinetics, and
pharmacodynamics of ALPN-303 administered intravenously and subcutaneously. We are planning to initiate patient-based studies in the second half of
2022 including SLE, and possibly other autoantibody-related diseases in other therapeutic areas.
In December 2021, we entered into the Horizon Agreement which grants Horizon an exclusive license for the development, manufacture and
commercialization of one Existing Program and up to three additional Research Programs generated from our libraries of proteins and molecules for
research, discovery and identification of additional compounds. Under the terms of the agreement, Horizon made an upfront payment to us of $25.0 million
as well as an equity investment for which they paid $15.0 million, a 25 percent premium to the 30-day volume-weighted average share price as of
December 9, 2021. In addition, we are eligible to receive up to $381.0 million per program, or approximately $1.5 billion in total, in future success-based
payments related to development, regulatory and commercial milestones as well as tiered royalties on global net sales.
Immuno-oncology
Our lead oncology program is davoceticept, a conditional CD28 costimulator and dual checkpoint inhibitor intended for the treatment of cancer.
Preclinical in vivo data have demonstrated monotherapy efficacy in tumor models superior to approved therapies. In June 2020, we initiated NEON-1, a
Phase 1 monotherapy dose escalation and expansion study in patients with advanced malignancies. Initial data from NEON-1 were presented at the 2021
ASCO Virtual Meeting demonstrating that davoceticept was well-tolerated as of the cutoff date (April 22, 2021) with evidence of peripheral T cell
modulation consistent with CD28 agonism. In addition, although most enrolled participants had tumors considered classically non-responsive to
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immunotherapies, 61% (14 of 23 evaluable) derived clinical benefit as defined as a best outcome of stable disease or better. Completion of dose escalation
for NEON-1 and initiation of expansion cohorts is anticipated in the first half of 2022.
In June 2021, we announced a collaboration and supply agreement with Merck to evaluate the safety and efficacy of davoceticept in combination
with Merck’s anti-PD-1 therapy KEYTRUDA (pembrolizumab) in a Phase 1 dose escalation and expansion study. The clinical trial, NEON-2, was initiated
in June 2021. As discussed above, on March 7, 2022, we announced that the FDA placed a partial clinical hold on the NEON-2 trial in response to the
death of a study participant in the NEON-2 trial. The participant’s death was attributed to cardiogenic shock, considered by the treating physicians as likely
related to immune-mediated myocarditis, or possibly infection. Participants who are currently enrolled in the NEON-2 trial may continue to receive
davoceticept and pembrolizumab, although no new participants may be enrolled until the partial clinical hold is resolved. This partial clinical hold does not
affect the ongoing NEON-1 clinical trial of davoceticept as monotherapy (NCT04186637).
Our scientific platform has also generated immune modulatory proteins with the potential of improving engineered cell therapies, such as CAR-T,
TCR-T, and TILs. In May 2019, we signed a collaboration and license agreement with Adaptimmune to develop next-generation SPEAR T cell products
which incorporate our secreted and transmembrane immunomodulatory protein (termed SIP™ and TIP™) technology. We intend to continue to leverage
our existing pipeline and platform to actively explore and evaluate potential value-creating partnering opportunities.
TM
Our goal is to discover and develop modern therapies to treat patients with serious conditions such as cancer and autoimmune/inflammatory
diseases. To achieve our goals, we intend to:
•
•
•
•
aggressively move our lead autoimmune/inflammatory program acazicolcept through clinical development as part of the AbbVie Agreement,
including conducting Synergy, our Phase 2 study for the treatment of SLE;
aggressively move our second autoimmune/inflammatory program ALPN-303 through a Phase 1 study in healthy volunteers and into clinical
studies for the treatment of B cell mediated autoimmune/inflammatory diseases;
aggressively move our lead oncology program davoceticept through clinical development for the treatment of cancer; and
maximize the value of our pipeline and platform via potential partnering activities.
Our operations to date have been limited to business planning, raising capital, developing our platform technology, identifying potential
immunotherapy candidates, clinical studies, and other research and development activities. To date, we have financed operations primarily through private
placements of common stock and convertible preferred stock, funds received from license and research agreements, debt financing and assets acquired
upon the close of our merger with Nivalis Therapeutics Inc., or Nivalis. We do not have any products approved for sale and have not generated any product
sales. Since inception and through December 31, 2021, excluding amounts borrowed through debt financing, we have raised an aggregate of $393.1 million
to fund operations, of which $170.6 million was from the sale of common stock and warrants, $49.2 million was from the sale of convertible preferred
stock, $129.2 million was through our license and collaboration agreements, and $44.1 million in cash, cash equivalents, and marketable securities acquired
through the merger with Nivalis. As of December 31, 2021, we had cash, cash equivalents, restricted cash, and investments totaling $215.4 million.
Our net loss was $50.3 million, $27.9 million, and $41.9 million for the years ended December 31, 2021, 2020, and 2019, respectively. We expect to
continue incurring significant expenses and operating losses for at least the next several years as we:
•
•
•
•
•
•
initiate and complete nonclinical studies and clinical trials for our product candidates, including acazicolcept, a dual ICOS/CD28 antagonist
program targeting autoimmune/inflammatory disorders, davoceticept, a conditional CD28 costimulator and dual checkpoint inhibitor intended
for the treatment of cancer, and ALPN-303, a dual B cell cytokine antagonist for B cell-mediated autoimmune/inflammatory diseases;
contract to manufacture and perform additional process development for our product candidates;
continue research and development efforts to build our pipeline beyond the current product candidates;
maintain, expand, and protect our intellectual property portfolio;
hire additional clinical, quality control, scientific, and management personnel; and
add operational and financial personnel to support our product development efforts and operational capabilities applicable to operating as a
public company.
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We do not expect to generate product revenue unless and until we successfully complete development of, obtain marketing approval for and
commercialize our product candidates, either alone or in collaboration with third parties. We expect these activities will take a number of years and our
success in these efforts is subject to significant uncertainty. Accordingly, we will need to raise additional capital prior to the regulatory approval and
commercialization of any of our product candidates. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our
operating activities through equity or debt financings, collaborations or licenses, capital lease transactions, or other available financing transactions.
However, additional capital may not be available on reasonable terms, if at all, and if we raise additional funds through the issuance of additional equity or
debt securities, it could result in dilution to our existing stockholders and increased fixed payment obligations.
Financial Overview
Collaboration Revenue
We derive our collaboration revenue primarily from our collaboration and licensing agreements. We may generate revenue in the future from
milestone payments received pursuant to our collaboration and licensing agreements with AbbVie, Horizon, Adaptimmune, or from payments from future
license or collaboration agreements, product sales, or government contracts and grants. We expect revenue we generate, if any, will fluctuate from quarter
to quarter.
Horizon
In December 2021, we entered into the Horizon Agreement which grants Horizon an exclusive license for the development, manufacture and
commercialization of one Existing Program and up to three additional Research Programs generated from our libraries of proteins and molecules for
research, discovery and identification of additional compounds.
Under the terms of the agreement, Horizon made an upfront payment to us of $25.0 million as well as an equity investment for which they paid
$15.0 million, a 25 percent premium to the 30-day volume-weighted average share price as of December 9, 2021. In addition, we are eligible to receive up
to $381.0 million per program, or approximately $1.5 billion in total, in future success-based payments related to development, regulatory and commercial
milestones as well as tiered royalties on global net sales. We will conduct our activities under the Existing Program and up to three Research Programs to
deliver compounds meeting agreed criteria. In addition, Horizon will pay us for the costs and expenses of conducting such activities under the deliverables
plans. Horizon will then assume responsibility for development and commercialization activities and costs.
For revenue recognition purposes, we determined that the Existing Program and each Research Program are distinct performance obligations. We
allocated revenue to each performance obligation based on its relative stand-alone selling price. The future success-based payments related to development
and regulatory milestones are probable of significant revenue reversal as the achievement is highly dependent on factors outside our control. Therefore,
these milestone payments are fully constrained and are not initially included in the transaction price. We will continue to re-evaluate the transaction price
each reporting period and update as uncertain events are resolved or other changes in circumstances occur. Any consideration related to commercial
milestones and royalties will be recognized when the related sales occur.
AbbVie
In June 2020, we entered into the AbbVie Agreement for the development of acazicolcept. The AbbVie Agreement grants AbbVie the exclusive
option to purchase an exclusive worldwide license to acazicolcept, or the License Option. The License Option is exercisable by AbbVie at any time and
will expire 90 days from the achievement of certain development milestones. If AbbVie exercises the License Option, AbbVie will take over the future
development and commercialization. Prior to the exercise of the License Option, we will perform research and development services, including conducting
our Phase 2 study in SLE, based on an agreed-upon development plan, or the Development Plan. We will be fully responsible for all costs incurred to
conduct the activities under the Development Plan, provided that, AbbVie may be responsible for increased costs under the Development Plan in
connection with certain material amendments proposed by AbbVie. We will also be solely responsible, at our sole cost and expense, for manufacturing and
regulatory filings for acazicolcept necessary to complete activities under the Development Plan.
In June 2020, in connection with the execution of the AbbVie Agreement, AbbVie paid us a nonrefundable upfront payment of $60.0 million. Prior
to the exercise of the License Option, AbbVie has agreed to make cash payments upon our achievement of certain predefined pre-option development
milestones, or the Alpine Development Milestones, up to an aggregate amount of $75.0 million. In the second quarter of 2021, we achieved $45.0 million
of the Alpine Development Milestones. If AbbVie exercises the License Option, they will pay a one-time cash payment of $75.0 million. Following the
exercise of the License Option, AbbVie has also agreed to make aggregate cash payments of up to $205.0 million upon
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AbbVie’s achievement of certain development and commercial milestones and additional aggregate cash payments of up to $450.0 million upon AbbVie’s
achievement of certain sales-based cash milestones, collectively referred to as the AbbVie Milestones. Subsequent to commercialization, we are also
eligible to receive high single-digit to low double-digit percentage royalties on worldwide net sales of licensed products.
For revenue recognition purposes, we determined that our contractual promises in the AbbVie Agreement are not distinct and are interdependent
with our performance obligation to provide research and development services under the Development Plan. Thus, all contractual promises related to the
upfront payment and Alpine’s Development Milestones were combined into a single performance obligation. We determined the Alpine Development
Milestone payments are probable of significant revenue reversal as the achievement is highly dependent on factors outside our control. Therefore, these
milestone payments were fully constrained and were not initially included in the transaction price. In June 2021, we re-evaluated and updated the
transaction price to include the achieved portion of the Alpine Development Milestones. We will continue to re-evaluate the transaction price each
reporting period and update as uncertain events are resolved or other changes in circumstances occur.
The License Option and the AbbVie Milestones were not determined to be performance obligations at the inception of the contract as they did not
represent material rights. If exercised, the License Option and AbbVie Milestones will be accounted for as a separate contract and will be recognized as
revenue if and when triggered. Any consideration related to sales-based royalties and profit-sharing payments will be recognized when the related sales
occur.
We use a cost-based input method to measure progress toward completion of the performance obligation and to calculate the corresponding revenue
to recognize each period. In applying the cost-based input, we use actual costs incurred relative to budgeted costs for the combined performance obligation.
These costs consist primarily of internal personnel efforts and third-party contract costs relative to the level of patient enrollment in the study. Revenue will
be recognized based on the level of costs incurred relative to the total budgeted costs for the performance obligation. A cost-based input method of revenue
recognition requires management to make estimates of costs to complete our performance obligation. 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 our performance obligation
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.
We recognized revenue from the AbbVie Agreement of $23.4 million and $7.0 million for the years ended December 31, 2021 and 2020,
respectively. As of December 31, 2021 the remaining balance of the transaction price is $74.5 million and is recorded as current and noncurrent deferred
revenue on our accompanying Consolidated Balance Sheets. We expect to recognize the remaining deferred revenue over the remainder of our
Development Plan, which began in June 2020 and will end upon the later of the exercise or expiration of the option.
Adaptimmune
In May 2019, we entered into the Adaptimmune Agreement with Adaptimmune, a clinical-stage biopharmaceutical company primarily focused on
providing novel cell therapies to patients, particularly for the treatment of solid tumors, to develop next-generation SPEAR T cell products which
incorporate our SIP and TIP technologies. Under the Adaptimmune Agreement, we are to perform certain research services and grant Adaptimmune an
exclusive license to programs from our SIP and TIP technologies. In June 2019, under the terms of the Adaptimmune Agreement, we received an upfront
license payment of $2.0 million and through December 31, 2021 we have received an additional $1.6 million in research support payments to fund ongoing
programs. These payments were recorded to deferred revenue upon receipt and were recognized as revenue based on employee hours contributed to each
performance obligation. In the fourth quarter of 2020, based on the completion of our initial research and development efforts in connection with our
performance obligations, we recognized the remaining balance in deferred revenue associated with Adaptimmune on our accompanying Consolidated
Balance Sheets. Under the Adaptimmune Agreement, we recognized no revenue for the year ended December 31, 2021, and $2.3 million and $1.3 million
for the years ended December 31, 2020 and 2019, respectively. In addition, we are eligible for additional research support payments, one-time payments
and downstream development and commercialization milestones of up to $288.0 million, if all pre-specified milestones for each program are achieved. We
are also eligible to receive low-single digit percentage royalties on worldwide net sales of the applicable products. In February 2022, Adaptimmune
selected an additional research program, triggering a $1.0 million upfront payment, which will be recorded as deferred revenue upon receipt and recognized
to revenue based on employee hours contributed.
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Research and Development Expenses
We focus our resources on research and development activities, including the conduct of preclinical studies, product development, regulatory
support, and clinical trials for our product candidates. We recognize research and development expenses as they are incurred. Our research and
development expenses consist of:
•
•
•
•
•
employee-related expenses, including salaries, benefits, taxes, travel, and stock-based compensation expense for personnel in research and
development functions;
expenses related to process development and production of product candidates paid to contract manufacturing organizations;
costs associated with preclinical activities and regulatory operations, including the cost of acquiring, developing, and manufacturing research
material;
clinical trials and activities related to regulatory filings for our product candidates; and
allocation of facilities, overhead, depreciation, and amortization of laboratory equipment and other expenses.
The table below summarizes our research and development expenses for the periods indicated. Our direct research and development expenses
consist primarily of expenses incurred pursuant to agreements with third-party manufacturing organizations for our product candidates, CROs, clinical trial
sites, collaborators, and consultants. Other direct costs included direct research and development costs incurred before a selected product candidate begins
clinical trials.
We use our employee and infrastructure resources across multiple research and development programs that we are advancing in parallel, and
therefore do not allocate salaries, stock-based compensation, employee benefit expenses or other indirect costs related to our research and development to
specific product candidates. These expenses are included in indirect research and development expense by type in the table below.
Our research and development expenses are summarized as follows (in thousands):
Direct research and development expense by program:
Acazicolcept (ALPN-101)
Davoceticept (ALPN-202)
ALPN-303
Other
Total direct research and development expense by program
Indirect research and development expense by type:
Personnel-related costs
Research and development supplies and services
Allocated facility, equipment and other expenses
Total indirect research and development expense
Total research and development expense
2021
Years Ended December 31,
2020
2019
$
$
10,923
10,640
13,311
515
35,389
17,456
2,833
3,064
23,353
58,742
$
$
4,814
4,697
1,047
62
10,620
11,697
2,042
2,826
16,565
27,185
$
$
10,583
8,393
31
236
19,243
11,169
2,589
2,846
16,604
35,847
We expect our research and development expenses to increase for the foreseeable future as we continue to develop our platform and product
candidates.
The successful development of our platform and product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature,
timing, or costs of the efforts necessary to finish developing any of our product candidates or the period in which material net cash, if any, from these
product candidates may commence. This is due to the numerous risks and uncertainties associated with developing therapeutics, including the uncertainty
of:
•
•
•
•
the scope, rate of progress, expense, and results of clinical trials;
the scope, rate of progress, and expense of process development and manufacturing;
preclinical and other research activities; and
the timing of regulatory approvals.
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General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs for employees in executive, business development, finance, and
administrative functions. Other significant general and administrative expenses include professional fees for accounting and legal services, expenses
associated with obtaining and maintaining patents and other intellectual property, and allocation of facility and overhead costs.
We expect general and administrative expenses to increase as we expand infrastructure, headcount, and continue to prosecute our patents and other
intellectual property. Other increases could potentially include increased costs for insurance, costs related to the hiring of additional personnel, and
increased fees for directors, outside consultants, lawyers, and accountants. We expect to incur significant costs to comply with corporate governance,
internal controls, and similar requirements applicable to public companies.
Interest Expense
Interest expense consists primarily of interest associated with our term loan with Silicon Valley Bank, or SVB, and the amortization of the related
debt discount.
Interest Income
Interest income consists of interest earned on our cash, cash equivalents, and investments.
Other (Expense) Income
For the years ended December 31, 2020 and 2019, other (expense) income consists primarily of research and development tax credits received by
our wholly-owned Australian subsidiary and an employee retention tax credit related to COVID-19 relief legislation. Other (expense) income was
immaterial for the year ended December 31, 2021.
Results of Operations
Comparison of Years Ended December 31, 2021 and 2020
The following table summarizes our results of operations for the years ended December 31, 2021 and 2020 (in thousands):
Collaboration revenue
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense):
Interest expense
Interest income
Other (expense) income
Loss before taxes
Income tax (expense) benefit
Net loss
Collaboration Revenue
Years Ended December 31,
2021
2020
Change
$
23,443 $
9,335 $
14,108
58,742
14,560
73,302
(49,859)
(816)
259
(4)
(50,420)
87
(50,333) $
27,185
10,899
38,084
(28,749)
(775)
245
1,333
(27,946)
6
(27,940) $
31,557
3,661
35,218
(21,110)
(41)
14
(1,337)
(22,474)
81
(22,393)
$
Revenue for the year ended December 31, 2021 consists of $23.4 million recognized under the AbbVie Agreement, an increase from prior year as
we execute on our AbbVie Development Plan. Revenue for the year ended December 31, 2020 consists of $7.0 million recognized under the AbbVie
Agreement and $2.3 million recognized under the Adaptimmune Agreement.
87
Research and Development Expenses
The $31.6 million increase in research and development expenses was primarily attributable to increases of $10.8 million in clinical trial activity
primarily related to our Synergy and NEON studies, $10.0 million in contract manufacturing and process development of our product candidates primarily
for acazicolcept and ALPN-303, and $4.8 million in preclinical and other research activities. Additionally, we had an increase of $5.7 million related to
personnel expenses, which includes $1.2 million in stock-based compensation expense, and an increase of $0.3 million related to overhead and facilities.
General and Administrative Expenses
The $3.7 million increase in general and administrative expenses was primarily attributable to increases of $2.5 million in personnel related
expenses, which includes $0.9 million in stock-based compensation expense, $0.8 million related to professional and legal services, and $0.4 million in
insurance, facility and other costs to support the growth and expansion of our business.
Interest Expense
Interest expense relates primarily to interest paid on our term loan with SVB and the related non-cash interest expense associated with the
amortization of the debt discount. Interest expense during the 2021 period is slightly higher due to additional interest related to the drawdown of the second
tranche of our SVB loan in March 2020.
Interest Income
Higher average investment balances during 2021, combined with lower interest rates produced relatively consistent interest income as compared to
the 2020 period.
Other (Expense) Income
Other expense during 2021 consisted of a loss on an asset disposal. In 2020, other income consisted of a $1.0 million research and development tax
credit received by our wholly-owned Australian subsidiary and a $0.3 million employee retention tax credit related to COVID-19 relief legislation.
Comparison of Years Ended December 31, 2020 and 2019
The following table summarizes our results of operations for the years ended December 31, 2020 and 2019 (in thousands):
Collaboration revenue
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense):
Interest expense
Interest income
Other (expense) income
Loss before taxes
Income tax (expense) benefit
Net loss
Years Ended December 31,
2020
2019
Change
$
9,335 $
1,740 $
7,595
27,185
10,899
38,084
(28,749)
(775)
245
1,333
(27,946)
6
$
(27,940) $
35,847
9,467
45,314
(43,574)
(338)
1,248
812
(41,852)
—
(41,852) $
(8,662)
1,432
(7,230)
14,825
(437)
(1,003)
521
13,906
6
13,912
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Collaboration Revenue
Revenue for the year ended December 31, 2020 consists of $7.0 million recognized under the AbbVie Agreement and $2.3 million recognized under
the Adaptimmune Agreement. Revenue for the year ended December 31, 2019 consists of $1.3 million related to the Adaptimmune Agreement and $0.4
million related to the milestone payment from Laurel from the sale of our GSNOR assets.
Research and Development Expenses
The $8.7 million decrease in research and development expenses was primarily attributable to decreases of $5.7 million in contract manufacturing
and process development of our product candidates and $4.1 million in other research activities. The decreases were partially offset by increases of $0.6
million in clinical trial activity and $0.5 million in stock-based compensation.
General and Administrative Expenses
The $1.4 million increase in general and administrative expenses was primarily attributable increases of $0.8 million related to professional and
legal services, $0.6 million in stock-based compensation and $0.4 million in insurance and facility costs to support the growth and expansion of our
business. These increases were partially offset by a decrease of $0.4 million related primarily to personnel expenses.
Interest Expense
Interest expense relates primarily to interest paid on our term loan with SVB and the related non-cash interest expense associated with the
amortization of the debt discount. The $0.4 million increase in interest expense is due to additional interest related to the drawdown of the second tranche
of our SVB loan in March 2020.
Interest Income
The $1.0 million decrease in interest income is due primarily to less interest earned on our investments as we maintained a lower average
investment balance during the 2020 period.
Other (Expense) Income
The $0.5 million increase in other (expense) income is attributable a $0.2 million increase in research and development tax credits received by our
wholly-owned Australian subsidiary. Additionally, for the 2020 period, we recognized a $0.3 million employee retention tax credit related to COVID-19
relief legislation.
Liquidity and Capital Resources
Sources of Liquidity
To date, we have financed our operations primarily through the sale of equity securities, debt, and payments received under our collaboration
agreements. As of December 31, 2021, we had cash, cash equivalents, restricted cash, and investments totaling $215.4 million. Except for any obligations
of our collaborators to make milestone payments under our agreements with them, we do not have any committed external sources of capital. Until such
time as we can generate substantial product revenue, if ever, we expect to finance our cash needs through a combination of collaboration agreements and
equity or debt financings.
Equity Financing Agreements
In December 2021, in connection with the execution of the Horizon Agreement, we entered into a Stock Purchase Agreement with Horizon, or the
Purchase Agreement, in which Horizon made an equity investment in Alpine of 951,980 shares of our common stock for approximately $15.76 per share,
for an aggregate purchase price of $15.0 million. The purchase price represents a 25% premium to the volume-weighted average share price of our
common stock for the 30-day period ended December 9, 2021. The shares are subject to lock-up restrictions, which, subject to certain exceptions, prohibit
Horizon from selling the shares for a period of six months after the date of the Purchase Agreement. The shares were recorded at the fair value of our
common stock on the effective date of the Horizon Agreement, with the excess of the proceeds recorded to deferred revenue.
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In September 2021, we entered into a securities purchase agreement, or the 2021 Securities Purchase Agreement, for a private placement with a
select group of institutional investors, pursuant to which we sold 6,489,357 shares of our common stock, or the Shares, and prefunded warrants to purchase
3,191,487 Shares, or the Prefunded Warrants. The purchase price for each Share and for each Prefunded Warrant was $9.40 per share, for an aggregate
purchase price of approximately $91.0 million. The Prefunded Warrants became fully exercisable upon the closing date and have an exercise price of
$0.001 per share. In connection with the 2021 Securities Purchase Agreement approximately 3.7 million of the Shares issued and approximately 2.3 million
of the Prefunded Warrants issued, for gross proceeds of approximately $57.0 million, were issued to certain stockholders whose beneficial ownership
exceeded 5% prior to completion of the 2021 Securities Purchases Agreement.
In July 2021, we entered into a sales agreement, or the Sales Agreement, with Cowen and Company, LLC, or Cowen, pursuant to which we may sell
shares of our common stock from time to time through an “at the market” equity offering for up to $75.0 million in gross cash proceeds. Cowen will act as
the sales agent and will be entitled to compensation for services of up to 3.0% of the gross sales price per share of all shares sold through Cowen under the
Sales Agreement. The shares would be issued pursuant to our effective shelf registration statement on Form S-3 (File No. 333-256107). We filed a
prospectus supplement, dated July 2, 2021, with the SEC in connection with the offer and sale of the shares pursuant to the Sales Agreement. As of the date
of this report, we have made no such sales under the Sales Agreement.
In July 2020, we entered into a securities purchase agreement, or the 2020 Securities Purchase Agreement, for a private placement with a select
group of institutional investors, pursuant to which we sold 5,139,610 units, or the Common Units, and 790,710 units, or the Prefunded Warrant Units, for
an aggregate purchase price of $60.0 million. Each Common Unit consists of one share of our common stock plus a warrant to purchase 0.3 shares of
common stock, or the Common Stock Warrants, and each Prefunded Warrant Unit consists of one prefunded warrant to purchase one share of common
stock, or the Prefunded Warrants, plus one Common Stock Warrant to purchase 0.3 shares of common stock. The Prefunded Warrant Units and the
Common Units are collectively referred to as the Units and each Unit has a purchase price of $10.1175. The Common Stock Warrants have an exercise
price of $12.74 and a term of 3.5 years. The Prefunded Warrants became fully exercisable upon the closing date and have an exercise price of $0.001 per
share.
In January 2019, we entered into a securities purchase agreement, or the 2019 Securities Purchase Agreement, with a limited number of accredited
investors, pursuant to which we sold approximately 4.7 million units, or the 2019 Units, for an aggregate purchase price of $25.3 million in a private
placement, which we refer to as the Private Placement. Each 2019 Unit has a purchase price of $5.37 and consists of one share of our common stock and a
warrant to purchase 0.39 shares of common stock. Pursuant to the terms of the 2019 Securities Purchase Agreement, we issued approximately 4.7 million
shares of common stock and warrants to purchase an aggregate of approximately 1.8 million shares of common stock. The warrants have an exercise price
of $12.74 and have a term of five years.
Debt Financing Agreements
In August 2019, we entered into an Amended and Restated Loan and Security Agreement, or the Loan Agreement, with SVB, pursuant to which
SVB agreed to extend term loans to us with an aggregate principal amount of up to $15.0 million, or the Term Loans. Borrowings under the Loan
Agreement consisted of up to three separate tranches. The initial tranche of $5.0 million was funded in August 2019, $3.0 million of which was used to
repay amounts owing under our prior loan and security agreement with SVB. In March 2020, the second tranche of $5.0 million was funded to us. We did
not draw down the final tranche of $5.0 million, which expired on July 31, 2020.
The Term Loans accrue interest at a floating per annum rate of 0.25% above the prime rate, subject to a floor of 5.75%, which interest is payable
monthly commencing in September 2019. Upon the occurrence and during the continuance of an event of default, a default interest rate will apply that is
4.0% above the otherwise applicable interest rate. The Term Loans were interest only until September 30, 2020, however, under the Loan Agreement our
interest only period automatically extended to June 30, 2021 if we received aggregate new capital of at least $40.0 million no later than June 30, 2020. We
met this milestone in June 2020 in conjunction with the execution of the AbbVie Agreement, discussed in detail in Note 11. As a result of the interest only
extension, the Term Loans will be payable in 25 equal monthly installments of principal plus interest, with the final installment due and payable on July 1,
2023.
We may prepay all, but not less than all, of the Term Loans subject to a prepayment fee equal to $75,000, which represents the deferred portion of
the final payment due under the Original Agreement, plus the outstanding principal balance under the Term Loans at the time of such prepayment
multiplied by a prepayment fee of 2.0% in the first year, 1.0% in the second year, and 0.0% in the third year and thereafter. Additionally a final payment in
the amount of 5.5% of the funded Term Loans is payable to SVB on the date on which the Term Loans are prepaid, paid or become due and payable in full.
The final payment fees are recorded in long-term debt with an offsetting reduction to debt discount on our accompanying Consolidated Balance Sheets.
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The Loan Agreement contains customary representations and warranties, events of default and affirmative and negative covenants, including,
among others, covenants that limit or restrict our ability to, among other things, incur additional indebtedness, grant liens, merge or consolidate, make
acquisitions, pay dividends or other distributions or repurchase equity, make investments, dispose of assets, engage in any new lines of business, and enter
into certain transactions with affiliates, in each case subject to certain exceptions. Among other events, a failure to make a required loan payment, an
uncured covenant breach or a material adverse change in our business, operations or condition (financial or otherwise) could lead to an event of default, and
in such case, all amounts then outstanding may become due and payable immediately. We were in compliance with our covenants as of December 31, 2021.
As security for its obligations under the Loan Agreement, we granted SVB a first priority security interest on substantially all of our assets, except
intellectual property, and subject to certain other exceptions. As of December 31, 2021, we had $8.2 million in outstanding principal and final fees due
under our term loan agreement. See Note 9 for further discussion of our Term Loans.
Cash Flows
The following is a summary of our cash flows (in thousands):
Net cash (used in) provided by operating activities
Net cash (used in) provided by investing activities
Net cash provided by (used in) financing activities
Net cash (used in) provided by operating activities:
2021
Years Ended December 31,
2020
2019
$
(15,248) $
(52,480)
100,764
30,084 $
(72,819)
61,381
(35,346)
16,763
24,255
Net cash used in operating activities was $15.2 million for the year ended December 31, 2021 and consisted primarily of our net loss of $50.3
million. This was offset by an increase of $27.3 million in our net operating assets and liabilities. Additionally, we had a $7.8 million increase in our net
non-cash adjustments, which primarily relates to stock-based compensation, depreciation and amortization.
Net cash provided by operating activities was $30.1 million for the year ended December 31, 2020 and consisted primarily of our net loss of $27.9
million. This was offset by an increase of $52.9 million in our net operating assets and liabilities. This increase was primarily driven by the receipt of a
$60.0 million upfront payment from AbbVie, which was recorded as current and noncurrent deferred revenue on our accompanying Consolidated Balance
Sheets. Additionally, we had an increase of $5.1 million in our net non-cash adjustments, which primarily relates to stock-based compensation, depreciation
and amortization.
Net cash used in operating activities was $35.3 million for the year ended December 31, 2019 and consisted primarily of our net loss of $41.9
million. This was offset by an increase of $3.2 million in our net operating assets and liabilities and an increase of $3.3 million in our net non-cash
adjustments, which primarily relate to stock-based compensation, depreciation and amortization.
Net cash (used in) provided by investing activities:
Cash flows from investing activities primarily reflect cash used to purchase investments and proceeds from the maturities and sales of investments,
thus causing a shift between our cash and cash equivalents and investment balances. We manage our cash usage with respect to our total cash, cash
equivalents and investments.
Net cash used in investing activities was $52.5 million for the year ended December 31, 2021 and consisted primarily of our purchases and
maturities of investments in U.S. Treasury securities, commercial paper, and corporate debt securities, partially offset by purchases of property and
equipment, primarily lab equipment, to support our research and development efforts.
Net cash used in investing activities was $72.8 million for the year ended December 31, 2020 and consisted primarily of our purchases and
maturities of investments in U.S. Treasury securities, commercial paper, and corporate debt securities, partially offset by purchases of property and
equipment, primarily lab equipment, to support our research and development efforts.
Net cash provided by investing activities was $16.8 million during the year ended December 31, 2019 and consisted primarily of the maturities,
sales and purchases of short-term investments in U.S. Treasury securities, commercial paper, and corporate debt securities, partially offset by purchases of
property and equipment, primarily lab equipment, to support our research and development efforts.
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Net cash provided by financing activities:
Net cash provided by financing activities was $100.8 million for the year ended December 31, 2021 and consisted primarily of the net proceeds of
$90.7 million related to the sale of approximately 6.5 million shares of common stock and 3.2 million prefunded warrants under our 2021 Securities
Purchase Agreement, $11.9 million in proceeds related to the fair value of our common stock purchased by Horizon in December 2021, and $0.5 million
related to the exercise of stock options. These were partially offset by $2.4 million in principal payments on our debt.
Net cash provided by financing activities was $61.4 million for the year ended December 31, 2020 and consisted primarily of the net proceeds of
$56.3 million related to the sale of approximately 5.9 million Units under our 2020 Securities Purchase Agreement, $5.0 million in proceeds received from
the draw down of the second tranche of our Loan Agreement in March 2020, and $0.1 million related to the exercise of stock options.
Net cash provided by financing activities was $24.3 million for the year ended December 31, 2019 and consisted primarily of the net proceeds of
$23.6 million related to the sale of approximately 4.7 million Units under our 2019 Securities Purchase Agreement and $2.0 million in net proceeds from
our debt refinancing, partially offset by $1.3 million in principal payments on our debt.
Funding Requirements
We have incurred operating losses since inception. We expect to continue to incur significant expenses and operating losses for the foreseeable
future as we continue our research and preclinical and clinical development of our product candidates; expand the scope of our current studies for our
product candidates; initiate additional preclinical, clinical or other studies for our product candidates, including under any collaboration agreements; change
or add additional manufacturers or suppliers; seek regulatory and marketing approvals for any of our product candidates that successfully complete clinical
studies; seek to identify, evaluate and validate additional product candidates; acquire or in-license other product candidates and technologies; maintain,
protect and expand our intellectual property portfolio; attract and retain skilled personnel; and experience any delays or encounter issues with any of the
above. Additionally, we have ongoing obligations with respect to our Loan Agreement, as described above, and our Operating Lease and certain
contingencies, as described below.
Operating Lease
In March 2019, we entered into a lease with ARE-Seattle No. 28, LLC, or the Landlord, for 27,164 square feet of office and laboratory space
located at 188 East Blaine Street, Seattle, Washington. The term of the lease is 10.8 years with one option to extend the term by 5 years. The lease term
commenced in June 2019. The “Rent Commencement Date” began in March 2020, nine months after the commencement date. We were not required to pay
base rent from the Rent Commencement Date through November 2020, the last day of the ninth month following the Rent Commencement Date. The
annual base rent under the lease is $1.7 million for the first year and will increase by 3.0% each year thereafter. We received a tenant improvement
allowance of $5.4 million, which is included in our base rent, and a maximum additional tenant improvement allowance of $1.8 million, which will result
in additional rent amortized over the term of the lease at an annual rate of 8.0%. The lease also requires us to pay additional amounts for operating and
maintenance expenses. In March 2019, in connection with the lease, we provided a $254,000 letter of credit as a security deposit, which is recorded as
restricted cash in our accompanying Consolidated Balance Sheets. See further discussion of our operating lease in Note 10.
Contingencies
Certain credits received related to our research and development expenditures and recorded within other income in our accompanying Consolidated
Statements of Operations and Comprehensive Income (Loss) are subject to review by foreign taxing authorities. It is reasonably possible we may incur
losses upon the completion of these reviews of up to approximately $1.8 million, which we would be required to repay to certain tax authorities.
Until such time as we can generate substantial product revenue, if ever, we expect to finance our cash needs through a combination of equity or debt
financings and collaboration agreements. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of
our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing
common stockholders. If we raise additional funds through collaboration agreements in the future, we may have to relinquish valuable rights to our
technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional
funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future
commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Our future capital requirements are difficult to forecast and will depend on many factors, including:
92
•
•
•
•
•
•
•
•
•
the number and characteristics of the future product candidates we pursue either from our internal research efforts or through acquiring or in-
licensing other product candidates or technologies;
the scope, progress, results and costs of independently researching and developing any of our future product candidates, including conducting
preclinical research and clinical trials;
whether our existing collaborations generate substantial milestone payments and, ultimately, royalties on future approved products for us;
the timing of, and the costs involved in, obtaining regulatory approvals for any future product candidates we develop independently;
the cost of future commercialization activities, if any;
the cost of manufacturing our future product candidates and products, if any;
our ability to maintain our existing collaborations and to establish new collaborations, licensing or other arrangements and the financial terms
of such arrangements;
the costs of preparing, filing, prosecuting, maintaining, defending and enforcing patents, including litigation costs and the outcome of such
litigation; and
the timing, receipt and amount of sales of, or royalties on, our current or future collaborators’ product candidates, and our future products, if
any.
We have considered that our long-term operations anticipate continuing net losses and the need for potential equity or debt financing. We have also
considered that new collaborations or selectively partnering our technology or programs may provide other sources of capital. However, there can be no
assurances that additional funding or other sources of capital will be available on terms acceptable to us, or at all. Based on our current operating plan, we
believe our available cash and cash equivalents and investments, will be sufficient to fund our planned level of operations for at least the next 12 months.
We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect. Additionally, the
process of testing drug candidates in preclinical and clinical studies is costly, and the timing of progress in these studies remains uncertain. Further,
inflation may affect our use of capital resources by increasing our cost of labor and clinical trial expenses. Our long-term funding requirements will consist
of operational, capital, and manufacturing expenditures, including those contractual commitments described above. Because of the inherent risks and
uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of capital outflows
and operating expenditures associated with our long-term anticipated preclinical studies and clinical trials.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements,
which we have prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these consolidated
financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. We
evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements, we believe that the following
accounting policies are the most critical to fully understanding and evaluating our financial condition and results of operations.
Accrued Liabilities
As part of the process of preparing our consolidated financial statements, we are required to estimate accruals for professional services and research
and development expenses. This process involves reviewing contracts and vendor agreements and communicating with applicable personnel to identify
services that have been performed on our behalf. We estimate the level of service performed and the associated cost incurred for the service when we have
not yet been invoiced or otherwise notified of the actual cost. We estimate accrued liabilities as of each balance sheet date based on known facts and
circumstances.
93
Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of
services performed differ from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular
period. To date, we have not experienced any significant adjustments to our estimates.
Revenue Recognition
Revenue recognition is a critical accounting estimate due to the magnitude and nature of the upfront cash and milestone payments we receive. Our
primary sources of revenue is derived from our collaboration and licensing agreements.
Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration
we expect to be entitled to in exchange for those goods or services. Our steps for recognizing revenue consist of; (1) identifying the contract, (2) identifying
the performance obligations as either distinct or bundled goods and services, (3) determining the transaction price associated with each performance
obligation for which we expect to be entitled in exchange for transferring such goods and services, (4) allocating the transaction price to the performance
obligations in the contract and (5) recognizing revenue upon satisfaction of performance obligations.
Our collaboration agreements principally contain multiple performance obligations, which may include (1) grants of, or options to obtain,
intellectual property licenses; (2) research and development services; and/or (3) manufacturing or supply services. Payments typically received under these
arrangements include one or more of the following: non-refundable upfront license fees, option exercise fees, payment for research and/or development
efforts, amounts due upon the achievement of specified objectives, and/or royalties on future product sales. Our revenue is primarily derived from our
collaboration agreements with Adaptimmune, AbbVie, and Horizon. See further discussion of our collaboration agreements in Note 11.
We allocate revenue to each performance obligation based on its relative stand-alone selling price. We generally determine stand-alone selling prices
at the inception of the contract based on our best estimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone
basis. Payments received prior to satisfying the relevant revenue recognition criteria are recorded as deferred revenue in the accompanying Consolidated
Balance Sheets and recognized as revenue when the related revenue recognition criteria are met. We recognize revenue under our collaboration agreements
by using a cost-based input method to measure progress toward completion of the performance obligation, including employee hours contributed to each
performance obligation, and to calculate the corresponding revenue to recognize each period.
Our collaboration agreements provide for non-refundable milestone payments. We recognize revenue that is contingent upon the achievement of a
substantive milestone in its entirety in the period in which the milestone is achieved. A milestone is considered substantive when the consideration payable
to us for such milestone (1) is consistent with our performance necessary to achieve the milestone or the increase in value to the collaboration resulting
from our performance; (2) relates solely to our past performance; and (3) is reasonable relative to all of the other deliverables and payments within the
arrangement. In making this assessment, we consider all facts and circumstances relevant to the arrangement, including factors such as the scientific,
regulatory, commercial, and other risks that must be overcome to achieve the milestone, the level of effort and investment required to achieve the milestone
and whether any portion of the milestone consideration is related to future performance or deliverables.
We review the contributed employee hours and progress towards completion for each performance obligation under our collaboration agreements
and adjust the revenue recognized to reflect changes in assumptions relating to the estimated satisfaction of the performance obligation. Revenue
recognition may be accelerated in the event of early termination of programs or if our expectations change. Alternatively, revenue recognition may be
decelerated if programs are extended or delayed. While such changes to our estimates have no impact on our reported cash flows, the timing of revenue
recorded in future periods could be materially impacted.
Stock-based Compensation
Stock-based compensation is recognized for all share-based payments based on the estimated fair value as of the date of grant. The fair value of our
stock options is calculated using the Black-Scholes option pricing model, which requires us to apply our judgment regarding certain key assumptions
including risk-free interest rate, expected term, volatility and dividend yield. For risk-free interest rate, we use the zero-coupon U.S. Treasury instruments
security rate with a term equal to the expected life of the option. We use the “simplified method” for options to determine the expected term of stock
options. Under this approach, the weighted-average expected life is presumed to be the average of the vesting term and the contractual term of the option.
For volatility, we analyzed the stock price volatility of companies at a similar stage of development to estimate expected volatility of our stock price. Our
assumed dividend yield is zero as we have never paid cash dividends and have no present intention to pay cash dividends. The fair value of restricted stock
units, or RSUs, is based on the closing price of our common stock on the award date. Stock-based compensation expense is recognized over the requisite
service period of the awards, usually the vesting
94
period, on a straight-line basis. For performance-based awards where the vesting of the options may be accelerated upon the achievement of certain
milestones, the related stock-based compensation is recognized as expense when it is probable the milestone will be met. We recognize forfeiture of awards
as they occur rather than estimating the expected forfeiture rate.
If factors change and we employ different assumptions for estimating stock-based compensation expense in future periods, or if we decide to use a
different valuation model, the stock-based compensation expense we recognize in future periods may differ significantly from what we have recorded in the
current period and could materially affect our financial statements.
Income Taxes
Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the consolidated financial statement and tax bases of assets and liabilities at the
applicable enacted tax rates. We will establish a valuation allowance for deferred tax assets if it is more likely than not that these items will expire before
we are able to realize their benefits or that future deductibility is uncertain.
We recognize the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by
the tax authorities, based on the technical merits of the position. The tax position is measured based on the largest benefit that has a greater than 50%
likelihood of being realized upon ultimate settlement. We recognize interest and penalties related to income tax matters in income tax expense if incurred.
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2019-12, Income
Taxes, or Topic 740: Simplifying the Accounting for Income Taxes. This ASU simplifies the accounting for income taxes by removing certain exceptions
to the general principles in Topic 740 and also improves consistent application by clarifying and amending existing guidance. The standard is effective for
fiscal years and interim periods within those fiscal years, beginning after December 15, 2020. We adopted this standard on January 1, 2021, and concluded
that the adoption of the standard did not have a material impact on our consolidated financial statements and related disclosures.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, and pursuant to Item 305 of Regulation S-K we are not required
to provide quantitative and qualitative disclosures about market risk.
Item 8. Financial Statements and Supplementary Data.
For information regarding our financial statements and supplementary data, please refer to the Notes to Consolidated Financial Statements included
elsewhere in this report.
As a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act and pursuant to Article 8, Regulation X and Item 302 of
Regulation S-K, we are permitted to provide scaled Item 8 disclosure.
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 Chief Financial Officer, 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
Securities Exchange Act of 1934, or 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 Securities and Exchange Commission’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
95
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. Our management recognizes that any
controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our
management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our
disclosure controls and procedures as of December 31, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our
disclosure controls and procedures were effective at the reasonable assurance level.
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 Rule 13a-15(f) and
Rule 15d-15(f) of the Exchange Act. Our internal control over financial reporting is a process 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. Our
internal control over financial reporting includes those policies and procedures that:
(i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our
management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could
have a material effect on the financial statements.
The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise
of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely.
Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide
reasonable, not absolute, assurances. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed
the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, our management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, Internal Control-Integrated Framework (2013). Based on our
assessment using those criteria, our management has concluded that, as of December 31, 2021, our internal control over financial reporting was effective.
Changes in Internal Control Over Financial Reporting
No significant changes in our internal control over financial reporting occurred during the fiscal quarter ended December 31, 2021, that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Auditor Attestation
We ceased to be an “emerging growth company” under the JOBS Act effective December 31, 2020. However, for so long as we are not classified as
an “accelerated filer” or “large accelerated filer” pursuant to SEC rules, we will continue to be exempt from the auditor attestation requirements of Section
404(b) of Sarbanes-Oxley.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
96
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by Item 10 of Form 10-K is incorporated by reference to our Proxy Statement for the 2022 Annual Meeting of
Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2021.
Item 11. Executive Compensation.
The information required by Item 11 of Form 10-K is incorporated by reference to our Proxy Statement for the 2022 Annual Meeting of
Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2021.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by Item 12 of Form 10-K is incorporated by reference to our Proxy Statement for the 2022 Annual Meeting of
Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2021.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by Item 13 of Form 10-K is incorporated by reference to our Proxy Statement for the 2022 Annual Meeting of
Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2021.
Item 14. Principal Accounting Fees and Services.
The information required by Item 14 of Form 10-K is incorporated by reference to our Proxy Statement for the 2022 Annual Meeting of
Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2021.
97
Item 15. Exhibits, Financial Statement Schedules.
PART IV
(a) The financial statements, schedules and exhibits filed as a part of this Annual Report on Form 10-K are as follows:
(a) Financial statements – The financial statements included in Item 8 are filed as part of this Annual Report on Form 10-K.
(b) Financial Statement Schedules – All schedules have been omitted because they are not applicable or required, or the information required to
be set forth therein is included in the consolidated financial statements or notes thereto included in Item 8 of this Annual Report on Form
10-K.
(c) Exhibits – The exhibits required to be filed as part of this report are listed in the Exhibit List attached hereto and are incorporated herein by
reference.
INDEX TO EXHIBITS
Exhibit Number
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
10.1*
10.2*
10.3*
10.4*
Description
Amended and Restated Certificate of Incorporation of the
Registrant, as amended
Amended and Restated Bylaws of the Registrant
Form of Common Stock Certificate of the Registrant
Warrant to Purchase Shares, dated December 16, 2016, by and
between Alpine Immune Sciences, Inc. and Silicon Valley Bank
Form of Warrant to Purchase Shares of Common Stock issued to
certain service providers on April 12, 2017 pursuant to the
Amended and Restated 2015 Stock Plan, as amended
Form of Warrant to Purchase Common Stock issued pursuant to
the Securities Purchase Agreement, dated January 15, 2019, by
and among the Registrant and the Purchasers party thereto
Warrant to Purchase Common Stock, dated August 26, 2019, by
and between Alpine Immune Sciences, Inc. and Silicon Valley
Bank
Form of Warrant to Purchase Common Stock issued pursuant to
the Securities Purchase Agreement, dated July 24, 2020, by and
among Alpine Immune Sciences, Inc. and the Purchasers party
thereto
Form of Prefunded Warrant to Purchase Common Stock issued
pursuant to the Securities Purchase Agreement, dated July 24,
2020, by and among Alpine Immune Sciences, Inc. and the
Purchasers party thereto
Description of Capital Stock
Form of Prefunded Warrant to Purchase Common Stock issued
pursuant to the Securities Purchase Agreement, dated September
14, 2021, by and among the Alpine Immune Sciences, Inc. and
the Purchasers party thereto
Nivalis Therapeutics, Inc. 2015 Equity Incentive Plan
Form of Notice of Stock Option Grant and Stock Option
Agreement for Employees under the Nivalis Therapeutics, Inc.
2015 Equity Incentive Plan
Form of Notice of Stock Option Grant and Stock Option
Agreement for Non-Employee Directors under the Nivalis
Therapeutics, Inc. 2015 Equity Incentive Plan
Nivalis Therapeutics, Inc. Employee Stock Purchase Plan
98
Form
10-K
10-K
10-K
10-K
10-K
8-K
8-K
Incorporated by Reference
File No.
001-37449
001-37449
001-37449
001-37449
001-37449
Exhibit
3.1
Filing Date
March 28, 2018
3.2
4.1
4.5
4.6
March 18, 2021
March 28, 2018
March 28, 2018
March 28, 2018
001-37449
10.3
January 16, 2019
001-37449
4.1
August 28, 2019
8-K
001-37449
10.3
July 24, 2020
8-K
10-K
8-K
001-37449
001-37449
001-37449
S-8
S-8
S-8
S-8
333-205220
333-205220
333-205220
333-205220
10.4
4.1
10.3
4.4
4.5
4.6
4.7
July 24, 2020
March 18, 2021
September 14, 2021
June 25, 2015
June 25, 2015
June 25, 2015
June 25, 2015
Exhibit Number
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*+
10.14*
10.15*
10.16*
10.17*
10.18*
10.19
10.20*
10.21
10.22
10.23**
10.24
10.25
10.26
10.27
Description
Form of Indemnification Agreement entered into by and between
the Registrant and its directors and officers
Non-Employee Director Compensation Guidelines
Change of Control and Severance Policy
Employment Agreement, dated as of January 1, 2018, by and
between the Registrant and Mitchell H. Gold, M.D.
Employment Agreement, dated as of January 1, 2018, by and
between the Registrant and Paul Rickey
Employment Agreement, dated as of January 1, 2018, by and
between the Registrant and Stanford Peng, M.D., Ph.D.
Employment Agreement, dated as of June 1, 2021, by and
between the Registrant and Zelanna Goldberg
Form of Stand-Alone Inducement Stock Option Grant between
the Registrant and Zelanna Goldberg
Separation Agreement, dated as of October 8, 2021, by and
between the Registrant and Zelanna Goldberg
Alpine Immune Sciences, Inc. (now known as AIS Operating
Co., Inc.) Amended and Restated 2015 Stock Plan, as amended
Form of Option Agreement under the Alpine Immune Sciences,
Inc. (now known as AIS Operating Co., Inc.) Amended and
Restated 2015 Stock Plan, as amended
Alpine Immune Sciences, Inc. 2018 Equity Incentive Plan, as
amended
Form of Stock Option Agreement under the 2018 Equity
Incentive Plan
Form of Restricted Stock Unit Agreement under the 2018 Equity
Incentive Plan
Securities Purchase Agreement, dated January 15, 2019, by and
among the Company and the Purchasers
Alpine Immune Sciences, Inc. Executive Incentive
Compensation Plan
Lease Agreement, dated March 14, 2019, by and between the
Company and ARE Seattle No. 28, LLC
Amended and Restated Loan and Security Agreement, dated
August 26, 2019, by and among Alpine Immune Sciences, Inc.,
AIS Operating Co., Inc. and Silicon Valley Bank
Option and License Agreement, dated June 17, 2020, by and
between Alpine Immune Sciences, Inc. and AbbVie Ireland
Unlimited Company
Securities Purchase Agreement, dated July 24, 2020, by and
among Alpine Immune Sciences, Inc. and the Purchasers named
therein
Registration Rights Agreement, dated July 24, 2020, by and
among Alpine Immune Sciences, Inc. and the Purchasers named
therein
Sales Agreement, dated as of July 2, 2021, between Alpine
Immune Sciences, Inc. and Cowen and Company, LLC
Securities Purchase Agreement, dated September 14, 2021, by
and among Alpine Immune Sciences, Inc. and the Purchasers
thereto
99
Incorporated by Reference
File No.
333-204127
Exhibit
10.18
Filing Date
May 13, 2015
Form
S-1
10-K
8-K
10-K
10-K
10-K
10-Q
10-Q
001-37449
001-37449
001-37449
001-37449
001-37449
001-37449
001-37449
S-8 POS
333-218134
S-8 POS
333-218134
8-K
8-K
8-K
8-K
8-K
10-Q
8-K
001-37449
001-37449
001-37449
001-37449
001-37449
001-37449
001-37449
10.6
10.1
10.33
10.35
10.37
10.2
10.1
4.1
4.2
10.1
10.2
10.1
10.1
10.1
10.6
10.1
March 18, 2021
December 11, 2017
March 28, 2018
March 28, 2018
March 28, 2018
August 10, 2021
August 10, 2021
September 11, 2017
September 11, 2017
June 17, 2020
June 14, 2018
January 27, 2020
January 16, 2019
April 1, 2019
May 9, 2019
August 28, 2019
10-Q
001-37449
10.2
August 11, 2020
8-K
8-K
8-K
8-K
001-37449
10.1
July 24, 2020
001-37449
10.2
July 24, 2020
001-37449
1.1
July 2, 2021
001-37449
10.1
September 14, 2021
Exhibit Number
10.28
10.29
10.30+**
10.31+
21.1
23.1+
24.1+
31.1+
31.2+
32.1+
32.2+
101.INS+
101.SCH+
101.CAL+
101.LAB+
101.PRE+
101.DEF+
104
*
+
**
Incorporated by Reference
Form
8-K
File No.
001-37449
Exhibit
10.2
Filing Date
September 14, 2021
8-K
001-37449
10.4
September 14, 2021
10-K
001-37449
21.1
March 28, 2018
Description
Registration Rights Agreement, dated September 14, 2021, by
and among Alpine Immune Sciences, Inc. and the Purchasers
thereto
Exchange Agreement, dated September 14, 2021, by and
between Alpine Immune Sciences, Inc. and Frazier Life Sciences
VIII, L.P.
License and Collaboration Agreement, dated December 15, 2021
by and between Alpine Immune Sciences, Inc. and Horizon
Therapeutics Ireland DAC
Stock Purchase Agreement, dated December 15, 2021 by and
between Alpine Immune Sciences, Inc. and Horizon
Therapeutics Ireland DAC
List of subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm
Powers of Attorney (contained on signature page)
Certification of Principal Executive Officer Required Under
Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of
1934, as amended
Certification of Principal Financial Officer Required Under
Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of
1934, as amended
Certification of Principal Executive Officer Required Under
Rule 13a-14(b) of the Securities Exchange Act of 1934, as
amended, and 18 U.S.C. Section 1350
Certification of Principal Financial Officer Required Under Rule
13a-14(b) of the Securities Exchange Act of 1934, as amended,
and 18 U.S.C. Section 1350
Inline XBRL Instance Document
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase
Document
Inline XBRL Taxonomy Extension Label Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase
Document
Inline XBRL Taxonomy Extension Definition Linkbase
Document
Cover page formatted as Inline XBRL and contained in Exhibit
101
Indicates a management contract or a compensatory plan, contract or arrangement.
Filed herewith.
Portions of this exhibit have been omitted in accordance with Item 601(b)(10) of Regulation S-K because they are private, confidential and not
material.
100
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report
to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 17, 2022
Date: March 17, 2022
ALPINE IMMUNE SCIENCES, INC.
By:
Name:
Title
/s/ Mitchell H. Gold, M.D.
Mitchell H. Gold, M.D.
Executive Chairman and Chief Executive Officer
ALPINE IMMUNE SCIENCES, INC.
By:
Name:
Title:
/s/ Paul Rickey
Paul Rickey
Senior Vice President and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Mitchell H. Gold, M.D.
and Paul Rickey, 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 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 and his or her substitute or substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.
101
Name
Title
Date
/s/ Mitchell H. Gold, M.D.
Mitchell H. Gold, M.D.
/s/ Paul Rickey
Paul Rickey
/s/ Peter Thomson, M.D.
Peter Thompson, M.D.
/s/ James N. Topper, M.D., Ph.D.
James N. Topper, M.D., Ph.D.
/s/ Jay Venkatesan, M.D.
Jay Venkatesan, M.D.
/s/ Robert Conway
Robert Conway
/s/ Natasha Hernday
Natasha Hernday
/s/ Christopher Peetz
Christopher Peetz
/s/ Xiangmin Cui, Ph.D.
Xiangmin Cui, Ph.D.
Chief Executive Officer and Executive Chairman of the Board
of Directors (Principal Executive Officer)
Senior Vice President and Chief Financial Officer (Principal
Accounting and Financial Officer)
Director
Director
Director
Director
Director
Director
Director
102
March 17, 2022
March 17, 2022
March 17, 2022
March 17, 2022
March 17, 2022
March 17, 2022
March 17, 2022
March 17, 2022
March 17, 2022
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm (PCAOB ID: 42)
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Income (Loss)
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F-1
F-2
F-4
F-5
F-6
F-7
F-8
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Alpine Immune Sciences, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Alpine Immune Sciences, Inc. (the Company) as of December 31, 2021 and 2020, the
related consolidated statements of operations and comprehensive income (loss), stockholder’s equity and cash flows for each of the three years in the
period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting
principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial
statements based on our 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 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 financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current and prior period audits of the financial statements that was communicated
or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion
on the critical audit matter or on the account or disclosure to which it relates.
F-2
Description of the Matter
Description of the Matter
Accounting for Revenue under the AbbVie Collaboration Agreement
As discussed in Note 11 to the consolidated financial statements, the Company
entered into an option and license agreement with AbbVie Ireland Unlimited
Company for the development of ALPN-101 in June 2020. Collaboration revenue
recognized from the AbbVie Agreement was $23.4 million and $7.0 million for the
year ended December 31, 2021 and 2020, respectively. The Company determined
that all contractual promises related to the upfront payment and Alpine’s
Development Milestone represent a single performance obligation and used a cost-
based input method to measure progress toward completion of the performance
obligation and to calculate the corresponding revenue to recognize each period.
Auditing the Company’s estimated measure of progress toward completion of the
performance obligation is complex. A cost-based input method of revenue
recognition requires management to make estimates of total expected costs to
complete the performance obligation. In making such estimates, significant judgment
is required to evaluate key assumptions related to cost estimates, including internal
personnel efforts and third-party contract costs.
As discussed in Note 11 to the consolidated financial statements, the Company entered into
an option and license agreement with AbbVie Ireland Unlimited Company for the
development of ALPN-101 in June 2020. Collaboration revenue recognized from the AbbVie
Agreement was $23.4 million and $7.0 million for the year ended December 31, 2021 and
2020, respectively. The Company determined that all contractual promises related to the
upfront payment and Alpine’s Development Milestone represent a single performance
obligation and used a cost-based input method to measure progress toward completion of the
performance obligation and to calculate the corresponding revenue to recognize each period.
Auditing the Company’s estimated measure of progress toward completion of the
performance obligation is complex. A cost-based input method of revenue recognition
requires management to make estimates of total expected costs to complete the performance
obligation. In making such estimates, significant judgment is required to evaluate key
assumptions related to cost estimates, including internal personnel efforts and third-party
contract costs.
How We Addressed the Matter in Our Audit To test revenue recognized, we performed audit procedures that included, among others,
gaining an understanding and testing the Company’s estimates of total expected costs
including testing the completeness and accuracy of the underlying data, inspecting evidence
of actual costs incurred and comparing with previous estimates. We evaluated any changes in
the total expected costs, inspected communications between the Company and AbbVie
regarding updates to estimated budgeted costs as well as any significant changes in its
development plan, performed sensitivity analyses of key assumptions and compared the
estimates to actual incurred costs for the same or similar activities. We discussed the basis for
key assumptions with the Company's research and development personnel to assess
management's key assumptions used in the Company's estimates of total expected costs.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2015.
Seattle, WA
March 17, 2022
F-3
ALPINE IMMUNE SCIENCES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable
Prepaid expenses and other current assets
Total current assets
Restricted cash, noncurrent
Property and equipment, net
Operating lease, right-of-use asset
Long-term investments
Deferred tax asset
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
Accrued liabilities
Deferred revenue, current
Operating lease liability, current
Current portion of long-term debt
Total current liabilities
Deferred revenue, noncurrent
Operating lease liability, noncurrent
Long-term debt
Total liabilities
Commitments and contingencies
Preferred stock, $0.001 par value per share; 10,000,000 shares authorized at December 31, 2021 and 2020; zero
shares issued and outstanding at December 31, 2021 and 2020
Stockholders’ equity:
Common stock, $0.001 par value per share; 200,000,000 shares authorized at December 31, 2021 and 2020;
31,444,746 shares issued and 30,194,279 shares outstanding at December 31, 2021; 23,853,650 shares issued and
23,803,183 shares outstanding at December 31, 2020
Treasury stock, at cost; 1,250,467 shares and 50,467 shares at December 31, 2021 and 2020, respectively
Additional paid-in capital
Accumulated other comprehensive (loss) gain
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
December 31,
2021
2020
67,907 $
94,396
25,000
4,710
192,013
254
1,716
8,837
52,866
214
255,900 $
3,349 $
9,417
51,773
617
4,622
69,778
50,830
11,009
3,380
134,997
34,959
70,622
—
1,520
107,101
254
1,785
9,401
25,549
—
144,090
582
5,777
31,627
655
2,526
41,167
21,348
11,815
7,602
81,932
—
—
30
—
287,345
(273)
(166,199)
120,903
255,900 $
24
—
177,947
53
(115,866)
62,158
144,090
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-4
ALPINE IMMUNE SCIENCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except share and per share amounts)
Collaboration revenue
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense):
Interest expense
Interest income
Other (expense) income
Loss before taxes
Income tax (expense) benefit
Net loss
Comprehensive income (loss):
Unrealized loss on investments
Unrealized (loss) gain on foreign currency translation
Comprehensive loss
Weighted-average shares used to compute basic and diluted net loss per share
Basic and diluted net loss per share
2021
Years Ended December 31,
2020
2019
$
23,443 $
9,335 $
1,740
58,742
14,560
73,302
(49,859)
(816)
259
(4)
(50,420)
87
(50,333) $
(238)
(88)
(50,659) $
27,185
10,899
38,084
(28,749)
(775)
245
1,333
(27,946)
6
(27,940) $
(15)
58
(27,897) $
35,847
9,467
45,314
(43,574)
(338)
1,248
812
(41,852)
—
(41,852)
29
(6)
(41,829)
25,476,889
20,826,466
18,358,864
(1.98) $
(1.34) $
(2.28)
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-5
ALPINE IMMUNE SCIENCES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(in thousands, except share and per share amounts)
Balance, December 31, 2018
Issuance of Units in Private Placement, net of offering costs
Exercise of stock options
Stock-based compensation
Issuance of warrants
Unrealized gain on investments
Unrealized loss on foreign currency translation
Net loss
Balance, December 31, 2019
Issuance of Units in private offering, net of offering costs
Issuance of warrants
Issuance of common stock under equity incentive plans
Stock-based compensation
Unrealized loss on investments
Unrealized gain on foreign currency translation
Net loss
Balance, December 31, 2020
Issuance of common stock in Private Placement, net of
offering costs
Issuance of common stock to Horizon
Exchange of common stock for prefunded warrants
Stock-based compensation
Issuance of common stock under equity incentive plans
Unrealized loss on investments
Unrealized loss on foreign currency translation
Net loss
Common Stock
Treasury
Shares
13,854,205 $
4,706,700
26,987
—
Amount
14
5
—
—
Shares
Amount
50,467 $
—
—
—
— $
—
—
—
—
—
—
18,587,892
5,139,610
—
75,681
—
—
—
23,803,183
6,489,357
951,980
(1,200,000)
—
149,759
—
—
—
—
—
—
19
5
—
—
—
—
—
24
6
1
(1)
—
—
—
—
—
30
—
—
—
50,467
—
—
—
—
—
—
50,467
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,200,000
—
—
—
—
—
1,250,467 $
—
—
—
—
—
—
—
— $
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
(Loss) Gain
Accumulated
Deficit
Total
Stockholders’
Equity
90,664
23,593
13
3,041
60
—
—
—
117,371
56,253
60
123
4,140
—
—
—
177,947
90,727
11,928
1
6,240
502
—
—
—
287,345
$
$
(13) $
—
—
—
(46,074) $
—
—
—
29
(6)
—
10
—
—
—
(15)
58
—
53
—
—
—
(41,852)
(87,926)
—
—
—
—
—
(27,940)
(115,866)
—
—
—
—
—
(238)
(88)
—
(273) $
—
—
—
—
—
—
(50,333)
(166,199) $
44,591
23,598
13
3,041
60
29
(6)
(41,852)
29,474
56,258
60
123
4,140
(15)
58
(27,940)
62,158
90,733
11,929
—
6,240
502
(238)
(88)
(50,333)
120,903
Balance, December 31, 2021
30,194,279 $
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ALPINE IMMUNE SCIENCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
2021
Years Ended December 31,
2020
2019
$
(50,333) $
(27,940) $
(41,852)
Loss on sale of property and equipment
Depreciation expense
Amortization of premium/discount on investments
Non-cash interest expense
Deferred income tax
Stock-based compensation expense
Changes in operating assets and liabilities:
Prepaid expenses and other current assets
Right-of-use asset
Accounts payable and accrued liabilities
Deferred revenue
Lease liabilities
Net cash (used in) provided by operating activities
Investing activities
Purchases of property and equipment
Purchase of investments
Maturities of investments
Proceeds from the sale of investments
Net cash (used in) provided by investing activities
Financing activities
Proceeds from sale of common stock and warrants, net of offering costs
Proceeds from issuance of common stock to Horizon
Proceeds from borrowings, net of issuance costs
Repayment of debt
Proceeds from exercise of stock options
Net cash provided by financing activities
Effect of exchange rate on cash, cash equivalents and restricted cash
Net increase in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash, beginning of period
Cash and cash equivalents and restricted cash, end of period
Supplemental Information
Recognition of right-of-use asset
Cash paid for interest
Discount in connection with issuance of debt
$
$
$
$
4
620
906
274
(214)
6,240
(3,063)
564
5,970
24,628
(844)
(15,248)
(118)
(133,518)
81,156
—
(52,480)
90,733
11,929
—
(2,400)
502
100,764
(88)
32,948
35,213
68,161 $
— $
554 $
— $
5
578
103
261
—
4,140
255
592
(491)
51,540
1,041
30,084
(802)
(101,328)
29,311
—
(72,819)
56,258
—
5,000
—
123
61,381
58
18,704
16,509
35,213 $
— $
490 $
334 $
16
468
(360)
140
—
3,041
(408)
1,553
816
1,435
(195)
(35,346)
(821)
(59,382)
75,575
1,391
16,763
23,598
—
1,977
(1,333)
13
24,255
(6)
5,666
10,843
16,509
11,173
170
—
The accompanying notes are an integral part of these consolidated financial statements.
F-7
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
Alpine Immune Sciences, Inc. (the “Company”, “Alpine”, “we”, “us”, or “our”), together with its consolidated subsidiaries, is a clinical-stage
biopharmaceutical company dedicated to discovering and developing innovative, protein-based immunotherapies to treat cancer and autoimmune and
inflammatory diseases. Our approach includes a proprietary scientific platform that converts native immune system proteins into differentiated, multi-
targeted therapeutics. We believe our strategies are capable of meaningfully modulating the human immune system and significantly improving outcomes
in patients with serious diseases. We were incorporated under the laws of the State of Delaware and are headquartered in Seattle, Washington.
A novel strain of coronavirus, SARS-CoV-2 (“COVID-19”), was first reported in December 2019, and subsequently declared a global pandemic by
the World Health Organization in March 2020. As a result of the COVID-19 outbreak, many companies have experienced disruptions in their operations
and in markets served. We have implemented some and may take additional temporary precautionary measures intended to help ensure the well-being of
our employees and minimize business disruption. We considered the impact of COVID-19 on the assumptions and estimates used and determined that there
were no material adverse impacts to our results of operations and financial position at December 31, 2021. The full extent of the future impacts of the
continuing COVID-19 outbreak on our operations is uncertain and may adversely impact our business, including our clinical trials.
2. Summary of Significant Accounting Policies
Basis of Presentation and Use of Estimates
The accompanying consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and
Exchange Commission (“SEC”) and generally accepted accounting principles in the United States of America (“GAAP”). The preparation of financial
statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Significant estimates inherent in the preparation of the accompanying consolidated financial
statements include those used for revenue recognition, accruals for clinical trial activities and other accruals, and the estimated fair value of equity-based
awards. We base our estimates and assumptions on historical experience when available and on various factors we believe to be reasonable under the
circumstances. Actual results could differ materially from those estimates.
Principles of Consolidation
Our consolidated financial statements include the financial position and results of operations of Alpine Immune Sciences, Inc. and our wholly
owned operating company and subsidiary, AIS Operating Co., Inc., and our wholly-owned subsidiary, Alpine Immune Sciences Australia PTY LTD. All
inter-company balances and transactions have been eliminated in consolidation.
Segments
We operate as one operating segment and use cash flow as the primary financial measure to manage our business.
Cash and Cash Equivalents and Restricted Cash
We consider all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Cash and cash
equivalents consist of deposits with commercial banks in checking and interest-bearing accounts, and highly liquid money market funds.
Restricted cash represents cash drawn on our line of credit used to establish collateral to support the security deposit on our operating lease to rent
office and laboratory space in Seattle, Washington.
Periodically, we maintain deposits in financial institutions in excess of government insured limits. We believe we are not exposed to significant
credit risk as our deposits, which are held at financial institutions, are high credit quality securities such as money market funds, U.S. Treasury securities,
and commercial paper. To date, we have not realized any losses on these deposits.
F-8
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Investments
Our investments include funds invested in highly liquid money market funds, U.S. Treasury securities, commercial paper, and corporate debt
securities with a final maturity of each security of less than two years. These investments are classified as available-for-sale debt securities, which are
recorded at fair value based on quoted prices in active markets. We classify our investments maturing within one year of the reporting date as short-term
investments.
If the estimated fair value of a debt security is below its amortized cost basis, we evaluate whether it is more likely than not that we will sell the
security before its anticipated recovery in market value and whether credit losses exist for the related securities. A credit loss exists if the present value of
expected cash flows is less than the amortized cost basis of the security. Credit-related losses are recognized as an allowance for credit losses on the balance
sheet with a corresponding adjustment to earnings. Unrealized gains and losses that are unrelated to credit deterioration are reported in other comprehensive
income (loss). Purchase premiums and discounts are recognized as interest income using the interest method over the terms of the securities. Realized gains
and losses and declines in fair value deemed to be other than temporary are reflected in the Consolidated Statements of Operations and Comprehensive
Income (Loss) using the specific-identification method.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is recorded using the straight-line method over the
estimated useful lives of the assets, generally three to five years, while leasehold improvements are amortized over the shorter of their estimated useful
lives or the related lease term. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the
accounts and any resulting gain or loss is credited or charged to operations. Maintenance and repairs are expensed as incurred. Major improvements are
capitalized as additions to property and equipment.
Impairment of Long-lived Assets
We evaluate our long-lived tangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such
assets may not be recoverable. If the carrying value exceeds the undiscounted future cash flows estimated to result from the use and eventual disposition of
the asset, we write down the asset to its estimated fair value. Impairment is assessed by comparing the undiscounted cash flows expected to be generated by
the asset to its carrying value. We did not record any impairments in the years ended December 31, 2021, 2020 or 2019.
Accrued Liabilities
As part of the process of preparing our consolidated financial statements, we are required to estimate accruals for professional services and research
and development expenses. This process involves reviewing contracts and vendor agreements and communicating with applicable personnel to identify
services that have been performed on our behalf. We estimate the level of service performed and the associated cost incurred for the service when we have
not yet been invoiced or otherwise notified of the actual cost. We estimate accrued liabilities as of each balance sheet date based on known facts and
circumstances.
Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of
services performed differ from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular
period. To date, we have not experienced any significant adjustments to our estimates.
Leases
We account for our leases under Accounting Standards Codification (“ASC”) 842, Leases. Under this guidance, we applied the practical expedients
regarding the identification of leases, lease classification, indirect costs, and the combination of lease and non-lease components. Arrangements meeting the
definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet as both a right-of-use asset and lease
liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or our incremental borrowing rate. As we do not
know the lessor’s implicit rate, we use our incremental borrowing rate at the commencement date of the lease in determining the present value of lease
payments. Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term. For
operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term. For
finance leases, interest on the lease liability and the amortization of the right-of-use asset results is front-loaded expense over the lease term. Variable lease
expenses are recorded when incurred.
F-9
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In calculating the right-of-use asset and lease liability, we elected to combine lease and non-lease components. We exclude short-term leases having
initial terms of 12 months or less from the new guidance as an accounting policy election, and recognize rent expense on a straight-line basis over the lease
term.
Derivative Financial Instruments
We evaluate all of our financial instruments, including prefunded warrants and warrants to purchase common stock, to determine if such instruments
are derivatives or contain features qualifying as embedded derivatives. For derivative financial instruments accounted for as liabilities, the derivative
instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the Consolidated
Statements of Operations and Comprehensive Income (Loss). We use the Black-Scholes option-pricing model to value the derivative instruments at
inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities
or as equity, is re-assessed at the end of each reporting period. We do not use derivative instruments to hedge exposures to cash flow, market, or foreign
currency risks.
Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration
we expect to be entitled to in exchange for those goods or services. Our steps for recognizing revenue consist of; (1) identifying the contract, (2) identifying
the performance obligations as either distinct or bundled goods and services, (3) determining the transaction price associated with each performance
obligation for which we expect to be entitled in exchange for transferring such goods and services, (4) allocating the transaction price to the performance
obligations in the contract and (5) recognizing revenue upon satisfaction of performance obligations.
Our collaboration agreements principally contain multiple performance obligations, which may include (1) grants of, or options to obtain,
intellectual property licenses; (2) research and development services; and/or (3) manufacturing or supply services. Payments typically received under these
arrangements include one or more of the following: non-refundable upfront license fees, option exercise fees, payment for research and/or development
efforts, amounts due upon the achievement of specified objectives, and/or royalties on future product sales. Our revenue is primarily derived from our
collaboration agreements with Adaptimmune Therapeutics plc (“Adaptimmune”), AbbVie Ireland Unlimited Company (“AbbVie”), and Horizon
Therapeutics Ireland DAC (“Horizon”). See further discussion of our collaboration agreements in Note 11.
We allocate revenue to each performance obligation based on its relative stand-alone selling price. We generally determine stand-alone selling prices
at the inception of the contract based on our best estimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone
basis. Payments received prior to satisfying the relevant revenue recognition criteria are recorded as deferred revenue in the accompanying Consolidated
Balance Sheets and recognized as revenue when the related revenue recognition criteria are met. We recognize revenue under our collaboration agreements
by using a cost-based input method to measure progress toward completion of the performance obligation, including employee hours contributed to each
performance obligation, and to calculate the corresponding revenue to recognize each period.
Our collaboration agreements provide for non-refundable milestone payments. We recognize revenue that is contingent upon the achievement of a
substantive milestone in its entirety in the period in which the milestone is achieved. A milestone is considered substantive when the consideration payable
to us for such milestone (1) is consistent with our performance necessary to achieve the milestone or the increase in value to the collaboration resulting
from our performance; (2) relates solely to our past performance; and (3) is reasonable relative to all of the other deliverables and payments within the
arrangement. In making this assessment, we consider all facts and circumstances relevant to the arrangement, including factors such as the scientific,
regulatory, commercial, and other risks that must be overcome to achieve the milestone, the level of effort and investment required to achieve the milestone
and whether any portion of the milestone consideration is related to future performance or deliverables.
We review the contributed employee hours and progress towards completion for each performance obligation under our collaboration agreements,
and adjust the revenue recognized to reflect changes in assumptions relating to the estimated satisfaction of the performance obligation. Revenue
recognition may be accelerated in the event of early termination of programs or if our expectations change. Alternatively, revenue recognition may be
decelerated if programs are extended or delayed. While such changes to our estimates have no impact on our reported cash flows, the timing of revenue
recorded in future periods could be materially impacted.
Research and Development
Research and development costs are expensed as incurred. Research and development costs include personnel costs, clinical trials, external contract
research and development expenses, raw materials, drug product manufacturing costs and
F-10
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
allocated overhead – including depreciation, rent and utilities. Research and development costs that are paid in advance of performance are capitalized as a
prepaid expense and amortized over the service period as the services are provided.
Stock-based Compensation
Stock-based compensation is recognized for all share-based payments based on the estimated fair value as of the date of grant. The fair value of our
stock options is calculated using the Black-Scholes option pricing model, which requires judgmental assumptions including volatility, risk-free interest rate,
expected term and dividend yield. The fair value of restricted stock units (“RSUs”) is based on the closing price of our common stock on the award date.
Stock-based compensation is recognized over the requisite service period of the awards, usually the vesting period, on a straight-line basis. For
performance-based awards where the vesting of the options may be accelerated upon the achievement of certain milestones, the related stock-based
compensation is recognized as expense when it is probable the milestone will be met. We recognize forfeiture of awards as they occur rather than
estimating the expected forfeiture rate.
Income Taxes
Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the consolidated financial statement and tax bases of assets and liabilities at the
applicable enacted tax rates. We will establish a valuation allowance for deferred tax assets if it is more likely than not that these items will expire before
we are able to realize their benefits or that future deductibility is uncertain.
We recognize the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by
the tax authorities, based on the technical merits of the position. The tax position is measured based on the largest benefit that has a greater than 50%
likelihood of being realized upon ultimate settlement. We recognize interest and penalties related to income tax matters in income tax expense if incurred.
Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of net loss and certain changes in equity excluded from net loss. For the years ended December 31,
2021, 2020, and 2019, other comprehensive loss consisted of unrealized gains and losses on our investments and unrealized gains and losses on foreign
currency translation.
Foreign Currency Translation
Our wholly-owned Australian subsidiary uses the Australian dollar as its functional currency. All assets and liabilities related to this subsidiary are
translated using period-end exchange rates and revenues and expenses are translated at average exchange rates for the year. Translation adjustments are
included as components of comprehensive income (loss) in the Consolidated Statements of Operations and Comprehensive Income (Loss).
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes
(“Topic 740”): Simplifying the Accounting for Income Taxes. This ASU simplifies the accounting for income taxes by removing certain exceptions to the
general principles in Topic 740 and also improves consistent application by clarifying and amending existing guidance. The standard is effective for fiscal
years and interim periods within those fiscal years, beginning after December 15, 2020. We adopted this standard on January 1, 2021, and concluded that
the adoption of the standard did not have a material impact on our consolidated financial statements and related disclosures.
3. Net Loss Per Share
Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period.
The net loss per share for the year ended December 31, 2021 reflects 6,489,357 shares of our common stock issued pursuant to a private placement
financing completed in September 2021 and 951,980 shares of our common stock issued in December 2021 pursuant to a private placement financing with
Horizon. The net loss per share for the year ended December 31, 2020 reflects 5,139,610 shares of our common stock issued pursuant to the securities
offering completed in July 2020. The net loss per share for the year ended December 31, 2019 reflects 4,706,700 shares of our common stock issued
pursuant to a private placement financing completed in January 2019. The increased number of shares issued in these periods has affected the year-over-
year comparability of our net loss per share calculations.
F-11
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The common stock issuable upon the conversion or exercise of the following dilutive securities has been excluded from the diluted net loss per
share calculation because their effect would have been anti-dilutive. Diluted net loss per share, therefore, does not differ from basic net loss per share for
the periods presented.
Common stock warrants
Prefunded warrants to purchase common stock
Stock options and RSUs outstanding
Total
4. Cash Equivalents and Investments
2021
3,666,435
5,182,197
5,877,309
14,725,941
December 31,
2020
3,673,551
790,710
4,175,345
8,639,606
2019
1,877,094
—
3,252,144
5,129,238
The amortized cost and fair value of our cash equivalents and investments are as follows (in thousands):
Money market funds
U.S. treasury bills
Corporate debt securities and commercial paper
Total
Classified as:
Cash equivalents
Short-term investments
Long-term investments
Total
Money market funds
U.S. treasury bills
Corporate debt securities and commercial paper
Total
Classified as:
Cash equivalents
Short-term investments
Long-term investments
Total
Amortized
Cost
50,277 $
30,006
117,492
197,775 $
Amortized
Cost
28,424 $
18,122
82,047
128,593 $
$
$
$
$
December 31, 2021
Gross
unrealized
gains
Gross
unrealized
losses
Fair market
value
— $
1
2
3 $
— $
(100)
(139)
(239) $
$
$
50,277
29,907
117,355
197,539
50,277
94,396
52,866
197,539
December 31, 2020
Gross
unrealized
gains
Gross
unrealized
losses
Fair market
value
— $
8
2
10 $
— $
—
(9)
(9) $
$
$
28,424
18,130
82,040
128,594
32,423
70,622
25,549
128,594
All investments held as of December 31, 2021 and 2020 were classified as available-for-sale debt securities and had contractual maturities of less
than two years. There were no realized gains and losses on these securities for the periods presented. The aggregate fair value of available-for-sale debt
securities in an unrealized loss position as of December 31, 2021 was $83.0 million. We did not have any investments in a continuous unrealized loss
position for more than twelve months as of December 31, 2021. Our available-for-sale debt securities are invested in highly liquid funds with high credit
ratings that have a final maturity of two years or less on the date of purchase. Unrealized losses on these investments were primarily due to changes in
interest rates. We evaluated our investments that are in an unrealized loss position and believe it is more likely than not that we will hold these investments
until maturity and will recover the amortized cost basis of these investments.
F-12
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. Fair Value Measurements
Cash and cash equivalents, restricted cash, receivables, accounts payable and accrued liabilities, which are recorded at invoiced amount or cost,
approximate fair value based on the short-term nature of these financial instruments. Fair value is defined as the exchange price received for an asset or
paid to transfer a liability, or an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of
unobservable inputs. The three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value, is as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in inactive markets, 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 supported by little or no market activity and significant to the fair value of the assets or liabilities.
As of December 31, 2021 and 2020, cash of $17.6 million and $2.5 million, respectively, is excluded from the fair value table below. The following
tables summarize our financial assets and liabilities measured at fair value on a recurring basis (in thousands):
Assets:
Money market funds
U.S. treasury bills
Corporate debt securities and commercial paper
Total
Assets:
Money market funds
U.S. treasury bills
Corporate debt securities and commercial paper
Total
Level 1
Level 2
Level 3
Total
December 31, 2021
50,277 $
29,907
—
80,184 $
— $
—
117,355
117,355 $
— $
—
—
— $
50,277
29,907
117,355
197,539
Level 1
Level 2
Level 3
Total
December 31, 2020
28,424 $
18,130
—
46,554 $
— $
—
82,040
82,040 $
— $
—
—
— $
28,424
18,130
82,040
128,594
$
$
$
$
Our Level 2 assets consist of commercial paper and corporate debt securities. We review trading activity and pricing for our available-for-sale
securities as of the measurement date. When sufficient quoted pricing for identical securities is not available, we use market pricing and other observable
market inputs for similar securities obtained from various third-party data providers. These inputs either represent quoted prices for similar assets in active
markets or have been derived from observable market data.
6. Property and Equipment
Property and equipment, net, consists of the following (in thousands):
Laboratory equipment
General equipment and furniture
Computer equipment and software
Leasehold improvements
Property and equipment, at cost
Less accumulated depreciation and amortization
Property and equipment, net
F-13
December 31,
2021
2020
3,132 $
479
211
85
3,907
(2,191)
1,716 $
2,604
479
211
85
3,379
(1,594)
1,785
$
$
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Depreciation expense was $620,000, $578,000 and $468,000 for the years ended December 31, 2021, 2020 and 2019, respectively.
7. Sale of Intangible Asset
In February 2018, we entered into an Option License Agreement (“Option Agreement”) with Laurel Venture Capital Ltd. (“Laurel”), which granted
Laurel a limited license to evaluate the indefinite-life GSNOR inhibitor IPR&D asset acquired as part of the merger with Nivalis in 2017. The IPR&D
represents the processes, expertise, and technology employed in the development of GSNOR inhibitors and Nivalis’ lead product candidate, cavosonstat.
Under the Option Agreement, we received an upfront non-refundable payment of $75,000, which was recognized as revenue in our accompanying
Consolidated Statements of Operations and Comprehensive Income (Loss).
In June 2018, we entered into an Asset Purchase Agreement (“Purchase Agreement”) with Laurel and completed the sale of global rights to the
GSNOR asset. Upon the sale of the GSNOR assets, we derecognized the full carrying value of the intangible asset. As consideration under the Purchase
Agreement, we received a non-refundable closing payment of $250,000, which was accounted for as a purchase of our intangible asset. In June 2019, we
recognized as revenue an additional payment of $425,000, related to the asset purchase. In addition, we are eligible to receive milestone payments of up
to $20.0 million, in the aggregate upon satisfaction by Laurel of certain regulatory approval milestones. We will also be eligible to receive royalty payments
equal to a low single-digit percentage rate of worldwide net sales of any approved products.
8. Additional Balance Sheet Information
Prepaid expenses and other current assets consist of the following (in thousands):
Prepaid research and development
Prepaid insurance
Deferred financing
Tenant improvement allowance receivable
Prepaid other
Other receivables
Prepaid expenses and other current assets
Accrued liabilities consist of the following (in thousands):
Research and development services
Employee compensation
Legal and professional fees
Accrued taxes
Accrued other
Accrued Liabilities
9. Long-term Debt
December 31,
2021
2020
3,315
454
352
—
266
323
4,710
$
$
December 31,
2021
2020
5,536
3,084
394
127
276
9,417
$
$
517
447
—
84
168
304
1,520
2,571
2,619
482
—
105
5,777
$
$
$
$
In December 2016, we entered into a Loan and Security Agreement (the “Original Agreement”), with Silicon Valley Bank (“SVB”), under which
we borrowed $5.0 million. The Original Agreement accrued interest at a floating per annum rate equal to the lender’s prime rate minus 1.75%. The Original
Agreement had an interest-only period through July 2018.
In August 2019 (the “Effective Date”), we entered into an Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with SVB,
pursuant to which SVB agreed to extend term loans to us with an aggregate principal amount of up to $15.0 million (the “Term Loans”). Borrowings under
the Loan Agreement consisted of up to three separate tranches. The initial tranche of $5.0 million was funded in August 2019, $3.0 million of which was
used to repay amounts owing under our Original Agreement. In March 2020, the second tranche of $5.0 million was funded to us. We did not draw down
the final tranche of $5.0 million, which expired on July 31, 2020. We intend to use the debt proceeds for working capital and other general corporate
purposes, including the advancement of our development programs.
F-14
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Term Loans accrue interest at a floating per annum rate of 0.25% above the prime rate, subject to a floor of 5.75%, which interest is payable
monthly commencing in September 2019. Upon the occurrence and during the continuance of an event of default, a default interest rate will apply that is
4.0% above the otherwise applicable interest rate. The Term Loans were interest only until September 30, 2020, however, under the Loan Agreement our
interest only period automatically extended to June 30, 2021 if we received aggregate new capital of at least $40.0 million no later than June 30, 2020. We
met this milestone in June 2020 in conjunction with the execution of the AbbVie agreement, discussed in detail in Note 11. As a result of the interest only
extension, the Term Loans will be payable in 25 equal monthly installments of principal plus interest, with the final installment due and payable on July 1,
2023.
We may prepay all of the Term Loans subject to a prepayment fee equal to $75,000, which represents the deferred portion of the final payment due
under the Original Agreement, plus the outstanding principal balance under the Term Loans at the time of such prepayment multiplied by a prepayment fee
of 2.0% in the first year, 1.0% in the second year, and 0% in the third year and thereafter. Additionally, a final payment in the amount of 5.5% of the funded
Term Loans is payable to SVB on the date on which the Term Loans are prepaid, paid or become due and payable in full. The final payment fees are
recorded in long-term debt with an offsetting reduction to debt discount on our accompanying Consolidated Balance Sheets.
The Loan Agreement contains customary representations and warranties, events of default and affirmative and negative covenants, including,
among others, covenants that limit or restrict our ability to, among other things, incur additional indebtedness, grant liens, merge or consolidate, make
acquisitions, pay dividends or other distributions or repurchase equity, make investments, dispose of assets, engage in any new lines of business, and enter
into certain transactions with affiliates, in each case subject to certain exceptions. We assessed the likelihood of the lender accelerating payment of the loan
due to a material adverse change in our business, operations, financial, or other condition as remote. We were in compliance with our covenants as of
December 31, 2021. As such, as of December 31, 2021, the classification of the loan is split between current and noncurrent based on the timing of
payment obligations. As security for its obligations under the Loan Agreement, we granted SVB a first priority security interest on substantially all of our
assets, except intellectual property, and subject to certain other exceptions.
In connection with the Loan Agreement, we issued a warrant to SVB to purchase up to 52,083 shares of our common stock at a price of $4.32 per
share, 17,361 shares of which became exercisable in August 2019 after we drew down the initial tranche. In March 2020, after we drew down the second
tranche of our Term Loan, an additional 17,361 shares became exercisable. The remaining warrants did not vest and expired on July 31, 2020, upon the
expiration of the third tranche of our Term Loan. The fair value of the warrants on the date of issuance for the initial tranche and second tranche
was $60,000 and $60,000, respectively, determined using the Black-Scholes option-pricing model, and was recorded as a component of equity and as a debt
discount on our accompanying Consolidated Balance Sheets. In connection with Original Agreement, SVB also holds 7,069 fully vested common stock
warrants at an exercise price of $12.38 per share.
The Term Loan was accounted for as a debt modification in a non-troubled debt restructuring, rather than a debt extinguishment, based on a
comparison of the present value of the cash flows under the terms of the debt immediately before and after the Effective Date of the Term Loan, which
resulted in a change of less than 10%. As a result, the remaining unamortized debt discount recorded in connection with the Original Agreement will be
amortized to interest expense over the repayment term of Loan Agreement. In connection with the initial and second tranches of the Loan Agreement, we
recorded a total debt discount of $812,000, which is being amortized to interest expense using the effective interest method over the repayment term of the
loan. Non-cash interest expense associated with the amortization of the discount was $274,000, $261,000, and $140,000, for years ended December 31,
2021, 2020, and 2019, respectively. The unamortized discount was $223,000 as of December 31, 2021.
Scheduled principal payments on our outstanding debt as of December 31, 2021 under our Loan Agreement, excluding final fee amounts, are as
follows (in thousands):
Year Ending December 31,
2022
2023
Total future principal payments
Total
4,800
2,800
7,600
$
$
F-15
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. Commitments and Contingencies
Operating Leases
We leased office and laboratory space located at 201 Elliott Avenue West, in Seattle, Washington, under an agreement classified as an operating
lease that expired on December 31, 2019. In May 2017, as required by the terms of the lease, we entered into a line of credit to establish collateral to
support the security deposit in an amount of $132,000, which was recorded as current restricted cash in our Consolidated Balance Sheets for the year ended
December 31, 2019.
In March 2019, we entered into a lease for office and laboratory space located at 188 East Blaine Street, Seattle, Washington. The term of the lease
is 10.8 years with one option to extend the term by 5.0 years. Our option to extend the rental term of our lease was not considered reasonably certain as of
December 31, 2021. The lease term commenced in June 2019. The “Rent Commencement Date” began in March 2020, nine months after the
commencement date. The annual base rent under the lease is $1.7 million for the first year and will increase by 3.0% each year thereafter. We were not
required to pay base rent from the Rent Commencement Date through November 2020, the last day of the ninth month following the Rent Commencement
Date. We received a tenant improvement allowance of $5.4 million, which is included in our base rent, and a maximum additional tenant improvement
allowance of $1.8 million, which will result in additional rent amortized over the term of the lease at an annual rate of 8.0%. The lease also requires us to
pay additional amounts for operating and maintenance expenses. In March 2019, in connection with the lease, we provided a $254,000 letter of credit as a
security deposit, which is recorded as noncurrent restricted cash in our accompanying Consolidated Balance Sheets.
As of December 31, 2021, our operating lease right-of-use assets and operating lease liability associated with our leases were $8.8 million and $11.6
million, respectively. Supplemental operating lease information for the year ended December 31, 2021 was as follows (in thousands):
Operating lease cost
Variable lease cost
Total lease cost
Other information:
Cash paid for amounts included in the measurement of lease liabilities
Weighted-average remaining lease term (years)
Weighted-average discount rate
$
$
$
For the Year Ended December 31,
2021
2020
1,837
603
2,440
$
$
2,117 $
8.2
10.7%
1,872
475
2,347
213
9.2
10.7%
Variable lease costs represent our share of the landlord’s operating expenses. We do not act as a lessor or have any leases classified as financing
leases. Maturities of our operating lease liabilities as of December 31, 2021 are as follows (in thousands):
2022
2023
2024
2025
2026
Thereafter
Total future minimum lease payments
Less: imputed interest
Operating lease liabilities
Contingencies
Minimum Lease
Payments
$
$
1,841
2,057
2,111
2,167
2,224
7,438
17,838
(6,212)
11,626
Certain credits received related to our research and development expenditures and recorded within other income in our accompanying Consolidated
Statements of Operations and Comprehensive Income (Loss) are subject to review by foreign taxing authorities. It is reasonably possible we may incur
losses upon the completion of these reviews ranging from $0 to $1.8 million, which we could be required to repay to certain tax authorities.
F-16
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. License and Collaboration Agreements
Horizon
In December 2021, we entered into an exclusive license and collaboration agreement with Horizon (the “Horizon Agreement”) for the development
and commercialization of up to four preclinical candidates generated from our unique discovery platform. The agreement includes licensing of one of our
existing preclinical biologic therapeutic programs (the “Existing Program”), as well as a research partnership to jointly develop candidates for up to three
additional autoimmune and inflammatory disease programs for other designated biological targets, (the “Research Programs”). These candidates include
previously undisclosed multi-specific fusion protein-based therapeutic candidates for autoimmune and inflammatory diseases. We will advance candidate
molecules to predefined preclinical milestones while Horizon will be responsible for the respective costs and, ultimately, Horizon will assume
responsibility for development and commercialization activities and costs.
In connection with the execution of the Horizon Agreement in December 2021, we entered into a stock purchase agreement under which Horizon
purchased 951,980 shares of our common stock in a private placement for approximately $15.76 per share and aggregate proceeds of $15.0 million. The
shares were sold at a 25% premium to the volume-weighted average share price of our common stock for a specified 30-day period prior to entering into
the agreement. The fair value of the common stock issued to Horizon of $11.9 million was recorded to equity, based on the closing price of common stock
on the effective date of the Horizon Agreement. For accounting purposes, the $3.1 million difference between the cash proceeds and the fair value of the
common stock was treated as additional consideration attributable to the Horizon Agreement.
Under the terms of the agreements, Horizon also paid us a non-refundable upfront payment of $25.0 million in the first quarter of 2022. In addition,
we are eligible to receive up to $381.0 million per program, or up to approximately $1.5 billion in total, in future success-based payments related to
development, regulatory and commercial milestones. Furthermore, we are eligible to receive tiered royalties from a mid-single digit percentage to a low
double-digit percentage on global net sales.
As of December 31, 2021, we recorded on our accompanying Consolidated Balance Sheets $28.1 million in current and noncurrent deferred
revenue, of which $25.0 million relates to accounts receivable for the up-front payment and $3.1 million relates to the premium paid by Horizon on the
stock issuance. As work under the Horizon license and collaboration agreement did not begin until 2022, we did not recognize any related revenue for the
year ended December 31, 2021.
For revenue recognition purposes, we determined that the Existing Program and each Research Program are distinct performance obligations. We
allocated revenue to each performance obligation based on its relative stand-alone selling price. The future success-based payments related to development
and regulatory milestones are probable of significant revenue reversal as the achievement is highly dependent on factors outside our control. Therefore,
these milestone payments are fully constrained and are not initially included in the transaction price. We will continue to re-evaluate the transaction price
each reporting period and update as uncertain events are resolved or other changes in circumstances occur. Any consideration related to commercial
milestones and royalties will be recognized when the related sales occur.
AbbVie
In June 2020, we entered into an option and license agreement with AbbVie (the “AbbVie Agreement”) for the development of ALPN-101
(“acazicolcept”). The AbbVie Agreement grants AbbVie the exclusive option to purchase an exclusive worldwide license to acazicolcept (the “License
Option”). The License Option is exercisable by AbbVie at any time and will expire 90 days from the achievement of certain development milestones. If
AbbVie exercises the License Option, AbbVie will take over the future development and commercialization. Prior to the exercise of the License Option, we
will perform research and development services, including conducting a Phase 2 study in systemic lupus erythematosus, based on an agreed-upon
development plan (the “Development Plan”). We will be fully responsible for all costs incurred to conduct the activities under the Development Plan,
provided that, AbbVie may be responsible for increased costs under the Development Plan in connection with certain material amendments proposed by
AbbVie. We will also be solely responsible, at our sole cost and expense, for manufacturing and regulatory filings for acazicolcept necessary to complete
activities under the Development Plan.
In June 2020, in connection with the execution of the AbbVie Agreement, AbbVie paid us a nonrefundable upfront payment of $60.0 million. Prior
to the exercise of the License Option, AbbVie has agreed to make cash payments upon our achievement of certain predefined pre-option development
milestones (the “Alpine Development Milestones”) up to an aggregate amount of $75.0 million. In the second quarter of 2021, we achieved $45.0 million
of the Alpine Development Milestones. If AbbVie exercises the License Option, they will pay a one-time cash payment of $75.0 million. Following the
exercise of the License Option, AbbVie has also agreed to make aggregate cash payments of up to $205.0 million upon AbbVie’s achievement of certain
development and commercial milestones and additional aggregate cash payments of up to $450.0 million upon AbbVie’s achievement of certain sales-
based cash milestones, collectively referred to as (the “AbbVie
F-17
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Milestones”). Subsequent to commercialization, we are also eligible to receive high single-digit to low double-digit percentage royalties on worldwide net
sales of licensed products.
For revenue recognition purposes, we determined that our contractual promises in the AbbVie Agreement are not distinct and are interdependent
with our performance obligation to provide research and development services under the Development Plan. Thus, all contractual promises related to the
upfront payment and Alpine’s Development Milestones were combined into a single performance obligation. We determined the Alpine Development
Milestone payments are probable of significant revenue reversal as the achievement is highly dependent on factors outside our control. Therefore, these
milestone payments were fully constrained and were not initially included in the transaction price. In June 2021, we re-evaluated and updated the
transaction price to include the achieved portion of the Alpine Development Milestones. We will continue to re-evaluate the transaction price each
reporting period and update as uncertain events are resolved or other changes in circumstances occur.
The License Option and the AbbVie Milestones were not determined to be performance obligations at the inception of the contract as they did not
represent material rights. If exercised, the License Option and AbbVie Milestones will be accounted for as a separate contract and will be recognized as
revenue if and when triggered. Any consideration related to sales-based royalties and profit-sharing payments will be recognized when the related sales
occur.
We use a cost-based input method to measure progress toward completion of the performance obligation and to calculate the corresponding revenue
to recognize each period. In applying the cost-based input, we use actual costs incurred relative to budgeted costs for the combined performance obligation.
These costs consist primarily of internal personnel efforts and third-party contract costs relative to the level of patient enrollment in the study. Revenue will
be recognized based on the level of costs incurred relative to the total budgeted costs for the performance obligation. A cost-based input method of revenue
recognition requires management to make estimates of costs to complete our performance obligation. 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 our performance obligation
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.
We recognized revenue from the AbbVie Agreement of $23.4 million and $7.0 million for the years ended December 31, 2021 and 2020,
respectively. As of December 31, 2021 the remaining balance of the transaction price is $74.5 million and is recorded as current and noncurrent deferred
revenue on our accompanying Consolidated Balance Sheets. We expect to recognize the remaining deferred revenue over the remainder of our
Development Plan, which began in June 2020 and ends upon the later of the exercise or expiration of the option.
Adaptimmune
In May 2019, we entered into a collaboration and licensing agreement with Adaptimmune (the “Adaptimmune Agreement”) to develop next-
generation SPEAR T cell products. Under the Adaptimmune Agreement, we are to perform certain research services and grant Adaptimmune an exclusive
license to programs from our secreted immunomodulatory protein (“SIP”) and transmembrane immunomodulatory protein (“TIP”) technologies. In June
2019, under the terms of the Adaptimmune Agreement, we received an upfront license payment of $2.0 million, and through December 31, 2021 we have
received an additional $1.6 million in research support payments to fund ongoing programs. These payments were recorded as deferred revenue upon
receipt and were recognized to revenue based on employee hours contributed to each performance obligation. In the fourth quarter of 2020, based on the
completion of our initial research and development efforts in connection with our performance obligations, we recognized the remaining balance in
deferred revenue associated with Adaptimmune on our accompanying Consolidated Balance Sheets. Under the Adaptimmune Agreement we recognized no
revenue for the year ended December 31, 2021, and $2.3 million and $1.3 million for the years ended December 31, 2020, and 2019, respectively. In
addition, we are eligible for additional research support payments, one-time payments and downstream development and commercialization milestones of
up to $288.0 million, if all pre-specified milestones for each program are achieved. We are also eligible to receive low-single digit royalties on worldwide
net sales of the applicable products. In February 2022, Adaptimmune selected an additional research program, triggering a $1.0 million upfront payment,
which will be recorded as deferred revenue upon receipt and recognized to revenue based on employee hours contributed.
F-18
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. Stockholders’ Equity
Common Stock
Shares of common stock reserved for future issuance were as follows:
Shares to be issued upon exercise of outstanding stock options
Shares to be issued upon release of RSUs
Shares to be issued upon conversion of common stock warrants
Shares to be issued upon conversion of prefunded warrants
Shares available for future stock grants
Shares to be issued under employee stock purchase plan
Shares of common stock reserved for future issuance
Securities Offerings
December 31,
2021
5,611,743
265,566
3,666,435
5,182,197
284,906
45,211
15,056,058
2020
4,175,345
—
3,673,551
790,710
887,901
45,211
9,572,718
In September 2021, we entered into a securities purchase agreement (the “2021 Securities Purchase Agreement”) for a private placement with a
select group of institutional investors, pursuant to which we sold 6,489,357 shares of our common stock (the “Shares”) and prefunded warrants to purchase
3,191,487 Shares (the “Prefunded Warrants”). The purchase price for each Share and for each Prefunded Warrant was $9.40 per share, for an aggregate
purchase price of approximately $91.0 million. The Prefunded Warrants became fully exercisable upon the closing date and have an exercise price of
$0.001 per share. We incurred $266,000 in financing costs associated with the 2021 Securities Purchase Agreement, which was netted against the proceeds
within additional-paid-in-capital on our accompanying Consolidated Balance Sheets.
In September 2021, we entered into an exchange agreement (the “Exchange Agreement”) with Frazier Life Sciences VIII, L.P. (the “Exchanging
Stockholder”), which Exchanging Stockholder is affiliated with a member of our board of directors, pursuant to which we exchanged an aggregate of
1,200,000 shares of common stock held by the Exchanging Stockholder for Prefunded Warrants (the “Exchange Warrants”) to purchase an aggregate of
1,200,000 shares of common stock. Upon the closing of the exchange, we reclassified 1,200,000 shares of common stock into treasury stock on our
accompanying Consolidated Balance Sheets.
In July 2020, we entered into a securities purchase agreement (the “2020 Securities Purchase Agreement”) for a private placement with a select
group of institutional investors, pursuant to which we sold 5,139,610 units (the “Common Units”) and 790,710 units (the “Prefunded Warrant Units”), for
an aggregate purchase price of $60.0 million. Each Common Unit consists of one share of our common stock plus a warrant to purchase 0.3 shares of
common stock (the “Common Stock Warrants”), and each Prefunded Warrant Unit consists of one prefunded warrant to purchase one share of common
stock plus 0.3 Common Stock Warrants. The Prefunded Warrant Units and the Common Units are collectively referred to as the “Units” and each Unit has
a purchase price of $10.1175. Pursuant to the terms of the 2020 Securities Purchase Agreement, we issued warrants to purchase 1,779,096 shares of
common stock with an exercise price of $12.74 and a term of 3.5 years. Additionally, we issued 790,710 prefunded warrants, which became fully
exercisable upon the closing date and have an exercise price of $0.001 per share. We incurred $3.7 million in financing costs associated with the 2020
Securities Purchase Agreement, which was netted against the proceeds within additional-paid-in-capital on our accompanying Consolidated Balance
Sheets.
In January 2019, we entered into a securities purchase agreement (the “2019 Securities Purchase Agreement”) with a limited number of accredited
investors, pursuant to which we sold 4,706,700 units (the “2019 Units”) for an aggregate purchase price of $25.3 million in a private placement (the
“Private Placement”). Each 2019 Unit has a purchase price of $5.37 and consists of one share of our common stock and a warrant to purchase 0.39 shares
of common stock. Pursuant to the terms of the 2019 Securities Purchase Agreement, we issued 4,706,700 shares of common stock and warrants to purchase
an aggregate of 1,835,610 shares of common stock. The warrants have an exercise price of $12.74 and have a term of five years. We incurred $1.7 million
in financing costs associated with the 2019 Securities Purchase Agreement, which was netted against the proceeds within additional-paid-in-capital on our
accompanying Consolidated Balance Sheets.
The issuance of the securities sold under the 2021, 2020, and 2019 Securities Purchase Agreements have not been registered under the Securities
Act of 1933, as amended, or state securities laws and may not be offered or sold in the United States absent registration with the SEC or an applicable
exemption from such registration requirements. We filed registration statements for the 2021, 2020 and 2019 Securities Purchase Agreements with the
SEC, which were declared effective by the SEC in November 2021, August 2020 and April 2019, respectively, which cover the resale of the shares of
common stock issuable in connection with the private placements and upon exercise of the warrants. In May 2021, the registration statement
F-19
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
for the 2019 Securities Purchase Agreement was deactivated following the expiration of our obligation to maintain its effectiveness under the related
registration rights agreement.
Financing Agreements
In July 2021, we entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”) pursuant to which we may sell
shares of our common stock from time to time through an “at the market” equity offering for up to $75.0 million in gross cash proceeds. Cowen will act as
the sales agent and will be entitled to compensation for services of up to 3.0% of the gross sales price per share of all shares sold through Cowen under the
Sales Agreement. The shares would be issued pursuant to our effective shelf registration statement on Form S-3 (File No. 333-256107). We filed a
prospectus supplement, dated July 2, 2021, with the SEC in connection with the offer and sale of the shares pursuant to the Sales Agreement. As of
December 31, 2021, no sales have been made under the Sales Agreement.
Common Stock Warrants
We have issued warrants in connection with our securities offerings, SVB loans, and to certain non-employee professional advisers. Excluding the
prefunded warrants we issued in connection with our securities offerings discussed above, the table below summarizes our warrant activity:
Outstanding at December 31, 2020
Exercised
Expired
Outstanding at December 31, 2021
Exercisable at December 31, 2021
Equity Incentive Plans
Warrants
Outstanding
3,673,551
(2,484)
(4,632)
3,666,435
3,666,435
Weighted-
average
Exercise
Price
$
$
$
12.74
5.02
97.12
12.64
12.64
Weighted-
average
Remaining
Contract
Term
(in years)
3.12
2.12
2.12
In June 2018 our stockholders approved, the 2018 Equity Incentive Plan (“2018 Plan”). Upon adoption, we ceased granting stock awards under the
Nivalis Therapeutics, Inc. 2015 Equity Incentive Plan (the “2015 EIP”) and the Amended and Restated 2015 Stock Plan (the “2015 Plan”), collectively, the
“Legacy Plans”. All shares of common stock subject to awards under the Legacy Plans that expire or terminate without having been exercised in full, or are
forfeited to or repurchased by the company, will be added to the 2018 Plan, up to a maximum of 1,972,784 shares. In June 2020, in conjunction with our
annual meeting of stockholders, our stockholders approved an additional increase of 743,515 shares authorized under our 2018 Plan.
Under our 2018 Plan we may issue stock options, stock appreciation rights, restricted stock, RSUs or performance shares. As of December 31, 2021
we have only issued stock options and RSUs. Our 2018 Plan provides for an annual increase in the number of shares reserved for insurance equal to the
lesser of (1) 5% of the number of shares of common stock outstanding as of the last day of the preceding calendar year or (2) 1,500,000. However, our
board of directors may act prior to January 1 of a given year to provide that there will be no January 1 increase for such year or that the increase for such
year will be a lesser number of shares. On January 1, 2022, a total of 1,500,000 additional shares were automatically added to the shares authorized under
the 2018 Plan.
In July 2017, in connection with the merger, we assumed Nivalis’ Employee Stock Purchase Plan (the “ESPP”) and the 2015 EIP. Upon assumption
of the ESPP, there were 45,211 shares available for issuance under the ESPP. As of December 31, 2021, we have not activated the ESPP.
Stock options granted under our equity plans generally vest within four years and vested options are exercisable from the grant date until ten years
after the date of grant. Vesting of certain employee options may be accelerated in the event of a change in control of the Company. We grant stock options
to employees with exercise prices equal to the fair value of our common stock on the date of grant. The term of incentive stock options may not exceed ten
years from the date of grant.
F-20
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of December 31, 2021, a total of 6,616,862 shares of common stock were authorized for issuance under our 2018 Plan, 2015 Plan and 2015 EIP.
A summary of stock option activity under our plans is presented below:
Outstanding at December 31, 2020
Granted
Exercised
Forfeited
Outstanding at December 31, 2021
Vested and expected to vest after December 31, 2021
Exercisable at December 31, 2021
Options
Outstanding
Weighted-
average
Exercise
Price
Weighted-
average
Remaining
Contract
Term
(in years)
Aggregate
Intrinsic
Value
(in thousands)
4,175,345 $
1,940,518 $
(91,190) $
(412,930) $
5,611,743 $
5,471,743 $
2,944,273 $
5.30
12.38
5.37
9.88
7.41
7.38
5.25
7.41 $
7.37 $
6.31 $
36,465
35,685
26,053
The aggregate intrinsic value of stock options exercised during the years ended December 31, 2021, 2020 and 2019 was $546,000, $104,000 and
$155,000, respectively. The fair value of stock options vested during the years ended December 31, 2021, 2020 and 2019 was $3.4 million, $4.2 million
and $3.0 million, respectively.
A summary of our RSU activity under our plans is presented below:
Non-vested at December 31, 2020
Granted
Non-vested at December 31, 2021
Number of
Shares
—
265,566
265,566
Weighted-
average
Remaining
Contract
Life
(in years)
Aggregate
Intrinsic
Value
(in thousands)
Weighted-
Average
Grant Date Fair Value
(per share)
$
$
—
12.00
$
12.00
1.95
$
491
The aggregate intrinsic value of RSUs released during the years ended December 31, 2021 and 2020 was $0 and $1.6 million, respectively. The fair
value of RSUs vested during the years ended December 31, 2021 and 2020 was $0 and $461,000, respectively. We had no RSU activity for the year ended
December 31, 2019.
We utilize newly issued shares to satisfy option exercises and RSU releases. As of December 31, 2021, there was $16.4 million of unrecognized
stock-based compensation expense related to approximately 2.9 million nonvested stock options and RSU awards that are expected to be recognized over a
weighted-average period of 2.7 years.
Stock-Based Compensation Expense
The fair value of RSUs is equal to the closing stock price on the date of grant. We use the Black-Scholes option pricing model to estimate the fair
value of stock options at the grant date. The Black-Scholes option pricing model requires us to make certain estimates and assumptions, including
assumptions related to the expected price volatility of our stock, the period during which the options will be outstanding, the rate of return on risk-free
investments, and the expected dividend yield of our stock. The fair values of stock options granted to employees were calculated using the following
assumptions:
Weighted-average estimated fair value at grant
Risk-free interest rate (1)
Expected term of options (in years) (2)
Expected stock price volatility (3)
Expected dividend yield (4)
2021
$8.44
0.25% -
1.3%
3.49 - 6.08
79% - 83%
—%
Years Ended December 31,
2020
$3.03
0.38% -
1.68%
5.27 – 6.90
73% - 82%
—%
2019
$4.14
1.42% -
2.63%
5.27 – 6.08
70% - 77%
—%
(1) The risk-free interest rate assumption was based on zero-coupon U.S. Treasury instruments that had terms consistent with the expected term of our
stock option grants.
(2) We used the “simplified method” for options to determine the expected term of stock options granted, since we do not have sufficient historical
exercise data to provide a reasonable basis upon which to estimate expected term due to the
F-21
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
limited time our shares have been publicly traded. Under this approach, the weighted-average expected life is presumed to be the average of the
vesting term and the contractual term of the option.
(3) Volatility is a measure of the amount by which a financial variable, such as share price, has fluctuated or is expected to fluctuate during a period.
We analyzed the stock price volatility of companies at a similar stage of development to estimate expected volatility of our stock price.
(4) We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.
Stock-based compensation expense is classified in the Consolidated Statements of Operations and Comprehensive Income (Loss) as follows (in
thousands):
Employee:
Research and development
General and administrative
Non-Employee:
Research and development
General and administrative
Total stock-based compensation expense
13. Income Taxes
2021
Years Ended December 31,
2020
2019
$
$
3,323 $
2,891
24
2
6,240 $
2,145 $
1,955
34
6
4,140 $
1,608
1,359
68
6
3,041
Our loss before taxes is derived from domestic (United States) and foreign (Australian) sources as follows (in thousands):
Years Ended December 31,
2020
2021
Domestic
Foreign
Total
$
$
(48,932)
(1,488)
(50,420)
$
$
(28,356)
410
(27,946)
2019
(38,234)
(3,618)
(41,852)
$
$
The provision for income taxes is composed of the following (in thousands):
Current:
U.S. - Federal
U.S. - State
Foreign
Total current
Deferred:
U.S. - Federal
U.S. - State
Foreign
Total deferred
Total income tax benefit
2021
Years Ended December 31,
2020
2019
$
$
—
—
129
129
—
—
(216)
(216)
(87)
$
$
—
(6)
—
(6)
—
—
—
—
(6)
$
$
—
—
—
—
—
—
—
—
—
F-22
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The effective tax rate of the provision for income taxes differs from the federal statutory rate as follows:
U.S. Statutory rate
Effect of:
Permanent differences
Federal research and development credit
Change in valuation allowance
Global intangible low-taxed income recapture
Stock-based compensation
Foreign rate differential
Other
Effective income tax rate
2021
21.0
(0.4)
4.5
(21.4)
(1.4)
(1.8)
0.2
(0.5)
0.2
%
%
%
%
%
%
%
%
%
Years Ended December 31,
2020
21.0
0.1
2.6
(20.7)
—
(2.8)
(0.1)
(0.1)
—
%
%
%
%
%
%
%
%
%
2019
21.0
(0.1)
1.1
(19.8)
—
(0.5)
0.6
(2.3)
—
%
%
%
%
%
%
%
%
%
We recorded tax benefits of $87,000, $6,000, and $0, representing effective tax rates of 0.2% for the year ended December 31, 2021, and 0.0%, for
the years ended December 31, 2020 and 2019, respectively. The $87,000 tax benefit for the year ended December 31, 2021 represents deferred tax benefits
from true-ups and the removal of the valuation allowance in place against our foreign deferred tax assets, partially offset by income tax expense for current
year activity.
The difference between the U.S. federal statutory tax rates of 21% and our effective tax rate in all periods is primarily due to changes in our
valuation allowance related to our deferred tax assets and the generation and consumption of federal research and development tax credits. We have elected
to treat taxes due on future U.S. inclusions in taxable income under the global intangible low-taxed income (“GILTI”) provision as a current-period expense
when incurred. As such, expected future GILTI inclusions have not been factored into the measurement of our deferred taxes.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The following table represents the significant components of our deferred tax assets and
liabilities for the periods presented (in thousands):
Deferred tax assets:
Net operating loss
Research and development credits
Intangible asset basis
Lease liability
Deferred revenue
Stock based compensation
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Prepaid expenses
Fixed asset basis
Right-of-use asset basis
Total deferred tax liability
Net deferred tax assets and liabilities
December 31,
2021
2020
$
$
22,054
6,297
13
2,476
8,333
1,672
217
41,062
(38,752)
2,310
(147)
(93)
(1,856)
(2,096)
214
$
$
21,992
4,044
24
2,619
—
1,337
72
30,088
(27,851)
2,237
(125)
(137)
(1,975)
(2,237)
—
A valuation allowance is provided for deferred tax assets where the recoverability of the assets is uncertain. The determination to provide a
valuation allowance is dependent upon the assessment of whether it is more likely than not that sufficient taxable income will be generated to utilize the
deferred tax assets. For the year ended December 31, 2021, we determined that based on an evaluation of the four sources of income and all available
evidence, both positive and negative, including our latest forecasts and cumulative losses in recent years, it was more likely than not that none of our
domestic deferred tax assets would be realized and therefore we continued to record a full valuation allowance. For the year ended
F-23
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2021, we determined that it was more likely than not that our foreign deferred tax assets would be realized. As such, we removed the
valuation allowance previously in place against our foreign deferred tax assets as we have generated sufficient foreign taxable income to utilize all
historical operating losses and are expecting future foreign taxable income. The valuation allowance increased by $10.9 million and $5.8 million during the
year ended December 31, 2021 and 2020, respectively.
We have net operating loss (“NOL”) carryforwards as follows (in thousands):
Federal (before January 1, 2018)
Federal (after January 1, 2018)
State
Foreign
2021
11,094
91,592
6,433
—
$
$
$
$
December 31,
2020
$
$
$
$
11,094
91,868
6,433
—
2019
11,094
67,500
6,433
787
$
$
$
$
Federal NOL carryforwards created before January 1, 2018 begin to expire in 2037. Federal NOL carryforwards created after January 1, 2018
carryforward indefinitely. State NOL carryforwards begin to expire in 2038. Foreign NOLs carryforward indefinitely.
We have net research and development tax credit carryforwards as follows (in thousands):
Federal
2021
December 31,
2020
2019
$
7,880
$
5,063
$
3,986
Federal research and development tax credit carryforwards begin to expire in 2035.
Current tax laws impose substantial restrictions on the utilization of research and development credit and NOL carryforwards in the event of an
ownership change, as defined by the Internal Revenue Code Section 382 and 383. Such an event may limit our ability to utilize NOLs and research and
development tax credit carryforwards. Under Internal Revenue Code Section 382 and 383, the 2017 merger with Nivalis is likely considered an ownership
change with respect to the potential limitation of the Nivalis federal tax credits and NOLs. As such, it is likely that any future utilization of Nivalis federal
tax credits and NOLs is substantially limited. Therefore, as of December 31, 2018, all Nivalis tax credit and NOL carryforwards have been reduced to zero.
We account for uncertainty in income taxes in accordance with ASC 740. Tax positions are evaluated in a two-step process, whereby we first
determine whether it is more likely than not that a tax position will be sustained upon examination by the tax authority, including resolutions of any related
appeals or litigation processes, based on technical merit. If a tax position meets the more-likely-than-not recognition threshold it is then measured to
determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than
50% likely of being realized upon ultimate settlement.
The following table summarizes the activity related to unrecognized tax benefits (in thousands):
Unrecognized benefits – beginning of year
Gross increases (decreases) – prior year tax positions
Gross increases – current year tax positions
Unrecognized benefit – end of year
2021
990
—
563
1,553
$
$
$
$
December 31,
2020
775
(7)
222
990
2019
469
—
306
775
$
$
All of the unrecognized tax benefits as of December 31, 2021 are accounted for as a reduction in our deferred tax assets. Due to our valuation
allowance, none of the $1.6 million of unrecognized tax benefits would affect our effective tax rate, if recognized. We do not believe it is reasonably
possible that our unrecognized tax benefits will significantly change in the next twelve months.
We recognize interest and penalties related to unrecognized tax benefits as income tax expense. There were no accrued interest or penalties related
to unrecognized tax benefits for 2021, 2020 and 2019.
We do not expect any significant change in our unrecognized tax benefits during the next twelve months.
F-24
ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Our material income tax jurisdictions are the United States (federal), California (state), and Australia (foreign). We are subject to audit for tax years
2012 and forward for federal purposes, 2017 and forward for California purposes, and 2019 and forward for foreign purposes.
14. Related Party Transactions
In September 2021, in connection with our 2021 Securities Purchase Agreement we issued 3,723,402 shares of common stock and 2,340,424
prefunded warrants to purchase shares of common stock for gross proceeds of approximately $57.0 million to certain of our stockholders whose beneficial
ownership exceeded 5% prior to the completion of the 2021 Securities Purchases Agreement. Also in September 2021, we exchanged an aggregate of
1,200,000 shares of common stock held Frazier Life Sciences VIII, L.P. for Prefunded Warrants to purchase an aggregate of 1,200,000 shares of common
stock.
None of the purchasers in the July 2020 private placement was a greater than 5% holder of our outstanding capital stock prior to the July 2020
private placement.
In January 2019, in connection with our 2019 Securities Purchase Agreement we sold an aggregate of 935,753 shares of common stock and issued
warrants to purchase an aggregate of 364,943 shares of common stock for gross proceeds of approximately $5.0 million to certain of our 5% stockholders.
15. 401(k) Retirement Plan
We have adopted a 401(k) plan. All employees are eligible to participate, provided they meet the requirements of the plan. Through December 31,
2021, we have not matched employee contributions to the plan. Beginning in 2022, we will match the employees’ 401(k) contributions, at our discretion
and not to exceed a prescribed annual limit.
F-25
Exhibit 10.13
This Separation Agreement and Release (“Agreement”) is made by and between Zelanna Goldberg (“Employee”) and Alpine
Immune Sciences, Inc. (the “Company”) (collectively referred to as the “Parties” or individually referred to as a “Party”).
SEPARATION AGREEMENT AND RELEASE
RECITALS
WHEREAS, Employee was employed by the Company pursuant to that certain Executive Employment Agreement between the
Company and Employee dated June 1, 2021 (the “Employment Agreement”);
WHEREAS, Employee signed an At-Will Employment, Confidential Information, Invention Assignment, and Arbitration Agreement
with the Company on June 1, 2021 (the “Confidentiality Agreement”);
WHEREAS, the Parties entered into a Participation Agreement (the “Participation Agreement”) under the Company’s Change of
Control and Severance Policy (the “Severance Policy”);
WHEREAS, the Parties entered into an Indemnification Agreement dated June 1, 2021 (the “Indemnification Agreement”);
WHEREAS, the Company and Employee have entered into a Stand-Alone Inducement Stock Option Grant, dated June 1, 2021 (the
“Option Agreement”), granting Employee the option to purchase shares of the Company’s common stock subject to the terms and conditions
of the Option Agreement;
WHEREAS, Employee separated from employment with the Company effective October 8, 2021 (the “Separation Date”);
WHEREAS, Employee’s separation from employment with the Company constitutes a “Non-COC Qualified Termination” under the
Severance Policy;
WHEREAS, this Agreement is the “Release” described in the Severance Policy; and
WHEREAS, the Parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions, and demands
that the Employee may have against the Company and any of the Releasees as defined below, including, but not limited to, any and all claims
arising out of or in any way related to Employee’s employment with or separation from the Company.
NOW, THEREFORE, in consideration of the mutual promises made herein, the Company and Employee hereby agree as follows:
COVENANTS
1. Consideration. In consideration of Employee’s execution of this Agreement and Employee’s fulfillment of all of its terms and
conditions, and provided that Employee does not revoke the Agreement under Section 6 below, the Company agrees to the following:
a. Separation Pay. The Company agrees to pay Employee a total of Three Hundred Fifty-Two Thousand Five Hundred
Dollars ($352,500), at the rate of approximately Thirty-Nine Thousand One Hundred Sixty-Six Dollars and Sixty-Seven Cents ($39,166.67)
per month, less applicable withholdings, for nine (9) months following the Separation Date in accordance with the Company’s regular payroll
procedures; provided, however, that all payments shall be further subject to the timing and other provisions of the paragraphs in the
Severance Policy bearing the headings “Release,” “Section 409A,” “Reduction of Severance Benefits,” and “Determination of Excise Tax
Liability” (together, the “Severance Policy Surviving Sections”). For the avoidance of doubt, this Agreement is the “Release” referred to in
the Severance Policy.
b. COBRA. Provided Employee timely elects and pays for continuation coverage pursuant to the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended (“COBRA”) within the time period prescribed pursuant to COBRA, the Company shall
reimburse Employee for the payments Employee makes for COBRA coverage for Employee and Employee’s eligible dependents that were
covered under the Company’s health care plans immediately prior to the Separation Date, for a period of up to the first nine (9) months of
such coverage, or, if earlier, until the sooner of (i) Employee’s securing of health insurance coverage through another employer or (ii)
Employee ceasing to be eligible for coverage under COBRA. COBRA reimbursements shall be made by the Company to Employee
consistent with the Company’s normal expense reimbursement policy, provided that the Company receives documentation substantiating
Employee’s payments for COBRA coverage. Notwithstanding the preceding, if the Company determines in its sole discretion that it cannot
provide COBRA reimbursement benefits without potentially violating applicable law (including, without limitation, Section 2716 of the
Public Health Service Act), the Company will instead provide the Employee nine (9) taxable monthly payments each in an amount equal to
the monthly COBRA premium that the Employee would be required to pay to continue the Employee’s group health coverage in effect on the
date of termination of employment (which amount will be based on the premium for the first month of COBRA coverage), regardless of
whether the Employee elects COBRA continuation coverage, beginning on the Company’s first regular payroll date that occurs on or after
the 60 day following the Separation Date and continuing monthly thereafter. Notwithstanding any of the foregoing, all reimbursements or
payments under this paragraph shall be subject to the timing and other provisions of the Severance Policy Surviving Sections.
th
c. Acknowledgement. Employee acknowledges that (i) without this Agreement, Employee is otherwise not entitled to the
consideration listed in this Section 1, (ii) the consideration provided in this Section 1 fully satisfies all of the Company’s obligations to
Employee under the Participation Agreement and the Severance Policy, (iii) the consideration provided in this Section 1 fully satisfies any
other obligation that the Company would have had to pay Employee severance under the Employment Agreement or any other plan or
agreement; and (iv) Employee is entitled to no other severance compensation or severance benefits.
2. Stock. The Parties agree that for purposes of determining the number of shares of the Company’s common stock that Employee
is entitled to purchase from the Company, pursuant to the exercise of outstanding options, Employee will be considered to have vested only
up to the Separation Date. Employee acknowledges that as of the Separation Date, Employee will have vested in zero (0) options and no
more.
3. Benefits. Employee’s health insurance benefits shall cease no later than the last day of the month in which the Separation Date
occurs (or earlier as may be required by the applicable plan policies, terms, and conditions), subject to Employee’s right to continue
Employee’s health insurance under COBRA. Employee’s participation in all benefits and incidents of employment, including, but not limited
to, vesting in stock options, and the accrual of bonuses, vacation, and paid time off, ceased as of the Separation Date.
4. Payment of Salary and Receipt of All Benefits. Employee acknowledges and represents that, other than the consideration set
forth in this Agreement, the Company has paid or provided all salary, wages, bonuses, accrued vacation/paid time off, premiums, leaves,
housing allowances, relocation costs, interest, severance, outplacement costs, fees, reimbursable expenses, commissions, stock, stock options,
vesting, and any and all other benefits and compensation due to Employee.
5. Release of Claims. Employee agrees that the foregoing consideration represents settlement in full of all outstanding obligations
owed to Employee by the Company and its current and former officers, directors, employees, agents, investors, attorneys, shareholders,
administrators, affiliates, benefit plans, plan administrators, professional employer organization or co-employer, insurers, trustees, divisions,
subsidiaries, predecessor and successor corporations, and assigns (collectively, the “Releasees”). Employee, on Employee’s own behalf and
on behalf of Employee’s respective heirs, family members, executors, agents, and assigns, hereby and forever releases the Releasees from,
and agrees not to sue concerning, or in any manner to institute, prosecute, or pursue, any claim, complaint, charge, duty, obligation, demand,
or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Employee may
possess against any of the Releasees arising from
any omissions, acts, facts, or damages that have occurred up until and including the date Employee signs this Agreement, including, without
limitation:
termination of that relationship;
a. any and all claims relating to or arising from Employee’s employment relationship with the Company and the
b. any and all claims relating to, or arising from, Employee’s right to purchase, or actual purchase of shares of stock of the
Company, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable
state corporate law, and securities fraud under any state or federal law;
c. any and all claims for wrongful discharge of employment, termination in violation of public policy, discrimination,
harassment, retaliation, breach of contract (both express and implied), breach of covenant of good faith and fair dealing (both express and
implied), promissory estoppel, negligent or intentional infliction of emotional distress, fraud, negligent or intentional misrepresentation,
negligent or intentional interference with contract or prospective economic advantage, unfair business practices, defamation, libel, slander,
negligence, personal injury, assault, battery, invasion of privacy, false imprisonment, conversion, and disability benefits;
d. any and all claims for violation of any federal, state, or municipal statute, including, but not limited to, Title VII of the
Civil Rights Act of 1964, the Civil Rights Act of 1991, the Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990, the
Equal Pay Act, the Fair Labor Standards Act, the Fair Credit Reporting Act, the Age Discrimination in Employment Act of 1967, the Older
Workers Benefit Protection Act, the Employee Retirement Income Security Act of 1974, the Worker Adjustment and Retraining Notification
Act, the Family and Medical Leave Act, the Immigration Reform and Control Act, the National Labor Relations Act, the California Family
Rights Act, the California Labor Code, the California Workers’ Compensation Act, and the California Fair Employment and Housing Act;
e. any and all claims for violation of the federal or any state constitution;
f. any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;
treatment of any of the proceeds received by Employee as a result of this Agreement; and
g. any claim for any loss, cost, damage, or expense arising out of any dispute over the nonwithholding or other tax
h. any and all claims for attorneys’ fees and costs.
Employee agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the
matters released. This release does not extend to any obligations incurred under this Agreement. This release does not release claims that
cannot be released as a matter of law. Any and all disputed wage claims that are released herein shall be subject to binding arbitration in
accordance with this Agreement, except as required by applicable law. This release does not extend to any right Employee may have to
unemployment compensation benefits. In addition, this release does not extend to any rights of indemnification Employee may have under
the Indemnification Agreement, the Company’s certificate of incorporation and bylaws, or any applicable D&O insurance policy with the
Company, subject to the respective terms, conditions, and limitations of such Indemnification Agreement, certificate of incorporation and
bylaws, or D&O insurance policy, in each case, as may be applicable.
6. Acknowledgment of Waiver of Claims under ADEA. Employee acknowledges that Employee is waiving and releasing any rights
Employee may have under the Age Discrimination in Employment Act of 1967 ("ADEA"), and that this waiver and release is knowing and
voluntary. Employee agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the date
Employee signs this Agreement. Employee acknowledges that the consideration given for this waiver and release is in addition to anything of
value to which Employee was already entitled. Employee further acknowledges that Employee has been advised by this writing that: (a)
Employee should consult with an attorney prior to executing this Agreement; (b) Employee has twenty-
one (21) days within which to consider this Agreement; (c) Employee has seven (7) days following Employee’s execution of this Agreement
to revoke this Agreement; (d) this Agreement shall not be effective until after the revocation period has expired; and (e) nothing in this
Agreement prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of this waiver under the
ADEA, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized by federal law. In the event
Employee signs this Agreement and returns it to the Company in less than the 21-day period identified above, Employee hereby
acknowledges that Employee has freely and voluntarily chosen to waive the time period allotted for considering this Agreement. Employee
acknowledges and understands that revocation must be accomplished by a written notification to the person executing this Agreement on the
Company’s behalf that is received prior to the Effective Date. The Parties agree that changes, whether material or immaterial, do not restart
the running of the 21-day period.
7. California Civil Code Section 1542. Employee acknowledges that Employee has been advised to consult with legal counsel and
is familiar with the provisions of California Civil Code Section 1542, a statute that otherwise prohibits the release of unknown claims, which
provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE
RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.
Employee, being aware of said code section, agrees to expressly waive any rights Employee may have thereunder, as well as under any other
statute or common law principles of similar effect.
8. No Pending or Future Lawsuits. Employee represents that Employee has no lawsuits, claims, or actions pending in Employee’s
name, or on behalf of any other person or entity, against the Company or any of the other Releasees. Employee also represents that Employee
does not intend to bring any claims on Employee’s own behalf or on behalf of any other person or entity against the Company or any of the
other Releasees.
9. Confidentiality. Subject to the Protected Activity provision, Employee agrees to maintain in complete confidence the existence
of this Agreement, the contents and terms of this Agreement, and the consideration for this Agreement (hereinafter collectively referred to as
“Separation Information”). Except as required by law, Employee may disclose Separation Information only to Employee’s immediate family
members, the Court in any proceedings to enforce the terms of this Agreement, Employee’s attorney(s), and Employee’s accountant(s) and
any professional tax advisor(s) to the extent that they need to know the Separation Information in order to provide advice on tax treatment or
to prepare tax returns, and must prevent disclosure of any Separation Information to all other third parties. Employee agrees that Employee
will not publicize, directly or indirectly, any Separation Information.
10. Trade Secrets and Confidential Information/Company Property. Employee acknowledges that, separate from this Agreement,
Employee remains under continuing obligations to the Company under the Confidentiality Agreement, including the provisions therein
regarding nondisclosure of the Company’s trade secrets and confidential and proprietary information. Employee’s signature below constitutes
Employee’s certification under penalty of perjury that Employee has returned all documents and other items provided to Employee by the
Company (with the exception of a copy of the Employee Handbook and personnel documents specifically relating to Employee), developed
or obtained by Employee in connection with Employee’s employment with the Company, or otherwise belonging to the Company.
11. No Cooperation. Subject to the Protected Activity provision, Employee agrees that Employee will not knowingly encourage,
counsel, or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or
complaints by any third party against any of the Releasees, unless under a subpoena or other court order to do so or upon written request from
an administrative agency or the legislature or as related directly to the ADEA waiver in this Agreement. Employee agrees both to
immediately notify the Company upon receipt of any such
subpoena or court order or written request from an administrative agency or the legislature, and to furnish, within three (3) business days of
its receipt, a copy of such subpoena or other court order or written request from an administrative agency or the legislature. If approached by
anyone for counsel or assistance in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints
against any of the Releasees, Employee shall state no more than that Employee cannot provide counsel or assistance.
12. Protected Activity Not Prohibited. Employee understands that nothing in this Agreement shall in any way limit or prohibit
Employee from engaging in any Protected Activity. Protected Activity includes filing and/or pursuing a charge, complaint, or report with, or
otherwise communicating, cooperating, or participating in any investigation or proceeding that may be conducted by any federal, state or
local government agency or commission, including the Securities and Exchange Commission, the Equal Employment Opportunity
Commission, the Occupational Safety and Health Administration, and the National Labor Relations Board (“Government Agencies”).
Employee understands that in connection with such Protected Activity under this section, Employee is permitted to disclose documents or
other information as permitted by law, without giving notice to, or receiving authorization from, the Company. Notwithstanding the
foregoing, Employee agrees to take all reasonable precautions to prevent any unauthorized use or disclosure of any information that may
constitute Company confidential information under the Confidentiality Agreement to any parties other than the Government Agencies.
Employee further understands that “Protected Activity” does not include the disclosure of any Company attorney-client privileged
communications or attorney work product. Any language in the Confidentiality Agreement regarding Employee’s right to engage in Protected
Activity that conflicts with, or is contrary to, this section is superseded by this Agreement. In addition, pursuant to the Defend Trade Secrets
Act of 2016, Employee is notified that an individual will not be held criminally or civilly liable under any federal or state trade secret law for
the disclosure of a trade secret that (i) is made in confidence to a federal, state, or local government official (directly or indirectly) or to an
attorney solely for the purpose of reporting or investigating a suspected violation of law, or (ii) is made in a complaint or other document
filed in a lawsuit or other proceeding, if (and only if) such filing is made under seal. In addition, an individual who files a lawsuit for
retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the individual’s attorney and use the
trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal and does not
disclose the trade secret, except pursuant to court order.
13. Nondisparagement. Employee agrees to refrain from any disparagement, defamation, libel, or slander of any of the Releasees,
and agrees to refrain from any tortious interference with the contracts and relationships of any of the Releasees. Employee shall direct any
inquiries by potential future employers to the Company’s human resources department, which shall use its best efforts to provide only the
Employee’s last position and dates of employment.
14. Cooperation with the Company. Employee agrees that Employee shall provide reasonable cooperation and assistance to the
Company in the resolution of any matters in which Employee was involved during the course of Employee’s employment, or about which
Employee has knowledge, and in the defense or prosecution of any investigations, audits, claims or actions now in existence or which may be
brought or threatened in the future against or on behalf of the Company, including any investigations, audits, claims or actions involving or
against its officers, directors and employees. Employee’s cooperation with such matters shall include, without limitation, being available to
consult with the Company regarding matters in which Employee has been involved or has knowledge; to reasonably assist the Company in
preparing for any proceeding (including, without limitation, depositions, mediations, hearings, settlement negotiations, discovery
conferences, arbitration, or trial); to provide affidavits reflecting truthful written testimony; to assist with any audit, inspection, proceeding or
other inquiry; and to act as a witness to provide truthful testimony in connection with any investigation, audit, mediation, litigation or other
legal proceeding affecting the Company. Employee agrees to keep the Company’s Human Resource department apprised of Employee’s
current contact information, including telephone numbers, work address, home address, and email address(es), and to promptly respond to
communications from the Company in connection with this Section 14. Employee understands and agrees that this provision requires
Employee’s cooperation with the Company, but is not intended to have any influence whatsoever on any specific outcome in any matter and
Employee is expected at all times to provide truthful testimony and responses in connection with any matter. Employee understands and
agrees that Employee is not otherwise entitled to any additional compensation for such cooperation, beyond the payments and consideration
provided under this Agreement.
15. Breach. In addition to the rights provided in the “Attorneys’ Fees” section below, Employee acknowledges and agrees that any
material breach of this Agreement, unless such breach constitutes a legal action by Employee challenging or seeking a determination in good
faith of the validity of the waiver herein under the ADEA, or of any provision of the Confidentiality Agreement (except as amended herein)
shall entitle the Company immediately to recover and/or cease providing the consideration provided to Employee under this Agreement and
to obtain damages, except as provided by law.
16. No Admission of Liability. Employee understands and acknowledges that with respect to all claims released herein, this
Agreement constitutes a compromise and settlement of any and all actual or potential disputed claims by Employee unless such claims were
explicitly not released by the release in this Agreement. No action taken by the Company hereto, either previously or in connection with this
Agreement, shall be deemed or construed to be (a) an admission of the truth or falsity of any actual or potential claims or (b) an
acknowledgment or admission by the Company of any fault or liability whatsoever to Employee or to any third party.
17. Costs. The Parties shall each bear their own costs, attorneys’ fees, and other fees incurred in connection with the preparation of
this Agreement.
18. ARBITRATION. EXCEPT AS PROHIBITED BY LAW, THE PARTIES AGREE THAT ANY AND ALL DISPUTES
ARISING OUT OF THE TERMS OF THIS AGREEMENT, THEIR INTERPRETATION, EMPLOYEE’S EMPLOYMENT WITH THE
COMPANY OR THE TERMS THEREOF, OR ANY OF THE MATTERS HEREIN RELEASED, SHALL BE SUBJECT TO
ARBITRATION UNDER THE FEDERAL ARBITRATION ACT (THE “FAA”) AND THAT THE FAA SHALL GOVERN AND APPLY
TO THIS ARBITRATION AGREEMENT WITH FULL FORCE AND EFFECT; HOWEVER, WITHOUT LIMITING ANY PROVISIONS
OF THE FAA, A MOTION OR PETITION OR ACTION TO COMPEL ARBITRATION MAY ALSO BE BROUGHT IN STATE COURT
UNDER THE PROCEDURAL PROVISIONS OF SUCH STATE’S LAWS RELATING TO MOTIONS OR PETITIONS OR ACTIONS TO
COMPEL ARBITRATION. EMPLOYEE AGREES THAT, TO THE FULLEST EXTENT PERMITTED BY LAW, EMPLOYEE MAY
BRING ANY SUCH ARBITRATION PROCEEDING ONLY IN EMPLOYEE’S INDIVIDUAL CAPACITY. ANY ARBITRATION WILL
OCCUR IN SAN MATEO COUNTY, CALIFORNIA, BEFORE JAMS, PURSUANT TO ITS EMPLOYMENT ARBITRATION RULES &
PROCEDURES (“JAMS RULES”), EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION. THE PARTIES AGREE THAT THE
ARBITRATOR SHALL HAVE THE POWER TO DECIDE ANY MOTIONS BROUGHT BY ANY PARTY TO THE ARBITRATION,
INCLUDING MOTIONS FOR SUMMARY JUDGMENT AND/OR ADJUDICATION, AND MOTIONS TO DISMISS AND
DEMURRERS, APPLYING THE STANDARDS SET FORTH UNDER THE CALIFORNIA CODE OF CIVIL PROCEDURE. THE
PARTIES AGREE THAT THE ARBITRATOR SHALL ISSUE A WRITTEN DECISION ON THE MERITS. THE PARTIES ALSO
AGREE THAT THE ARBITRATOR SHALL HAVE THE POWER TO AWARD ANY REMEDIES AVAILABLE UNDER APPLICABLE
LAW, AND THAT THE ARBITRATOR MAY AWARD ATTORNEYS’ FEES AND COSTS TO THE PREVAILING PARTY, WHERE
PERMITTED BY APPLICABLE LAW. THE ARBITRATOR MAY GRANT INJUNCTIONS AND OTHER RELIEF IN SUCH
DISPUTES. THE DECISION OF THE ARBITRATOR SHALL BE FINAL, CONCLUSIVE, AND BINDING ON THE PARTIES TO THE
ARBITRATION. THE PARTIES AGREE THAT THE PREVAILING PARTY IN ANY ARBITRATION SHALL BE ENTITLED TO
INJUNCTIVE RELIEF IN ANY COURT OF COMPETENT JURISDICTION TO ENFORCE THE ARBITRATION AWARD. THE
PARTIES TO THE ARBITRATION SHALL EACH PAY AN EQUAL SHARE OF THE COSTS AND EXPENSES OF SUCH
ARBITRATION, AND EACH PARTY SHALL SEPARATELY PAY FOR ITS RESPECTIVE COUNSEL FEES AND EXPENSES;
PROVIDED, HOWEVER, THAT THE ARBITRATOR MAY AWARD ATTORNEYS’ FEES AND COSTS TO THE PREVAILING
PARTY, EXCEPT AS PROHIBITED BY LAW. THE PARTIES HEREBY AGREE TO WAIVE THEIR RIGHT TO HAVE ANY DISPUTE
BETWEEN THEM RESOLVED IN A COURT OF LAW BY A JUDGE OR JURY. NOTWITHSTANDING THE FOREGOING, THIS
SECTION WILL NOT PREVENT EITHER PARTY FROM SEEKING
INJUNCTIVE RELIEF (OR ANY OTHER PROVISIONAL REMEDY) FROM ANY COURT HAVING JURISDICTION OVER THE
PARTIES AND THE SUBJECT MATTER OF THEIR DISPUTE RELATING TO THIS AGREEMENT AND THE AGREEMENTS
INCORPORATED HEREIN BY REFERENCE. SHOULD ANY PART OF THE ARBITRATION AGREEMENT CONTAINED IN THIS
SECTION CONFLICT WITH ANY OTHER ARBITRATION AGREEMENT BETWEEN THE PARTIES, INCLUDING, BUT NOT
LIMITED TO THE ARBITRATION SECTION OF THE CONFIDENTIALITY AGREEMENT, THE PARTIES AGREE THAT THIS
ARBITRATION AGREEMENT IN THIS SECTION SHALL GOVERN.
19. Tax Consequences. The Company makes no representations or warranties with respect to the tax consequences of the payments
and any other consideration provided to Employee or made on Employee’s behalf under the terms of this Agreement. Employee agrees and
understands that Employee is responsible for payment, if any, of local, state, and/or federal taxes on the payments and any other
consideration provided hereunder by the Company and any penalties or assessments thereon. Employee further agrees to indemnify and hold
the Releasees harmless from any claims, demands, deficiencies, penalties, interest, assessments, executions, judgments, or recoveries by any
government agency against the Company for any amounts claimed due on account of (a) Employee’s failure to pay or delayed payment of
federal or state taxes, or (b) damages sustained by the Company by reason of any such claims, including attorneys’ fees and costs. The Parties
agree and acknowledge that the payments made pursuant to Section 1 of this Agreement are not related to sexual harassment or sexual abuse
and not intended to fall within the scope of 26 U.S.C. Section 162(q).
20. Section 409A. It is intended that this Agreement comply with, or be exempt from, Code Section 409A and the final regulations
and official guidance thereunder (“Section 409A”) and any ambiguities herein will be interpreted to so comply and/or be exempt from
Section 409A. Each payment and benefit to be paid or provided under this Agreement is intended to constitute a series of separate payments
for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. The Company and Employee will work together in good faith to
consider either (i) amendments to this Agreement; or (ii) revisions to this Agreement with respect to the payment of any awards, which are
necessary or appropriate to avoid imposition of any additional tax or income recognition prior to the actual payment to Employee under
Section 409A. In no event will the Releasees reimburse Employee for any taxes that may be imposed on Employee as a result of Section
409A.
21. Authority. The Company represents and warrants that the undersigned has the authority to act on behalf of the Company and to
bind the Company and all who may claim through it to the terms and conditions of this Agreement. Employee represents and warrants that
Employee has the capacity to act on Employee’s own behalf and on behalf of all who might claim through Employee to bind them to the
terms and conditions of this Agreement. Each Party warrants and represents that there are no liens or claims of lien or assignments in law or
equity or otherwise of or against any of the claims or causes of action released herein.
22. Severability. In the event that any provision or any portion of any provision hereof or any surviving agreement made a part
hereof becomes or is declared by a court of competent jurisdiction or arbitrator to be illegal, unenforceable, or void, this Agreement shall
continue in full force and effect without said provision or portion of provision.
23. Attorneys’ Fees. Except with regard to a legal action challenging or seeking a determination in good faith of the validity of the
waiver herein under the ADEA, in the event that either Party brings an action to enforce or effect its rights under this Agreement, the
prevailing Party shall be entitled to recover its costs and expenses, including the costs of mediation, arbitration, litigation, court fees, and
reasonable attorneys’ fees incurred in connection with such an action.
24. Entire Agreement. This Agreement represents the entire agreement and understanding between the Company and Employee
concerning the subject matter of this Agreement and Employee’s employment with and separation from the Company and the events leading
thereto and associated therewith, and supersedes and replaces any and all prior agreements and understandings concerning the subject matter
of this Agreement and Employee’s relationship with the Company, including, for example, the Employment Agreement, the Participation
Agreement, and the Severance Policy. Notwithstanding the foregoing, the respective rights and obligations of each of the Parties prescribed
in the following
agreements shall remain in full force and effect and survive Employee’s separation from employment with the Company: (a) the
Confidentiality Agreement, (b) the Option Agreement, (c) the Indemnification Agreement, (d) Sections 7-23 of the Employment Agreement,
and (e) the Severance Policy Surviving Sections (as defined above).
25. No Oral Modification. This Agreement may only be amended in a writing signed by Employee and the Company’s Chief
Executive Officer.
26. Governing Law. This Agreement shall be governed by the laws of the State of California, without regard for choice-of-law
provisions, except that any dispute regarding the enforceability of the arbitration section of this Agreement shall be governed by the FAA.
Employee consents to personal and exclusive jurisdiction and venue in the State of California.
27. Effective Date. Employee understands that this Agreement shall be null and void if not executed by Employee within twenty-
one (21) days. Each Party has seven (7) days after that Party signs this Agreement to revoke it. This Agreement will become effective on the
eighth (8th) day after Employee signed this Agreement, so long as it has been signed by the Parties and has not been revoked by either Party
before that date (the “Effective Date”).
28. Counterparts. This Agreement may be executed in counterparts and each counterpart shall be deemed an original and all of
which counterparts taken together shall have the same force and effect as an original and shall constitute an effective, binding agreement on
the part of each of the undersigned. The counterparts of this Agreement may be executed and delivered by facsimile, photo, email PDF, or
other electronic transmission or signature.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
29. Voluntary Execution of Agreement. Employee understands and agrees that Employee executed this Agreement voluntarily and
without any duress or undue influence on the part or behalf of the Company or any third party, with the full intent of releasing all of
Employee’s claims against the Company and any of the other Releasees. Employee acknowledges that:
(a) Employee has read this Agreement;
(b) Employee has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of
Employee’s own choice or has elected not to retain legal counsel;
(c) Employee understands the terms and consequences of this Agreement and of the releases it contains;
(d) Employee is fully aware of the legal and binding effect of this Agreement; and
(e) Employee has not relied upon any representations or statements made by the Company that are not specifically set forth
in this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.
ZELANNA GOLDBERG, an individual
Dated: 10/7/2021 /s/ Zelanna Goldberg
Zelanna Goldberg
ALPINE IMMUNE SCIENCES, INC.
Dated: 10/7/2021 By /s/ Paul Rickey
Paul Rickey
Chief Financial Officer
Exhibit 10.30
Execution Version
CERTAIN INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND
WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. OMISSIONS ARE
DESIGNATED AS [***].
LICENSE AND COLLABORATION AGREEMENT
This LICENSE AND COLLABORATION AGREEMENT (the “Agreement”) is entered into as of December 15, 2021
(the “Effective Date”) by and between Horizon Therapeutics Ireland DAC, a company formed under the laws of Ireland
(“Horizon”), and Alpine Immune Sciences, Inc., a Delaware corporation (“Alpine”). Alpine and Horizon are sometimes
referred to herein individually as a “Party” and collectively as the “Parties”.
RECITALS
Whereas, Alpine has (a) a preclinical biologic therapeutic program comprising a proprietary lead [***] compound and
other [***] compounds that include [***] and (b) proprietary scientific technology and expertise to generate libraries of
compounds and variants and fusion proteins, including [***] compounds, designed to have specified characteristics and
biological functions;
Whereas, Horizon possesses resources and expertise in the development and commercialization of pharmaceutical
products and is interested in further advancing the [***] biologic therapeutic program and engaging Alpine to conduct a research
collaboration for discovery of compounds and variants directed to biologic targets selected by Horizon; and
Whereas, Alpine and Horizon wish to engage in a multi-program research collaboration, and Alpine wishes to grant, and
Horizon wishes to obtain an exclusive license under certain intellectual property rights of Alpine to research, develop,
manufacture, commercialize and otherwise exploit Licensed Compounds and Licensed Products in the Field (as such terms are
defined herein) in accordance with and on the terms and conditions set forth below.
Now, Therefore, in consideration of the foregoing premises and the mutual covenants and conditions contained in this
Agreement, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 “AAA Rules” has the meaning set forth in Section 12.1(d).
1.2 “Acquiror” has the meaning set forth in Section 12.6.
1.3 “Affiliate” means, with respect to a particular Person, any other Person that controls, is controlled by or is under
common control with such Person, for as long as such control exists. For the purposes of this definition, the word “control”
(including, with correlative meaning, the terms “controlled by” or “under common control with”) shall mean the actual power,
either directly or indirectly through one or more intermediaries, to direct or cause the direction of the management and policies of
such entity, whether by the ownership of fifty percent (50%) or more of the voting stock of such entity, or by contract or
otherwise.
1.4 “Alpine Controlled Patents” has the meaning set forth in Section 7.2(a)(iv).
1.5 “Alpine Indemnitees” has the meaning set forth in Section 9.2.
1.6 “Alpine Libraries” means Alpine’s libraries of proteins and molecules that: (a) [***] and (b) [***], but in any event
excluding all Alpine Reserved Sequences.
1.7 “Alpine Reserved Sequence” means those proteins and molecules identified in Exhibit A, as may be updated by
Alpine during the Query Period in accordance with Section 2.3(a).
1.8 “Alpine Third Party Agreement” has the meaning set forth in Section 2.7(b).
1.9 “Back-Up Compounds” means the [***] identified as back-ups to the Lead Compound on Exhibit B, as may be
modified pursuant to Section 2.3.
1.10 “Bankruptcy Code” means Title 11, U.S. Code Sections 101 et. Seq.
1.11 “Binding” means as to a Binding Partner, [***]; and “Bind” has its cognate meaning.
1.12 “Binding Partner” means any physiological molecular binding partner of a Target [***].
1.13 “Biosimilar” means, as determined on a country-by-country basis, any product with respect to a Licensed Product
(a) which (i) has been licensed as a biosimilar or interchangeable product by FDA pursuant to Article 351(k) of the Public Health
Service Act (42 U.S.C. 262(k)), as may be amended, or any subsequent or superseding law, statute or regulation, (ii) has been
licensed as a similar biological medicinal product by EMA pursuant to Directive 2001/83/EC, as may be amended, or any
subsequent or superseding law, statute or regulation, or (iii) has otherwise achieved Regulatory Approval from another applicable
Regulatory Authority on a basis analogous to clause (a)(i) or (ii), in each case (clause (i) and (ii)); or (b) obtained marketing
approval in such country in the Territory by means of an abbreviated procedure that relies (i) in whole or in part on the safety and
efficacy data contained in the Regulatory Approval Application for such Licensed Product submitted by Horizon or its Affiliate
or Sublicensee and approved in such country, or (ii) on establishing biosimilarity to such Licensed Product in such country, and in
each case (clause (a) and (b)) which product is marketed for sale by a Third Party (not licensed, supplied or otherwise authorized
by Horizon or its Affiliates or Sublicensees) in a country in the Territory.
1.14 “Business Day” means any weekday that is not a legal holiday in New York, New York, U.S. or Dublin, Ireland,
and is not a day on which banking institutions are required by Law to be closed.
1.15 “Calendar Quarter” means the respective periods of three (3) consecutive calendar months ending on March 31,
June 30, September 30 and December 31; provided, however, that (a) the first Calendar Quarter of any particular period shall
extend from the commencement of such period to the end of the first complete Calendar Quarter thereafter; and (b) the last
Calendar Quarter shall end upon the expiration or termination of this Agreement.
1.16 “Calendar Year” means (a) for the first Calendar Year of the Term, the period beginning on the Effective Date and
ending on December 31, 2021, (b) for each Calendar Year of the Term thereafter, each successive period beginning on January 1
and ending twelve (12) consecutive calendar months later on December 31, and (c) for the last Calendar Year of the
2
Term, the period beginning on January 1 of the Calendar Year in which the Agreement expires or terminates and ending on the
effective date of expiration or termination of this Agreement.
1.17 [***].
1.18 [***].
1.19 “Change of Control” means the occurrence of any of the following: (a) a Party enters into a merger, consolidation,
business combination, recapitalization, share exchange, stock sale or sale or transfer of all or substantially all of its assets to
which this Agreement relates, or other similar transaction or series of transactions with a Third Party; or (b) any transaction or
series of related transactions in which any Third Party or group of Third Parties acquires beneficial ownership of securities of a
Party representing more than fifty percent (50%) of the combined voting power of the then outstanding securities of such Party.
Notwithstanding the foregoing clauses (a) or (b), a stock sale to underwriters of a public offering of a Party’s capital stock or
other Third Parties for the purpose of financing or a transaction solely to change the domicile of a Party shall not constitute a
Change of Control.
1.20 “Claims” has the meaning set forth in Section 9.1.
1.21 “Clinical Trial” means any human clinical trial of a product as defined in 21 C.F.R. § 312.21, or an equivalent
human clinical trial prescribed by the Regulatory Authorities in a foreign country.
1.22 “Code” means the Internal Revenue Code of 1986, as amended.
1.23 “Combination Product” means a Licensed Product that contains a Licensed Compound as an active ingredient
and includes at least one (1) active pharmaceutical ingredient other than a Licensed Compound (whether co-formulated or co-
packaged) and is sold either as a fixed dose or as separate doses in a single package.
1.24 “Commercialization” means all activities undertaken before and after obtaining Regulatory Approval relating
specifically to the pre-launch, launch, promotion, detailing, medical education and medical liaison activities, marketing, pricing,
reimbursement, sale, import, export and distribution of Licensed Products in the Field in the Territory, including strategic
marketing, sales force detailing, advertising, all customer support, Licensed Product distribution and invoicing and sales
activities, including any clinical study conducted after Regulatory Approval of a Licensed Product. “Commercialize” has a
correlative meaning.
1.25 “Commercially Reasonable Efforts” means efforts [***]. Commercially Reasonable Efforts shall be determined
[***].
1.26 “Confidential Information” of a Party means any and all Information that is disclosed by or on behalf a Party to
the other Party or its Affiliates pursuant to this Agreement, whether in oral, written, graphic, or electronic form. All Information
disclosed by or on behalf of a Party or its Affiliate pursuant to the Confidentiality Agreement shall be deemed to be such Party’s
Confidential Information, with the mutual understanding and agreement that any use or disclosure thereof that is authorized under
Article 10 shall not be restricted by or be deemed a violation of the Confidentiality Agreement. Notwithstanding anything
contained herein to the contrary, (a) all Horizon Sole Program IP and Research Program IP shall be deemed to be the Confidential
Information of Horizon, where Horizon shall be deemed to be the disclosing Party and Alpine shall be deemed to be the receiving
Party with respect thereto; (b) all Alpine Sole
3
Program IP shall be deemed to be the Confidential Information of Alpine, where Alpine shall be deemed to be the disclosing
Party and Horizon shall be deemed to be the receiving Party with respect thereto; and (c) all Joint Program IP, and the terms of
this Agreement, shall be deemed to be the Confidential Information of both Parties, and both Parties shall be deemed to be the
receiving Party with respect thereto.
1.27 “Confidentiality Agreement” means the Mutual Confidentiality Agreement between Alpine and Viela Bio, Inc.
(now an Affiliate of Horizon), dated as of November 14, 2019, as amended.
1.28 “Conflict” means, with respect to any Target identified as a Proposed Target, that as of the date such Target is
proposed by Horizon, such Target is the subject of: [***].
1.29 “Control” means with respect to any Information or intellectual property right, that an entity (a) owns or (b) has
the right to grant access, a license, or a sublicense (as applicable, other than by virtue of the rights granted in this Agreement) to
such Information or intellectual property right on the terms and conditions set forth in this Agreement without violating the terms
of any then-existing agreement with any Third Party. “Controlled” has a correlative meaning. Notwithstanding the foregoing, the
following shall not be deemed to be Controlled by Alpine or its Affiliates: (i) any Information or intellectual property owned or
controlled by any Acquiror immediately prior to the effective date of the Change of Control, and (ii) any Information or
intellectual property developed or acquired by or on behalf of any Acquiror after a Change of Control, without access to or use of
the Alpine Libraries, Licensed Technology or Confidential Information of Horizon or use of any employees or subcontractors
who have or have had access to any of the foregoing; however, for clarity, any Information or Patents used or generated by the
Acquiror or its Affiliates in performing any activity pursuant to this Agreement shall be considered to be Controlled by Alpine or
its Affiliates and included in the Licensed Technology subject to the license granted to Horizon under this Agreement.
1.30 “COVID Event” has the meaning set forth in Section 12.3.
1.31 [***].
1.32 [***].
1.33 “Cure Period” has the meaning set forth in Section 11.3.
1.34 “Deliverables” means the types and quantities of molecules, controls, plasmids, and proteins to be provided for the
Existing Program described in Exhibit C, as may be amended by written agreement of the Parties, or otherwise agreed in any
other work plan for the Existing Program agreed in writing by the Parties pursuant to this Agreement.
1.35 “Deliverables Budget” means the budget setting forth the total costs and expenses for Alpine to perform the
activities contemplated by the applicable Deliverables Plan and generate and deliver the Deliverables. The initial Deliverables
Budget is attached hereto as Exhibit D, as may be amended by written agreement of the Parties.
1.36 “Deliverables Plan” means each work plan for the Existing Program agreed to by the Parties in writing setting
forth certain activities to be conducted by Alpine, Queries, and Deliverables. The initial Deliverables Plan is attached hereto as
Exhibit C, as may be amended by written agreement of the Parties.
4
1.37 “Designated European Country” means [***].
1.38 “Development” means all activities that relate to obtaining, maintaining or expanding Regulatory Approval for a
Licensed Compound or Licensed Product, including research, preclinical testing, toxicology, formulation, Clinical Trials,
preparation, submission, review, and development of data or information for the purpose of submission to a Governmental
Authority to obtain, maintain or expand Regulatory Approval for a Licensed Compound or Licensed Product, and any post-
marketing surveillance study of a Licensed Compound or Licensed Product, whether or not required as a condition to, or for the
maintenance of any Regulatory Approval for a Licensed Compound or Licensed Product. “Develop” and “Developing” have
correlative meanings.
1.39 “Dollar” means a U.S. dollar, and “$” shall be interpreted accordingly.
1.40 [***].
1.41 “EMA” means the European Medicines Agency or any successor entity.
1.42 “Excluded Target” means, individually and collectively, any Target for which there is a Conflict.
1.43 “Excluded Target List” means the list provided from time to time by Alpine to the Gatekeeper listing Targets for
which there is a Conflict.
1.44 “Existing Program” means Alpine’s preclinical biological therapeutic program comprising [***], including the
Lead Compound and any Back-Up Compound, and the Alpine Libraries.
1.45 “Existing Program IP” has the meaning set forth in Section 7.1(b)(i).
1.46 “FD&C Act” means the U.S. Federal Food, Drug and Cosmetic Act, as amended, and applicable regulations
promulgated thereunder by the FDA.
1.47 “FDA” means the U.S. Food and Drug Administration or any successor entity.
1.48 “Field” means any and all uses.
1.49 “First Commercial Sale” means, with respect to a Licensed Product in a country, the first sale to a Third Party
following the receipt of Regulatory Approval (including pricing and reimbursement approval if necessary to initiate marketing
and sale of such Licensed Product in such country) in such country; provided that “First Commercial Sale” shall not include sale,
disposal or use of a Licensed Product for marketing, regulatory, development or charitable purposes, such as clinical trials, pre-
clinical trials, compassionate use, named patient use, or indigent patient programs, in each case, without consideration.
1.50 “Force Majeure” has the meaning set forth in Section 12.3.
1.51 “FTE” means the equivalent of the work of one qualified employee or agent for the applicable activities, full time,
for one year.
5
1.52 “FTE Rate” means [***] per one full FTE per [***], which rate includes all direct and indirect costs of the
performing Party’s FTE, including personnel and travel expenses. Such rate, [***].
1.53 “GAAP” means the then current generally accepted accounting principles in the U.S., as applied on a consistent
basis.
1.54 “Gatekeeper” means a Third Party selected by the Parties to oversee the management of the Excluded Target List
and the Reserved Target List.
1.55 “GCP” or “Good Clinical Practices” means the then-current standards, practices and procedures promulgated or
endorsed by the FDA as set forth in the guidelines entitled “Guidance for Industry E6 Good Clinical Practice: Consolidated
Guidance,” including related regulatory requirements imposed by the FDA and comparable regulatory standards, practices and
procedures promulgated by the EMA or other Regulatory Authority applicable to the Territory, as they may be updated from time
to time, including applicable quality guidelines promulgated under the ICH.
1.56 “GLP” or “Good Laboratory Practices” means the then-current good laboratory practice standards promulgated
or endorsed by the FDA as defined in 21 C.F.R. Part 58, and comparable regulatory standards promulgated by the EMA or other
Regulatory Authority applicable to the Territory, as they may be updated from time to time, including applicable quality
guidelines promulgated under the ICH.
1.57 “Governmental Authority” means any multinational, federal, state, local, municipal, provincial or other
governmental authority of any nature (including any governmental division, prefecture, subdivision, department, agency, bureau,
branch, office, commission, council, court or other tribunal).
1.58 “Horizon Controlled Patents” has the meaning set forth in Section 7.2(a)(i).
1.59 “Horizon Indemnitees” has the meaning set forth in Section 9.1.
1.60 “Horizon Reserved Sequence” has the meaning set forth in Section 2.3(b).
1.61 “In Vivo Pharmacology Study” means any study which includes an efficacy or pharmacodynamic-related
endpoint, including, any study in non-human primates (whether pharmacokinetic or not, and whether or not conducted under
GLP).
1.62 “ICH” means International Conference on Harmonisation.
1.63 “IND” means (a) an Investigational New Drug Application as defined in the FD&C Act and applicable regulations
promulgated thereunder by the FDA, or (b) the equivalent application to the equivalent agency in any other regulatory
jurisdiction, the filing of which is necessary to Initiate or conduct a Clinical Trial of a pharmaceutical product in humans in such
jurisdiction.
1.64 “Indemnified Party” has the meaning set forth in Section 9.3.
1.65 “Indemnifying Party” has the meaning set forth in Section 9.3.
6
1.66 “Information” means any and all data, results, technology, business or financial information or information of any
type whatsoever, in any tangible or intangible form, including know-how, trade secrets, practices, techniques, methods, processes,
developments, specifications, formulations, or formulae of any type or kind (patentable or otherwise), software, algorithms,
marketing reports, expertise, technology, test data (including pharmacological, biological, chemical, biochemical, clinical test
data and data resulting from non-clinical studies), chemistry, manufacture and controls information, stability data and other study
data and procedures.
1.67 “Initiation” means, with respect to a Clinical Trial, the first dosing of the first subject in such Clinical Trial.
“Initiate” has a correlative meaning.
1.68 “Joint Program IP” has the meaning set forth in Section 7.1(b)(iii).
1.69 “Joint Program Patent” has the meaning set forth in Section 7.1(b)(iii).
1.70 “Joint Research Committee” or “JRC” has the meaning set forth in Section 4.10.
1.71 “JPC” means the committee described in Section 7.2(a)(vi).
1.72 “Knowledge” means, with respect to Alpine, the actual knowledge, as of the Effective Date, of the individuals
listed on Exhibit E exercising reasonably diligent inquiry of such individual’s direct reports.
1.73 “Laws” means any and all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect
of law of any Regulatory Authority or other Governmental Authority, including federal, national, multinational, state, provincial,
county, city or other political subdivision.
1.74 “Lead Compound” means the lead [***] set forth on Exhibit F.
1.75 “Licensed Compound” means (a) any Licensed Existing Program Compound or (b) Research Program
Compound.
1.76 “Licensed Existing Program Compound” means (a) [***] the Lead Compound, any Back-Up Compound and
any Horizon Reserved Sequences [***], or (b) [***].
1.77 “Licensed Existing Program Product” means any product containing or comprising a Licensed Existing Program
Compound, alone or in combination with one or more other active ingredients, in any and all forms, presentations, delivery
systems, dosages and formulations.
1.78 “Licensed Know-How” means any and all Information that is (a) Controlled by Alpine or any of its Affiliates
(subject to Section 2.7(b)) as of the Effective Date or at any time during the Term, and (b) [***] for the Development,
Manufacturing, Commercialization, use, sale, offer for sale, importation or other exploitation of any Licensed Existing Program
Compound or Licensed Existing Program Product in the Field, including Alpine’s Sole Program IP and Alpine’s rights in any
Joint Program IP. Licensed Know-How shall include the Information listed on Exhibit G. With regard to any Information first
Controlled by Alpine or its Affiliate after the Query Period to the extent that it is specific to manufacturing, formulation, or
delivery technology generally applicable to other products of Alpine or such Affiliates as well
7
as to Licensed Existing Program Compounds or Licensed Existing Program Products, it will be Licensed Know-How only if it is
necessary for the Development, Manufacturing, Commercialization, use, sale, offer for sale, importation or other exploitation of
any Licensed Existing Program Compound (including as incorporated into a Licensed Existing Program Product) in the Field.
1.79 “Licensed Patent” means any Patent that is (a) Controlled by Alpine or any of its Affiliates (subject to
Section 2.7(b)) as of the Effective Date or at any time during the Term (including Alpine’s Sole Program Patents and Alpine’s
rights in any Joint Program Patents), and (b) [***] for the Development, Manufacturing, Commercialization, use, sale, offer for
sale, importation or other exploitation of any Licensed Existing Program Compound (including as incorporated into a Licensed
Existing Program Product) in the Field, including any Patent claiming (i) any Licensed Existing Program Compound (including
Licensed Existing Program Compound contained in a Licensed Existing Program Product) in the Field, (ii) any (A) [***], or (B)
Horizon Reserved Sequences that are part of, or encode any part of, any Licensed Existing Program Compound, or (iii) the
Manufacture or use of any Licensed Existing Program Compound (including Licensed Existing Program Compound contained in
a Licensed Existing Program Product). The Licensed Patents existing as of the Effective Date are listed on Exhibit H. With
regard to any Patent first Controlled by Alpine or its Affiliate after the Query Period to the extent that it claims manufacturing,
formulation, or delivery technology generally applicable to other products of Alpine or such Affiliates as well as to Licensed
Existing Program Compounds or Licensed Existing Program Products, it will be a Licensed Patent only if it is necessary for the
Development, Manufacturing, Commercialization, use, sale, offer for sale, importation or other exploitation of any Licensed
Existing Program Compound (including as incorporated into a Licensed Existing Program Product) in the Field.
1.80 “Licensed Product” means (a) any Licensed Existing Program Product or (b) Research Program Product.
1.81 “Licensed Technology” means the Licensed Know-How and Licensed Patents.
1.82 “Manufacture” means all activities related to the manufacturing of any Licensed Compound or Licensed Product,
or any ingredient thereof, including test method development, analytical testing and stability testing, formulation, process
development, manufacturing scale-up, manufacturing any Licensed Compound or Licensed Product in bulk or finished form for
Development, manufacturing finished Licensed Product for Commercialization, packaging, in-process and finished product
testing, release of Licensed Product or any component or ingredient thereof, quality assurance activities related to manufacturing
and release of Licensed Product, and regulatory activities related to any of the foregoing. “Manufacturing” has a correlative
meaning.
1.83 “Net Sales” means, with respect to a given period of time after First Commercial Sale of a Licensed Product, gross
sales of such Licensed Product by Horizon, its Affiliates and Sublicensees (each a “Selling Party”) in such period, [***] by the
Selling Party across its operations:
(a) [***];
(b) [***];
(c) [***];
8
(d) [***];
(e) [***];
(f) [***];
(g) [***];
(h) [***].
Even if there is overlap between any of the [***] described above, [***]. For purposes of determining Net Sales, a Licensed
Product shall be deemed to be sold when invoiced and a sale shall not include [***]. [***] shall be excluded from the
computation of Net Sales if [***], but [***] shall be included in the computation of Net Sales.
Notwithstanding the foregoing, in the event a Licensed Product is sold in a country in the Territory as a Combination Product,
Net Sales of the Combination Product will be calculated as follows:
(i) If the Licensed Product (containing only a Licensed Compound and no other active pharmaceutical
ingredient) and the other active pharmaceutical ingredient(s) each are sold separately in such country, Net Sales will be calculated
by [***].
(ii) If the Licensed Product is sold independently of the other active pharmaceutical ingredient(s) therein
in such country, but the other pharmaceutical ingredient(s) is not sold independently in such country, Net Sales will be calculated
by [***].
(iii) If the Licensed Product is not sold independently of the other active pharmaceutical ingredient(s)
therein in such country, but the other active pharmaceutical ingredient(s) is sold independently in such country, Net Sales will be
calculated by [***].
(iv) If the Licensed Product is not sold independently in such country and the other active pharmaceutical
ingredient(s) is not sold in reasonable quantities independently in such country, the Parties shall determine Net Sales for such
Combination Product by [***].
All discounts, allowances, credits, rebates and other deductions, to the extent allocable across multiple products including a
Licensed Product, shall be fairly allocated between the Licensed Product and other products of Horizon, its Affiliates or
Sublicensees, so that the Licensed Product does not bear a disproportionate portion of such deductions.
1.84 “New Technology” has the meaning set forth in Section 2.7(b).
1.85 “Non-Breaching Party” has the meaning set forth in Section 11.3.
1.86 “Patents” means (a) pending patent applications, issued patents, utility models and designs; (b) reissues,
substitutions, confirmations, registrations, validations, re-examinations, additions, continuations, continued prosecution
applications, continuations-in-part, or divisions of or to any of the foregoing; and (c) extensions, renewals or restorations of any
of the foregoing by existing or future extension, renewal or restoration mechanisms, including supplementary protection
certificates or the equivalent thereof.
9
1.87 [***].
1.88 [***].
1.89 [***].
1.90 [***].
1.91 [***].
1.92 “Person” means any individual, corporation, company, partnership, association, joint-stock company, trust,
unincorporated organization or government or political subdivision thereof.
1.93 “Phase 1 Clinical Trial” means a Clinical Trial of a Licensed Product conducted in healthy volunteer subjects or
patients with the disease or condition under study to evaluate the drug metabolism, pharmacologic actions, the side effects or, if
possible, to gain early evidence on the effectiveness of the Licensed Product, as and to the extent defined for the U.S. in 21 C.F.R.
§ 312.21(a), as amended from time to time, or equivalent law or regulation in regulatory jurisdictions outside the U.S.
1.94 “Phase 2 Clinical Trial” means a Clinical Trial of a Licensed Product conducted in patients with the disease or
condition under study to evaluate dose ranges, pharmacodynamics, biomarkers, biological activity or the effectiveness of the
Licensed Product, as and to the extent defined for the U.S. in 21 C.F.R. § 312.21(b), as amended from time to time, or equivalent
law or regulation in regulatory jurisdictions outside the U.S.
1.95 “Phase 3 Clinical Trial” means a Clinical Trial of a Licensed Product with a defined dose or a set of defined doses
of such Licensed Product on sufficient numbers of human patients designed to confirm with statistical significance the safety and
efficacy of such Licensed Product and to support a Regulatory Approval, as and to the extent defined for the U.S. in 21 C.F.R.
§ 312.21(c), as amended from time to time, or equivalent law or regulation in regulatory jurisdictions outside the U.S.
1.96 “PHSA” means the United States Public Health Service Act, as amended from time to time.
1.97 “Pivotal Clinical Trial” shall mean (a) a Phase 3 Clinical Trial, or (b) any other Clinical Trial of a Licensed
Product for which the applicable Regulatory Authority has agreed, whether before Initiation of such Clinical Trial (e.g., pursuant
to an agreement with or statement from the FDA or the EMA on a ‘Special Protocol Assessment’ or equivalent or other guidance
or minutes issued by the FDA or EMA) or after Initiation of such Clinical Trial (e.g., based on an interim data analysis), is
sufficient to form the primary basis of an efficacy claim in a Regulatory Approval Application submission, regardless of whether
the sponsor of such trial characterizes or refers to such trial as a [***] trial (or otherwise) in the applicable protocol, on
clinicaltrials.gov, or in any other context. If a Clinical Trial is determined by the applicable Regulatory Authority, after review of
the efficacy and safety data from a [***] Clinical Trial for the Licensed Product, to be sufficient to form the primary basis of an
efficacy claim in a Regulatory Approval Application submission (i.e. Clinical Trial constitutes a Pivotal Clinical Trial) without
the need for a Phase 3 Clinical Trial(s) prior to submission, then, for purposes of Section 6.4, the Initiation of such Pivotal
Clinical Trial shall be deemed to have occurred on the date of such determination by the applicable Regulatory Authority.
10
1.98 “Product Infringement” has the meaning set forth in Section 7.3(a).
1.99 “Product-Specific Claim” has the meaning set forth in Section 7.2(a)(i).
1.100 “Product-Specific Patent” has the meaning set forth in Section 7.2(a)(i).
1.101 “Program” means, individually and collectively, the Existing Program and the Research Program.
1.102 “Proposed Target” means any Target that is proposed by Horizon to be a Reserved Target.
1.103 “Prosecution and Maintenance” means, with respect to any Patent, the preparation, filing, prosecution and
maintenance (including any oppositions,
interferences, reissue proceedings, reexaminations, post-grant proceedings,
supplemental examinations, post grant review proceedings, inter partes review proceedings, patent interference proceedings,
opposition proceedings, derivation proceedings, reissue and reexamination, maintenance and defense) of or with respect to such
Patent. For clarity, “Prosecution and Maintenance” shall not include requests for Patent term extensions.
1.104 “Query(ies)” means each written request by Horizon specifying the qualities and characteristics with respect to a
particular [***] in regard to which Alpine will interrogate the Alpine Libraries.
1.105 “Query Period” means the period commencing on the Effective Date and ending [***].
1.106 “Regulatory Approval” means all approvals from the relevant Regulatory Authority in a given country or
regulatory jurisdiction of the Regulatory Approval Application for a Licensed Product in the Field, including all licenses,
registrations, and pricing or reimbursement approvals, that are necessary to initiate the sale and marketing of such Licensed
Product, in such country or regulatory jurisdiction.
1.107 “Regulatory Approval Application” means an application to the appropriate Regulatory Authority for approval
to sell a Licensed Product in any particular jurisdiction, including a New Drug Application in the U.S.
1.108 “Regulatory Authority” means, in a particular country or jurisdiction, any applicable Governmental Authority
that has the authority to regulate the manufacture, marketing, testing, pricing, or sale of drug products in such country or
jurisdiction.
1.109 “Regulatory Exclusivity” means any exclusive marketing rights or data exclusivity rights conferred by any
Governmental Authority under applicable Law with respect to a Licensed Product in a country or jurisdiction in the Territory to
prevent Third Parties from Commercializing such Licensed Product in such country or jurisdiction, other than a Patent right,
including orphan drug exclusivity, pediatric exclusivity, rights conferred in the U.S. under the Hatch-Waxman Act or the FDA
Modernization Act of 1997, in the EU under Directive 2001/83/EC, or rights similar thereto in other countries or regulatory
jurisdictions in the Territory.
1.110 “Regulatory Materials” means regulatory applications, submissions, notifications, communications,
correspondence, registrations, Regulatory Approvals or other filings made to, received from or otherwise conducted with a
Regulatory Authority in order to
11
Develop, Manufacture, or Commercialize a Licensed Product in a particular country or jurisdiction.
1.111 “Research Plan” means, with respect to any Research Program Target(s), the plan agreed to by the Parties in
writing setting forth certain research activities to be conducted by Alpine, the associated budget and Research Program
Deliverables. The initial Research Plan is attached hereto as Exhibit I.
1.112 “Research Program” has the meaning set forth in Section 4.1.
1.113 “Research Program Compound” means (a) any molecule or compound that contains, comprises or incorporates
(i) [***] (ii) [***] (b) [***]
1.114 “Research Program Deliverables” means, with respect to any Research Program, the Research Program
Libraries, including proteins, molecules and sequences contained therein, data, and types and quantities of molecules, controls,
plasmids, and proteins to be provided for such Research Program as agreed in the Research Plan.
1.115 “Research Program IP” has the meaning set forth in Section 7.1(c)(i).
1.116 “Research Program Libraries” means, with respect to any Research Program Target(s), the libraries of proteins
and molecules[***].
1.117 “Research Program Patents” has the meaning set forth in Section 7.1(c)(ii).
1.118 “Research Program Product” means any product containing or comprising a Research Program Compound,
alone or in combination with one or more other active ingredients, in any and all forms, presentations, delivery systems, dosages
and formulations.
1.119 “Research Program Target” means any Reserved Target selected by Horizon for a research program to be
conducted in accordance with Article 4, unless and until replaced pursuant to Section 4.2.
1.120 “Research Program Term” has the meaning set forth in Section 4.6.
1.121 “Research Specifications” has the meaning set forth in Section 4.5.
1.122 “Reserved Target” means any of the Targets on the Reserved Target List provided by Horizon to the Gatekeeper,
as such list may be amended pursuant to Section 4.2.
1.123 “Royalty Term” has the meaning set forth in Section 6.6(b).
1.124 “Selection Period” has the meaning set forth in Section 4.2(b).
1.125 [***].
1.126 “Sole Program IP” has the meaning set forth in Section 7.1(b)(ii).
1.127 “Sole Program Patent” has the meaning set forth in Section 7.1(b)(ii).
1.128 “SPA” has the meaning set forth in Section 6.2.
12
1.129 “Specifications” has the meaning set forth in Section 3.1.
1.130 “Subcontractors” has the meaning set forth in Section 2.1(b).
1.131 “Subject Patent” has the meaning set forth in Section 7.4.
1.132 “Sublicensee” means any Third Party to whom Horizon grants a sublicense of the license granted in Section
2.2(a) or a license under any Research Program IP with respect to any Research Program Product.
1.133 “Substitution Notice” has the meaning set forth in Section 2.3(b).
1.134 “Target” means any [***].
1.135 “Term” has the meaning set forth in Section 11.1.
1.136 “Territory” means worldwide.
1.137 “Third Party” means any entity other than Alpine or Horizon or an Affiliate of either of them.
1.138 “U.S.” means the United States of America, including all possessions and territories thereof.
1.139 “Valid Claim” means a claim [***].
1.140 “Variant” [***].
1.141 “VAT” means value added tax, sales taxes, consumption taxes and other similar taxes imposed or required by
applicable Law.
2.1 Research License.
ARTICLE 2
LICENSES
(a) Non-Exclusive License to Use the Alpine Libraries. Subject to the terms and conditions of this Agreement,
Alpine hereby grants to Horizon a non-exclusive license to access the Alpine Libraries and use the proteins and molecules within
the Alpine Libraries (i) to research, discover and identify [***] for further Development as Licensed Existing Program
Compounds [***] or (ii) [***] in connection with the activities in clause (i) and the exercise of the rights granted in Section 2.2
with respect to any Licensed Existing Program Compounds resulting from the activities in clause (i) [***]. For clarity, Horizon
may use the proteins and molecules within the Alpine Libraries as permitted by the proceeding sentence and [***]; however,
Horizon shall not use the Alpine Libraries or proteins or molecules therein to develop any [***]. Alpine will disclose to Horizon
the Alpine Libraries on the Effective Date [***].
(b) Subcontractors. Horizon shall have the right to utilize its Affiliates and Third Party subcontractors
(“Subcontractors”) to perform activities set forth in Section 2.1(a) for or on behalf of Horizon, subject to the terms and
conditions set forth in Section 2.4(b).
2.2 Exclusive Development and Commercialization License.
13
(a) Exclusive License Grant. Subject to the terms and conditions of this Agreement, Alpine hereby grants to
Horizon an exclusive (even as to Alpine and its Affiliates), royalty-bearing license, with the right to sublicense as provided in
Section 2.4, under the Licensed Technology, to Develop, Manufacture, Commercialize, make, have made, use, sell, offer for sale,
import and otherwise exploit Licensed Existing Program Compounds and Licensed Existing Program Products in the Field in the
Territory. For clarity, no license whatsoever (whether to Information or intellectual property) is granted by Alpine with respect to
any active pharmaceutical ingredient(s) or other subject matter that is Controlled by Alpine or its Affiliates incorporated in any
Licensed Existing Program Product other than the Licensed Existing Program Compound(s) contained in or comprising such
Licensed Existing Program Product.
(b) Subcontractors. Horizon shall have the right to utilize its Affiliates and Subcontractors to perform activities
set forth in Section 2.2(a) for or on behalf of Horizon, subject to the terms and conditions set forth in Section 2.4(b).
2.3 Use and Restrictions on [***] in Alpine Libraries.
(a) Alpine Right to Use. Subject to this Section 2.3 and the limitations in Section 2.8, and excluding any
Horizon Reserved Sequences, Alpine shall retain the right to use all other [***] in the Alpine Libraries to generate compounds
(excluding any [***]) for Alpine’s other programs. Alpine may update the list of Alpine Reserved Sequences on Exhibit A upon
written notice to Horizon to add any such [***] in the Alpine Libraries (subject to the limitations in Section 2.8, and [***].
(b) Horizon Reserved Sequences. The [***] that are part of, or encode any part of, the Lead Compound and
any [***] that are part of, or encode any part of, the Back-Up Compounds are referred to as “Horizon Reserved Sequences”.
[***] Alpine shall deliver the Horizon Reserved Sequences to Horizon together with the Lead Compound and the Back-Up
Compounds in accordance with Section 3.1. With regard to any [***] identified from the Alpine Libraries during the Query
Period that Horizon selects to substitute for a Horizon Reserved Sequence in accordance with this Section 2.3(b), [***].
2.4 Sublicensing and Subcontracting Rights.
Affiliates or Sublicensees, subject to the following:
(a) Sublicenses. Horizon shall have the right to grant sublicenses of the license granted in Section 2.2(a) to its
failures by its Affiliates and Sublicensees to comply with the applicable terms of this Agreement;
(i) Horizon shall remain responsible for the performance of its obligations hereunder and any and all
(ii) such sublicense shall be granted pursuant, and subject to, a written agreement that is consistent with
the terms and conditions of this Agreement and Horizon shall contractually require that its Sublicensees comply with the
applicable terms and conditions of this Agreement;
(iii) Horizon shall provide to Alpine a fully executed copy of each agreement pursuant to which such
sublicense is granted promptly after execution, which may be redacted with respect to matters unnecessary to show compliance
herewith; and
(iv) [***]
14
(b) Subcontractors. Horizon (and its Affiliates and Sublicensees) shall have the right to retain and authorize
Subcontractors to perform any activity in connection with Horizon’s (or its Affiliate’s or Sublicensee’s) exercise of any of its
rights or performance of any of its obligations hereunder, where such activity is to be performed at the direction and control and
for the sole benefit of Horizon, its Affiliates or Sublicensees. Such retention of such Subcontractor shall not be a sublicense
within the meaning of this Section 2.4 but shall be considered an activity of Horizon under the license granted in Section 2.2(a).
Horizon shall remain liable to Alpine for any act or omission of its Subcontractors and any and all failures by such
Subcontractors to comply with the terms of this Agreement.
2.5 Disclosure of Licensed Know-How. Alpine will promptly transfer to Horizon all Licensed Know-How
(a) promptly following the Effective Date to the extent then existing, (b) generated during the activities conducted pursuant to the
Deliverables Plan, as applicable, [***] following completion of such activities, and (c) [***].
2.6 Retained Rights; No Implied Licenses. Except as expressly granted under Sections 2.1 and 2.2 and subject to
Sections 2.3 and 2.8, Alpine retains all rights under the Licensed Technology, including the right to fulfill Alpine’s obligations
under this Agreement. Except as explicitly set forth in this Agreement, neither Party shall be deemed by estoppel or implication
to have granted the other Party any license or other right to any intellectual property of such Party.
2.7 Third Party Agreements.
(a) During the Term, if Alpine or its Affiliate is planning to enter into an agreement with a Third Party under
which Alpine or its Affiliate obtains a license or rights to Information or Patents that are necessary for the Development
Manufacture or Commercialization of one or more Licensed Compounds (including as incorporated into Licensed Products), then
Alpine shall provide Horizon with written notice thereof. [***].
(b) During the Term, subject to Section 2.7(a), if Alpine or any of its Affiliates enters into an agreement with a
Third Party under which Alpine or its Affiliate obtains a license or rights, with the right to sublicense, to Information or Patents
that would fall within the definition of Licensed Know-How or Licensed Patents (“New Technology”) (each such agreement, an
“Alpine Third Party Agreement”), then Alpine shall inform Horizon and shall provide Horizon with a copy of the Alpine Third
Party Agreement, which may be redacted if necessary to exclude only confidential terms that would not be relevant to any rights
or obligations of Horizon. [***].
2.8 Exclusivity and Non-Compete.
(a) During the Term, except for the activities conducted and rights granted to Horizon by Alpine with respect to
Licensed Compounds and Licensed Products as expressly provided in this Agreement, Alpine and its Affiliates shall not conduct
or participate in, or license, sublicense or enable any Third Party to conduct or participate in, the development, manufacture or
commercialization of, or research for the intended purpose of identifying or discovering, [***].
(b) Notwithstanding the provisions of Section 2.8(a), in the event that after the Effective Date, a Change of
Control of Alpine occurs and the Acquiror in such Change of Control (or any of its Affiliates existing prior to such Change of
Control that are not combined with Alpine or any of its Affiliates in or after such Change of Control) is as of the effective date
15
of such Change of Control or thereafter developing or commercializing a Competing Product, [***].
(c) Covenants. Horizon agrees on behalf of itself and its Affiliates not to (i) Develop, Manufacture,
Commercialize or otherwise exploit any Licensed Existing Program Product for any oncology application or (ii) enable,
(sub)license or authorize any Third Party to take any action prohibited by clause (i) (it being understood that nothing can prevent
off-label use). Alpine agrees on behalf of itself and its Affiliates not to (A) Develop, Manufacture, Commercialize or otherwise
exploit any Licensed Product for any application or (B) enable, (sub)license or authorize any Third Party to take any action
prohibited by clause (A).
ARTICLE 3
EXISTING PROGRAM
3.1 Alpine Deliverables and Responsibilities. The Parties have agreed to the initial Deliverables Plan attached as
Exhibit C as of the Effective Date, and during the Query Period, the Parties may mutually agree in writing to enter into one or
more additional Deliverables Plans. Alpine shall conduct the activities, with the objective of delivering the Deliverables, as
contemplated by and in accordance with the Deliverables Plan. The Deliverables Plan shall provide the specific Queries Alpine is
to use in identifying [***] from the Alpine Libraries and the specifications and quality details as to each Deliverable
(“Specifications”). Alpine shall provide Horizon the Deliverables within [***] of completion of the applicable Deliverables Plan.
Alpine shall provide Deliverables that meet the Specifications.
3.2 Records; Updates. Alpine shall maintain complete, current and accurate records of all activities conducted pursuant
to the Deliverables Plan, and all data and other information resulting from such Deliverables Plan activities. Such records shall
properly reflect all work performed and results achieved in the performance of such Deliverables Plan activities in good scientific
manner appropriate for regulatory purposes.
3.3 Costs and Payment for Deliverables. Horizon shall pay Alpine for [***]. Payment for [***] will be subject to
Horizon’s prior written consent. Alpine shall submit [***] to be paid by Horizon in accordance with the Deliverables Budget, and
payment is due within [***] of Horizon’s receipt of the applicable invoice.
3.4 Subcontractors. Alpine shall have the right to engage Subcontractors to perform any portion of its obligations
under the Deliverables Plan; provided that (a) Alpine shall promptly provide Horizon notice thereof, and (b) each Subcontractor
shall be required to agree in writing to be bound by terms with respect to (i) maintenance of the confidentiality of Confidential
Information that are no less stringent than those contained in this Agreement and (ii) ownership of intellectual property that are
consistent with those contained in this Agreement. Alpine shall remain liable to Horizon for any act or omission of its
Subcontractors and any and all failures by such Subcontractors to comply with the terms of this Agreement.
ARTICLE 4
RESEARCH PROGRAMS
4.1 Overview. During the Research Program Term, the Parties shall conduct a research collaboration pursuant to which
Horizon will select one or more Research Program Targets pursuant to Section 4.2 for a particular research program and Alpine
will conduct research using its proprietary technologies to discover proteins and molecules, including Variants, and genetic
sequences for such proteins, molecules and Variants, designed to have
16
specified attributes and biological functions in accordance with the Research Plan with respect to such Research Program
Target(s) (the program for research with respect to such Research Program Target(s), a “Research Program”). For clarity, a
given Research Program may be for the purpose of discovering Research Program Compounds with respect to one Research
Program Target or with respect to multiple Research Program Targets.
4.2 Selection of Research Program Targets for a Research Program.
(a) Schedule for Initial Selection. Horizon will use reasonable efforts to select one or more Reserved Targets
(after discussion with Alpine through the JRC) as initial Research Program Targets for a Research Program pursuant to the
following schedule, as may be modified by written agreement of the Parties; provided that nothing in this Section 4.2(a) is
intended to limit Horizon’s ability to replace Research Program Targets in accordance with Section 4.2(c):
Research Program
First Research Program
Second Research Program
Third Research Program
[***]
[***]
[***]
Timing for Initial Selection
(b) Selection of Research Program Targets for a Research Program. At any time [***] (“Selection Period”),
subject to the schedule for initial selection in Section 4.2(a), Horizon may, upon written notice to Alpine and the Gatekeeper,
(i) select any one or more Reserved Targets as Research Program Targets for a Research Program upon written notice to Alpine
and the Gatekeeper or (ii) [***].
(c) Changes to Reserved Targets. During the Selection Period, Horizon may submit any Proposed Target(s) as
proposed additional or replacement Reserved Target(s) by providing written notice to the Gatekeeper; [***]. Within [***] from
receipt of such notice, the Gatekeeper, by reviewing the Excluded Target List, shall inform Horizon whether there is a Conflict
with respect to the Target(s) based on the Excluded Target List. If there is no Conflict, the Proposed Target(s) will automatically
become Reserved Target(s) and if such Target(s) replace any other Reserved Target(s), such replaced Target(s) shall cease to be
Reserved Target(s). After the Selection Period, Horizon shall no longer have any right to select any Reserved Target(s) as
Research Program Target(s). At the end of the Selection Period, only Targets that are then Research Program Targets shall
continue to be Reserved Targets. Horizon may, at any time after the Effective Date, provide written notice to the Gatekeeper that
a Target is no longer a Reserved Target.
(d) Excluded Target List. Following the Effective Date, Alpine shall be permitted to add new Targets to the
Excluded Target List by providing written notice to the Gatekeeper, in accordance with this Section 4.2(d), and provided that
[***].
4.3 Research Plan. The Parties will review and update the Research Plan for a Research Program as appropriate
promptly following selection of the Research Program Target(s). The JRC shall review the Research Plan no less than [***] or on
such other interval mutually agreed to by the Parties.
4.4 Conduct of Research Program. The Parties shall in good faith conduct the work to be performed by each of them
as set out in the applicable Research Plan during the Research
17
Program Term, using their respective Commercially Reasonable Efforts to accomplish the objectives of the Research Plan in
accordance with the terms of this Agreement. [***] After delivery of the Research Program Deliverables by Alpine to Horizon,
Horizon will be solely responsible for further development; [***].
4.5 Research Program Deliverables. Alpine shall conduct the activities and deliver the Research Program Deliverables
contemplated by and in accordance with the Research Plan. The Research Plan shall provide specifications and quality details
(“Research Specifications”) as to each Research Program Deliverable. Alpine shall provide Horizon the Research Program
Deliverables as specified in the Research Plan meeting the Research Specifications; provided that, if Alpine [***].
4.6 Research Program Term. The term of the Research Programs shall commence on the Effective Date and continue
until (a) the end of the Selection Period if [***], (b) the end of the Selection Period if [***], or (c) [***] after the end of the
Selection Period, [***] (“Research Program Term”). The Research Program Term may be extended by mutual written
agreement of the Parties, and the corresponding Research Plan and, as applicable, the associated budget therewith shall be
amended to reflect the extension.
4.7 Subcontractors. Alpine shall have the right to engage Subcontractors to perform any portion of its obligations
under any Research Plan; provided that (a) Alpine shall promptly provide Horizon notice thereof, and (b) each Subcontractor
shall be required to agree in writing to be bound by terms with respect to (i) maintenance of the confidentiality of Confidential
Information that are no less stringent than those contained in this Agreement and (ii) ownership of intellectual property that are
consistent with those contained in this Agreement. Alpine shall remain liable to Horizon for any act or omission of its
Subcontractors and any and all failures by such Subcontractors to comply with the terms of this Agreement.
4.8 Records and Reports.
(a) Records. Each Party shall maintain complete, current and accurate records of all activities conducted
pursuant to any Research Plan, and all Information resulting from such Research Plan activities. Such records shall properly
reflect all work performed and results achieved in the performance of such Research Plan activities in good scientific manner
appropriate for regulatory and patent purposes, including the work done and results achieved by any Affiliate or Third Party on
behalf of such Party. During each JRC meeting, each Party shall provide the JRC with an update on the progress of Research Plan
activities and any Information generated from such Research Plan activities since the prior JRC meeting.
(b) Copies and Inspection of Records. Horizon shall have the right, during normal business hours and upon
reasonable advance written notice not more than [***] (unless such audit shows cause for any additional audit(s) during such
period), to (i) [***] in a manner intended to minimize any disruption of and interference with Alpine’s or its Subcontractor’s
operations and subject to such Horizon personnel agreeing to be bound by the rules applicable to such facility.
(c) Quarterly Reports. At least [***] before each JRC meeting (but not more often than [***], Alpine shall
provide to Horizon a written progress report in English which shall describe the work performed since the last such update on the
Research Programs by or on behalf of Alpine, evaluate such work performed in relation to the goals of the Research Programs
and provide such other information as may be necessary for the conduct of the Research Programs or reasonably requested by
Horizon relating to the progress of the goals or performance of the
18
Research Programs. For clarity, all such reports shall be considered the Confidential Information of both Parties.
4.9 Research Costs. Horizon shall pay Alpine for the costs and expenses for conducting the activities under any
Research Plan [***]. Payment for additional costs and expenses will be subject to Horizon’s prior written consent. Alpine shall
submit an invoice for such costs and expenses [***], and payment is due within [***] of Horizon’s receipt of the applicable
invoice.
4.10 Joint Research Committee. Within [***] after the Effective Date, the Parties shall establish a joint research
committee (the “Joint Research Committee” or “JRC”). The JRC shall consist of [***] members from each Party (or such
other number as agreed to by the Parties), and each Party may replace any of its members of the JRC from time to time by
providing prior written notice (which may be by email) to the other Party. The JRC will have [***]. The chairpersons shall be
responsible for calling and convening meetings but shall have no special authority over the other members of the JRC and shall
have no additional voting rights.
(a) Specific Responsibilities of the JRC. The JRC shall serve as a forum for overseeing and governing the
Research Programs in accordance with the procedures set forth in this Section 4.10 and any other procedures as agreed upon by
the JRC members. Except as otherwise provided herein, the role of the JRC shall be to:
activities conducted under the Research Programs;
(i) exchange information and facilitate discussions and cooperation between the Parties with respect to
(ii) monitor, review and record the progress of the Research Programs;
criteria for Research Program Deliverables;
(iii) review and approve any Research Plans or updates or amendments to the Research Plans, including
(iv) facilitate the activities of the Gatekeeper; and
(v) carry out any other functions delegated to it by the Parties.
(b) Meetings; Minutes. The JRC shall meet regularly, and at least [***], during the Research Program Term, or
as otherwise agreed upon by the Parties. JRC meetings may be held in person or by audio or video conference as the Parties may
mutually agree. In-person meetings shall be held at locations alternately selected by the Parties. The JRC chairpersons shall be
responsible for calling meetings on no less than [***] notice. The Parties shall alternate for each JRC meeting to have their
chairperson (or designate): (i) prepare and circulate an agenda (requested by any member of either Party) reasonably in advance
of the upcoming meeting; and (ii) prepare and issue minutes of the JRC meeting as promptly as practicable thereafter. Such
minutes shall not be finalized until the chairperson of the non-preparing Party reviews and approves such minutes in writing.
Employees or consultants of either Party who are not representatives of the Parties on the JRC may attend meetings of the JRC;
provided that (A) such attendees shall be bound by obligations of confidentiality and non-disclosure that are at least as stringent
as the provisions of Article 10, and (B) attendance of any non-employee must be pre-approved by the other Party, such approval
not to be unreasonably withheld, conditioned or delayed. Each Party shall be responsible for all travel and related costs and
expenses for its members and other representatives to attend meetings of, and otherwise participate in, the JRC.
19
(c) Decision-Making. The JRC will use good faith efforts to make all decisions within its authority by
consensus. Actions to be taken by the JRC shall be taken only following [***], with Alpine’s representatives collectively having
[***] and Horizon’s representatives collectively having [***]. If the JRC fails to reach agreement on a matter before it
concerning Section 4.10(a), either Party may submit such matter for resolution to the Parties’ executive officers in accordance
with the provisions of Section 12.1(c). If the executive officers are unable to resolve a matter within the authority of the JRC
within [***] (or such other period as may be agreed by the Parties in writing) after such referral, [***].
(d) Limitations on Authority. The JRC shall only have the powers expressly assigned to it in this Agreement
and shall not have the authority to: (i) modify or amend the terms and conditions of this Agreement; (ii) waive either Party’s
compliance with the terms and conditions of this Agreement; or (iii) determine any such issue in a manner that would conflict
with the express terms and conditions of this Agreement. Each Party shall retain the rights, powers, and discretion granted to it
under this Agreement and no such rights, powers, or discretion shall be delegated to or vested in the JRC unless the Parties
expressly so agree in writing.
the Parties, the JRC will be dissolved.
(e) Discontinuation of the JRC. Upon completion of the Research Program Term, unless agreed in writing by
ARTICLE 5
DEVELOPMENT, MANUFACTURE, REGULATORY AND COMMERCIALIZATION
5.1 Horizon Rights and Responsibilities. Without limiting Section 5.3, Horizon (itself and with its Affiliates and
Sublicensees) shall have the sole right and responsibility, in its sole discretion and at its expense, for all aspects of the
Development, Manufacturing, and Commercialization of the Licensed Compounds and Licensed Products in the Territory,
including all decisions regarding the clinical development plan and regulatory strategy, design, sale, price and promotion, of
Licensed Compounds and Licensed Products. Without limiting the foregoing or Section 5.3, Horizon (itself and with its Affiliates
and Sublicensees) shall have the sole right and responsibility, in its sole discretion and at its expense, for preparing, filing and
maintaining all Regulatory Materials for Licensed Compounds and Licensed Products with applicable Regulatory Authorities in
the Territory, and Horizon shall own all Regulatory Materials (including all INDs, NDAs, Regulatory Approval Applications and
Regulatory Approvals) for Licensed Compounds and Licensed Products in the Territory and otherwise shall be responsible for all
regulatory matters with respect to Licensed Compounds and Licensed Products in the Territory. Horizon shall be responsible for
creating and maintaining a global safety database for Licensed Compounds and Licensed Products in the Territory, at Horizon’s
expense and for reporting quality complaints, adverse events and safety data related to Licensed Compounds and Licensed
Products to applicable Regulatory Authorities in the Territory, as well as responding to safety issues and to all requests of
Regulatory Authorities relating to Licensed Compounds and Licensed Products in the Territory.
5.2 Alpine Support. Prior to the [***] of the Effective Date, Horizon may request that Alpine (a) [***]. Any such
reasonable assistance and cooperation and attendance at regulatory meetings provided by Alpine pursuant to this Section 5.2 shall
be [***].
5.3 Diligence. Horizon shall use Commercially Reasonable Efforts to Develop, seek Regulatory Approval for and, if
Regulatory Approval is obtained, [***].
20
5.4 Communication. With respect to Licensed Existing Program Products, [***], Horizon shall provide Alpine a
summary [***] of material developments with respect to Licensed Existing Program Products, [***]. With respect to Research
Program Products on a Research Program-by-Research Program basis, [***] and [***], Horizon shall provide Alpine a summary
[***] of the clinical and regulatory status of such Research Program Product, [***]. All reports and other Information provided
by Horizon under this Section 5.4 will be Horizon’s Confidential Information, subject to the terms of Article 10.
ARTICLE 6
FINANCIAL TERMS
6.1 Upfront Payment. Within [***] after the Effective Date, Horizon shall pay to Alpine a one-time, non-refundable
and non-creditable upfront license payment of twenty-five million Dollars ($25,000,000).
6.2 Equity Consideration. Concurrent with the execution and delivery of this Agreement, the Parties shall enter into a
stock purchase agreement (the “SPA”), pursuant to which Horizon shall agree to purchase fifteen million Dollars ($15,000,000)
in equity of Alpine at a twenty-five percent (25%) premium over the thirty (30) day volume weighted average price ending five
(5) trading days before the announcement of this Agreement all on the terms and conditions set forth in the SPA.
6.3 Pre-clinical Milestone Payment.
(a) Existing Program. Within [***] of the [***] for the first Licensed Existing Program Compound, Horizon
shall pay to Alpine a [***] of [***]. For clarity, this milestone payment shall only be payable once.
(b) Research Program. Within [***] of: (i) the [***] for the first Research Program Compound for a given
Research Program and (ii) the delivery of Research Program Deliverables for such Research Program Compound, Horizon shall
pay to Alpine a one-time, non-refundable and non-creditable payment of [***]. For clarity, this milestone payment shall only be
payable once per Research Program for up to three (3) separate Research Programs, and the total amount of milestone payments
made by Horizon to Alpine under this Section 6.3(b) if this milestone event is achieved for three (3) Research Programs shall in
no event exceed [***].
6.4 Development and Regulatory Milestone Payments.
(a) Existing Program. Within [***] after the first achievement by a Licensed Existing Program Product of any
development and regulatory milestone event set forth below, Horizon shall pay to Alpine the corresponding one-time, non-
refundable, non-creditable development and regulatory milestone payment specified below. For clarity, each milestone payment
below shall only be payable once, and the total amount of milestone payments made by Horizon to Alpine under this Section
6.4(a) shall in no event exceed [***].
21
Milestone Event
[***]
[***]
[***]
[***]
[***]
Milestone Payment
[***]
[***]
[***]
[***]
[***]
(b) Research Program. Within [***] after the first achievement by a Research Program Product for a given
Research Program of any development and regulatory milestone event set forth below, Horizon shall pay to Alpine the
corresponding one-time, non-refundable, non-creditable development and regulatory milestone payment specified below. For
clarity, each milestone payment below shall only be payable once per Research Program for up to three (3) separate Research
Programs, and the total amount of milestone payments made by Horizon to Alpine under this Section 6.4(b) for a Research
Program, if all milestone events are achieved for such Research Program, shall in no event exceed [***], and, if all milestone
events are achieved for three (3) Research Programs, shall in no event exceed [***]. Milestone events and payments will be
determined separately for each Research Program.
Milestone Event
[***]
[***]
[***]
[***]
[***]
6.5 Sales Milestones.
Milestone Payment
[***]
[***]
[***]
[***]
[***]
(a) Existing Program. Within [***] after the Calendar Quarter in which any sales milestone event set forth
below is achieved by any Licensed Existing Program Product(s), Horizon shall make the corresponding one-time, non-refundable
(except as set forth in Section 6.10), non-creditable sales milestone payment to Alpine specified below. For clarity, each
milestone payment below shall only be payable once, and the total amount of milestone payments made by Horizon to Alpine
under this Section 6.5 shall in no event exceed [***].
Milestone Event
[***]
[***]
[***]
[***]
Milestone Payment
[***]
[***]
[***]
[***]
(b) Research Program. Within [***] after the Calendar Quarter in which any sales milestone event set forth
below is achieved by any Research Program Product(s) for a given
22
Research Program, Horizon shall make the corresponding one-time, non-refundable (except as set forth in Section 6.10), non-
creditable sales milestone payment to Alpine specified below. For clarity, each milestone payment below shall only be payable
once per Research Program for up to three (3) separate Research Programs, and the total amount of milestone payments made by
Horizon to Alpine under this Section 6.5(b) for a Research Program, if all milestone events are achieved for a Research Program,
shall in no event exceed [***] per Research Program, and, if all milestone events are achieved for three (3) Research Programs,
shall in no event exceed [***]. Milestone events and payments will be determined separately for each Research Program.
Milestone Event
[***]
[***]
[***]
[***]
6.6 Royalties
(a) Royalty Rates.
Milestone Payment
[***]
[***]
[***]
[***]
(i) Licensed Existing Program Products. Subject to this Section 6.6, in each Calendar Quarter during
the Royalty Term applicable to Licensed Existing Program Products, Horizon shall pay to Alpine non-creditable, non-refundable
(except as set forth in Section 6.10) [***] on annual Net Sales of Licensed Existing Program Products in the Territory, as
calculated by multiplying the applicable royalty rate by the corresponding amount of incremental Net Sales of such Licensed
Existing Program Products in the Territory in each Calendar Year, as follows:
Annual Net Sales of Licensed Existing Program Products
[***]
[***]
[***]
[***]
Royalty Rate
[***]
[***]
[***]
[***]
(ii) Research Program Products. Subject to this Section 6.6, in each Calendar Quarter during the
Royalty Term applicable to the Research Program Products for a given Research Program, Horizon shall pay to Alpine non-
creditable, non-refundable (except as set forth in Section 6.10) royalties on annual Net Sales of such Research Program Products
in the Territory, as calculated by multiplying the applicable royalty rate by the corresponding amount of incremental Net Sales of
such Research Program Products in the Territory in each Calendar Year, as follows, with Net Sales and royalties determined
separately for each Research Program:
23
Annual Net Sales of Research Program Products
[***]
[***]
[***]
[***]
Royalty Rate
[***]
[***]
[***]
[***]
(b) Royalty Term. Royalties shall be paid under this Section 6.6(b), (i) on a Licensed Existing Program Product-
by-Licensed Existing Program Product and country-by-country basis, commencing on the First Commercial Sale of a Licensed
Existing Program Product in a country and ending on the later of (A) [***], (B) [***] and (C) the [***] anniversary of the First
Commercial Sale of such Licensed Existing Program Product in such country, or (ii) on a [***], commencing on the First
Commercial Sale of a Research Program Product in a country and ending on the later of (A) [***], (B) [***], and (C) the [***]
anniversary of the First Commercial Sale of such Research Program Product in such country (as applicable to the particular
Licensed Existing Program Product or Research Program Product, the “Royalty Term”).
(c) No Valid Claim.
(i) If, during the Royalty Term for a Licensed Existing Program Product in a country, the composition of
matter or method of use of such Licensed Existing Program Product (or Licensed Existing Program Compound contained therein)
in such country is not covered by a Valid Claim of a Licensed Patent, then the applicable royalty rates set forth in Section 6.6(a)
with respect to Net Sales of such Licensed Existing Program Product and such country shall be reduced by [***] during the
period of the Royalty Term in which no Valid Claim of a Licensed Patent exists.
(ii) If, during the Royalty Term for a Research Program Product in a country, the composition of matter
or method of use of such Research Program Product (or Research Program Compound contained therein) in such country is not
covered by a Valid Claim of a Research Program Patent, then the applicable royalty rates set forth in Section 6.6(a) with respect
to Net Sales of such Research Program Product and such country shall be reduced by [***] during the period of the Royalty Term
in which no Valid Claim of a Research Program Patent exists.
(d) Biosimilar Competition. If, during the Royalty Term for a Licensed Product in a country, one or more
Biosimilars is sold in such country, the applicable royalty rates set forth in Section 6.6(a) for such Licensed Product in such
country shall be reduced in such country by [***] commencing at such time that the market penetration of the Biosimilars in such
country is equal to or greater than [***], as determined by dividing (i) [***] by (ii) [***].
(e) Third Party Licenses. On a Licensed Product-by-Licensed Product and country-by-country basis, Horizon
shall have the right to deduct from the royalty payment that would otherwise have been due under Section 6.6(a) with respect to
Net Sales of such Licensed Product in such country an amount equal to [***] of any [***] paid by Horizon or its Affiliate or
Sublicensee to any Third Party (including any [***] under an Alpine Third party Agreement reimbursed by Horizon to Alpine) in
consideration for a license or other rights under any Information or Patents owned or controlled by a Third Party that is [***] to
Develop,
24
Manufacture, or Commercialize such Licensed Product in such country (including under an Alpine Third Party Agreement
pursuant to Section 2.7(b)).
(f) Royalty Floor. In no event shall the application of Section 6.6(c), Section 6.6(d) and Section 6.6(e) reduce
the royalty payable on Net Sales of a Licensed Product in a country in a Calendar Quarter during the Royalty Term to less than
[***] of the royalty that would be payable on Net Sales of such Licensed Product in such country determined in accordance with
Section 6.6(a) (as reduced by Section 6.6(c), as applicable) without application of any such reductions; provided however that
any amounts paid to Third Parties as described in Section 6.6(e) that could not be applied due to application of the royalty floor
set forth in this Section 6.6(f) may be carried forward and applied against payments of royalties under Section 6.6(a) owing in
respect of such Licensed Product and such country on a Calendar Quarter basis, subject however to the application of the royalty
floor in each subsequent Calendar Quarter.
(g) Royalty Reports and Payments. Within [***] following the end of each Calendar Quarter, commencing
with the Calendar Quarter in which the First Commercial Sale of any Licensed Product is made anywhere in the Territory,
Horizon shall provide Alpine with a report containing the following information for the applicable Calendar Quarter: (i) [***],
(ii) [***] (iii) [***] (iv) [***]. Concurrent with the delivery of the applicable quarterly report, Horizon shall pay in Dollars all
amounts due to Alpine pursuant to Section 6.6 in such Calendar Quarter.
6.7 Payments Under Third Party License Agreements. As between the Parties, Alpine shall be solely responsible for
any royalties and other payments to Third Parties under any license or other agreement existing as of the Effective Date or
entered into during the Term (subject to Section 2.7(b) with regard to any Alpine Third Party Agreement) by Alpine or its
Affiliate pursuant to which Alpine gains Control of any Licensed Technology.
6.8 Currency of Payments. Unless otherwise set forth in this Agreement or agreed to by the Parties, all payments under
this Agreement shall be made in Dollars by wire transfer of immediately available funds into an account designated by Alpine.
Net Sales outside of the U.S. shall be first determined in the currency in which they are earned and shall then be converted into an
amount in Dollars using Horizon’s customary and usual conversion procedures used in preparing its financial statements pursuant
to GAAP for the applicable reporting period.
6.9 Late Payments. If Alpine does not receive payment of any undisputed sum due to it on or before the due date,
Alpine shall provide notice to Horizon of such late payment. If Horizon does not make any payment within [***] following
receipt of such notice, then any portions thereof due hereunder which are not paid on the date such payments are due under this
Agreement will bear interest at the lesser of (a) [***] or (b) [***], in each case calculated on the number of days such payment is
delinquent, [***].
6.10 Records; Audits. Horizon and its Affiliates will, and Horizon will cause each of its Sublicensees, if any, to,
maintain complete and accurate records in sufficient detail to confirm the accuracy of the calculation of royalty payments and the
achievement of milestone events, for a period of [***] after the Calendar Year in which such sales or events occurred. Upon
reasonable prior notice, such records of Horizon and its Affiliates shall be made available during regular business hours for a
period of [***] from the end of the Calendar Year to which they pertain for examination, and not more often than once each
Calendar Year (unless there is a just cause for an additional examination based upon results of the earlier audit during such
Calendar Year), by an independent certified public accountant selected by Alpine and reasonably
25
acceptable to Horizon, for the sole purpose of and only to the extent necessary for verifying the accuracy of the financial reports
furnished by Horizon pursuant to this Article 6. Such independent accountant shall disclose to Alpine only the amounts that such
independent accountant believes to be due and payable hereunder to Alpine, details concerning any discrepancy from the amount
paid and the amount due, and shall disclose no other information revealed in such audit. The records for any particular Calendar
Year shall only be subject to [***] audit hereunder. Any and all records examined by such independent accountant shall be
deemed Horizon’s Confidential Information which may not be disclosed by such independent accountant to any Third Party, and
Horizon may require such independent accountant to enter into an appropriate written agreement obligating it to be bound by
obligations of confidentiality and restrictions on use of such Confidential Information that are no less protective than those set
forth in Article 10. If, as a result of any inspection of the books and records of Horizon, it is shown that payments under this
Agreement were less than the amount which should have been paid, then Horizon shall make all payments required to be made
from the original due date to eliminate any discrepancy revealed by such inspection within [***] of such finding. If, as a result of
any inspection of the books and records of Horizon, it is shown that payments under this Agreement were more than the amount
which should have been paid, then Alpine shall, at Horizon’s election, either make all payments required to be made to eliminate
any discrepancy revealed by such inspection within [***] of such finding or credit such amounts to Horizon against future
payments. Alpine shall pay for such audits, except that in the event that the audited amounts were underpaid by Horizon by more
than [***] of the undisputed amounts that should have been paid during the period in question as per the audit, Horizon shall pay
the costs of the audit.
6.11 Taxes.
income arising directly or indirectly from the efforts of the Parties under this Agreement.
(a) Taxes on Income. Each Party shall be solely responsible for the payment of all taxes imposed on its share of
(b) VAT on Payments. All payments due under this Agreement are exclusive of VAT. If any VAT is chargeable
in respect of amounts payable pursuant to this Agreement, VAT shall be charged at the applicable rate required by applicable Law
and the party making such payment shall pay the VAT amount on receipt of a VAT invoice in the appropriate form.
(c) Withholding Tax; Cooperation. The Parties agree to cooperate with one another and use reasonable efforts
to reduce or eliminate tax withholding or similar obligations in respect of royalties, milestone payments, and other payments
made by Horizon to Alpine under this Agreement. To the extent Horizon is required under the Code, or any other tax Laws to
deduct and withhold taxes on any payment to Alpine, Horizon shall pay the amounts of such taxes to the proper Governmental
Authority in a timely manner and promptly transmit to Alpine an official tax certificate or other reasonable evidence of such
withholding. If any taxes are so deducted or withheld, such deducted or withheld amounts shall be treated for all purposes of this
Agreement as having been paid to Alpine. Upon Horizon’s reasonable request, Alpine shall provide Horizon any tax forms
(including a United States tax “residency certificate”, Internal Revenue Service Form W-8BEN or W-8ECI or other applicable
Internal Revenue Service Form) that may be reasonably necessary in order for Horizon to determine whether to withhold tax on
any such payments or to withhold tax on such payments at a reduced rate under the Code or any other tax Laws, including any
applicable bilateral income tax treaty. Horizon shall give reasonable support so that any withholding tax or value added tax may
be minimized or avoided to the extent permitted under the applicable Laws and treaties. Each Party shall provide the other with
reasonable assistance to enable the recovery, as permitted by applicable Laws, of
26
withholding taxes, value added taxes, or similar obligations resulting from payments made under this Agreement, such recovery
to be for the benefit of the Party bearing such withholding tax or value added tax. Horizon shall require its Sublicensees in the
Territory to cooperate with Alpine in a manner consistent with this Section 6.11(c). Notwithstanding the foregoing, (i) if Horizon
assigns or transfers this Agreement or its rights and obligations thereunder or changes its jurisdiction of tax residency, and such
transfer, assignment or change increases the amount of taxes required to be deducted or withheld from or paid with respect to the
payments to Alpine contemplated by this Agreement, Horizon and its assignee or transferee shall pay Alpine an additional
amount such that Alpine shall receive, on an after-tax basis, the same amount it would have received had no such transfer or
assignment been made; or (ii) if Alpine assigns or transfers this Agreement or its rights and obligations thereunder or changes its
jurisdiction of tax residency, and such transfer, assignment or change increases the amount of taxes required to be deducted or
withheld from or paid with respect to the payments to Alpine contemplated by this Agreement, then any amount payable to
Alpine or its assignee or transferee under this Agreement shall be limited to the amount that would have been payable to Alpine
had no such assignment, transfer or change occurred. On or prior to the Effective Date, Alpine shall deliver to Horizon a valid
exemption certificate issued by the German Federal Tax Office.
7.1 Ownership.
ARTICLE 7
INTELLECTUAL PROPERTY
(a) Background Rights. Each Party shall retain all right, title and interest in and to any Information or Patents
Controlled by such Party or its Affiliate as of the Effective Date, or which becomes Controlled by such Party or its Affiliate after
the Effective Date and independently of this Agreement, subject to any licenses granted herein with respect to any such
intellectual property that is Licensed Technology.
(b) Existing Program IP.
(i) Inventorship. The determination of inventorship of inventions, Information or Patents conceived,
reduced to practice, discovered, developed or otherwise made solely or jointly by or on behalf of such Party or its Affiliates
during the course of, arising out of or as a result of activities performed pursuant to the Existing Program or with respect to
Licensed Existing Program Compounds or Licensed Existing Program Products as contemplated by this Agreement, whether or
not patented or patentable (“Existing Program IP”), and whether Existing Program IP is conceived, reduced to practice,
discovered, developed or otherwise made solely by a Party or jointly with the other Party for the purpose of allocating proprietary
rights (including Patent, copyright or other intellectual property rights) therein, shall, for purposes of this Agreement, be made in
accordance with the United States patent law and other applicable Law in the United States irrespective of where such
conception, reduction to practice, discovery, development or making occurs.
(ii) Sole Program IP. As between the Parties, each Party shall solely own and retain all right, title, and
interest in and to any and all Existing Program IP that is conceived, reduced to practice, discovered, developed or otherwise made
solely by or on behalf of such Party or its Affiliate (“Sole Program IP”), including all Patents claiming such Sole Program IP
(“Sole Program Patents”). [***] Alpine’s rights in any Sole Program IP and Joint Program IP (as defined below) would be
included in the Licensed Technology and subject to the licenses granted to Horizon under this Agreement.
27
(iii) Joint Program IP. As between the Parties, all right, title, and interest in and to any and all Existing
Program IP that is conceived, reduced to practice, discovered, developed or otherwise made jointly by or on behalf of Horizon or
its Affiliates on the one hand, and Alpine or its Affiliates on the other hand (“Joint Program IP”), including all Patents claiming
such Joint Program IP (“Joint Program Patents”), shall be owned jointly by the Parties, with each Party owning an equal,
undivided interest in and to such Joint Program IP. Subject to the license grants set forth in Sections 2.1 and 2.2 and to Alpine’s
obligations under Section 2.8, each Party shall have the right to exploit the Joint Program IP without a duty of seeking consent
from or accounting to the other Party.
(iv) Assignment. Each Party shall cause any Person that performs activities for such Party under this
Agreement to be under an obligation to assign (or, if such Party is unable to cause such Person to agree to such assignment
obligation despite such Party’s using commercially reasonable efforts to negotiate such assignment obligation, provide a license
under) their rights in any Existing Program IP to such Party, except where applicable Law requires otherwise and except in the
case of governmental, not-for-profit and public institutions which have standard policies against such an assignment (in which
case a suitable license, or right to obtain such a license, shall be obtained).
(c) Research Program IP.
(i) Inventorship. The determination of inventorship of inventions, Information or Patents conceived,
reduced to practice, discovered, developed or otherwise made solely or jointly by or on behalf of the Parties or its Affiliates
during the course of, arising out of or as a result of activities performed pursuant to the Research Program or with respect to
Research Program Compounds or Research Program Products as contemplated by this Agreement, whether or not patented or
patentable (“Research Program IP”), and whether Research Program IP is conceived, reduced to practice, discovered,
developed or otherwise made solely by a Party or jointly with the other Party for the purpose of allocating proprietary rights
(including Patent, copyright or other intellectual property rights) therein, shall, for purposes of this Agreement, be made in
accordance with the United States patent law and other applicable Law in the United States irrespective of where such
conception, reduction to practice, discovery, development or making occurs. [***].
(ii) Ownership. [***].
(iii) [***].
(iv) [***].
(v) [***].
7.2 Patent Prosecution.
(a) Licensed Patents and Horizon Sole Program Patents.
(i) Horizon Controlled Patents. As between the Parties, subject to this Section 7.2(a), [***].
(ii) Cooperation. [***].
28
(iii) Back-Up Rights. If Horizon intends to allow any such Horizon Controlled Patent to lapse or become
abandoned in any jurisdiction in the Territory, Horizon shall notify Alpine at least [***] in advance of such lapse or
abandonment, [***] Upon such assumption, Alpine shall control the Prosecution and Maintenance of such Horizon Controlled
Patent pursuant to the terms and conditions set forth in Section 7.2(a)(i) above, mutatis mutandis, using counsel of its choice at its
cost and expense.
(iv) Alpine Controlled Patents. As between the Parties, subject to this Section 7.2(a)(iv), [***].
(v) [***].
(vi) Joint Patent Committee. The Parties shall form a committee comprised of one (1) or two (2)
representatives of each Party (as determined by mutual written agreement of the Parties), which committee shall meet [***] or at
other regular intervals as determined by such committee, to discuss strategy [***] The committee will use [***] to make all
decisions by consensus. Actions to be taken by the committee shall be taken only following unanimous vote, with Alpine’s
representatives collectively having one (1) vote and Horizon’s representatives collectively having one (1) vote. If the committee
fails to reach agreement on a matter before it, either Party may submit such matter for resolution to the Parties’ executive officers
in accordance with the provisions of Section 12.1(c). If the executive officers fail to reach agreement on a matter before them,
then [***].
(vii) Other Horizon Patents. [***].
(viii) Cooperation. Each Party shall provide the other Party all reasonable assistance and cooperation, at
the other Party’s request and expense, in the Prosecution and Maintenance of Patents as set forth in this Section 7.2, including
providing any necessary powers of attorney and executing any other required documents or instruments for such prosecution.
Each Party shall execute and deliver to the other assignments with respect to any Patents in a mutually agreeable form and will
take whatever actions reasonably necessary (including the appointment of the other Party as its attorney in fact solely to make
such assignment) to effect such assignment, in accordance with the ownership provisions provided above in Section 7.1(b). The
prosecuting Party under this Section 7.2 agrees to conduct such Prosecution and Maintenance activities toward the objective of
optimizing overall patent protection for Licensed Existing Program Compounds and Licensed Existing Program Products.
(b) Research Program Patents. [***].
7.3 Patent Enforcement.
(a) Licensed Patents and Horizon Sole Program Patents.
(i) Notification. If either Party (i) becomes aware of any alleged or threatened infringement of any
Licensed Patents, Joint Program Patents or Sole Program Patents by a Third Party in the Territory based on the development,
commercialization or exploitation of, or an application to register or market, a product containing a Licensed Existing Program
Compound or any Licensed Existing Program Product in the Territory, or (ii) receives notice alleging that a Third Party’s
manufacture, use, or sale of the product containing a Licensed Existing Program Compound or any Licensed Existing Program
Product does not infringe any Licensed Patent, Joint Program Patent, or Sole Program Patent, or that such Patent is invalid or
unenforceable (including submitting an application to the FDA that constitutes an act of
29
infringement under 35 U.S.C. § 271(e)(2) or comparable application under applicable Law) (each, a “Product Infringement”), it
shall promptly notify the other Party in writing to that effect and the Parties will consult with each other regarding any actions to
be taken with respect to such Product Infringement. Each Party shall share with the other Party all Information available to it
regarding such alleged Product Infringement.
(ii) Enforcement Rights.
(1) Horizon Controlled Patents.
a. Horizon’s First Right to Enforce. As between the Parties, Horizon shall have the first
right, but not the obligation, to bring a suit or other action against any Person engaged in a Product Infringement of, or any other
action or proceeding regarding alleged or threatened infringement or claim of invalidity or unenforceability of, any Horizon
Controlled Patent to defend against any challenge to any of the foregoing, at Horizon’s cost and expense. Horizon shall keep
Alpine regularly informed of the status and progress of such enforcement or defense efforts, shall reasonably consider Alpine’s
comments on any such efforts, including determination of litigation strategy and filing of material papers to the competent court.
Alpine shall provide Horizon reasonable assistance in such enforcement or defense pursuant to this Section 7.3(a)(ii)(1)a, at
Horizon’s request and expense, including joining such action as a party plaintiff if required by applicable Laws to pursue such
action. In addition, [***] Alpine shall be entitled to separate representation in such matter by counsel of its own choice and at its
own expense.
b. Alpine’s Step-In Right to Enforce. If (A) Horizon elects not to commence a suit to
enforce any Horizon Controlled Patent that Horizon has the first right to enforce against any Person pursuant to Section 7.3(a)(ii)
(1)a, or settle or otherwise secure the abatement of such infringement or not to defend against any challenge to any of the
Horizon Controlled Patent, or (B) Horizon fails to commence such suit within [***] (or such shorter period necessary to initiate
and maintain such action) of a request by Alpine to do so, then, [***] Alpine shall have the right, but not the obligation, to
commence a suit or take action to enforce such Horizon Controlled Patent against such infringement in the Territory or to defend
against such challenge, at Alpine’s cost and expense. In such event and to the extent time permits, promptly after Horizon’s
notice to Alpine that it does not elect to enforce such Horizon Controlled Patent or to defend against such challenge, the Parties
shall meet to discuss in good faith the strategy for enforcing such Horizon Controlled Patent or defending against such challenge.
Alpine shall keep Horizon regularly informed of the status and progress of such enforcement or defense efforts, shall reasonably
consider Horizon’s comments on any such efforts, including determination of litigation strategy and filing of material papers to
the competent court. [***] Horizon shall be entitled to separate representation in such matter by counsel of its own choice and at
its own expense.
(2) Alpine’s Sole Right to Enforce Alpine Controlled Patents. As between the Parties, Alpine
shall have the sole right, but not the obligation, to bring a suit or other action against any Person engaged in any action or
proceeding regarding alleged or threatened infringement or claim of invalidity or unenforceability of Alpine Controlled Patents or
to defend against any challenge to any of the foregoing, at Alpine’s cost and expense. Alpine shall keep Horizon regularly
informed of the status and progress of such enforcement or defense efforts, [***].
(b) Research Program Patents. As between the Parties, [***].
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(c) Biosimilar Applications. If either Party receives a copy of an application submitted to the FDA under
subsection (k) of Section 351 of the PHSA or any subsequent or superseding Law, statute or regulation naming a Licensed
Product as a reference product (a “Biosimilar Application”) or otherwise becomes aware that such a Biosimilar Application has
been filed (such as in an instance described in Section 351(l)(9)(C) of the PHSA), either Party shall, within [***] of receipt of
such Biosimilar Application or becoming aware that such Biosimilar Application has been filed, notify the other Party so that the
other Party may seek permission to view the application and related confidential information from the filer of the Biosimilar
Application under Section 351(l)(1)(B)(iii) of the PHSA to the extent Section 351(l)(1)(B)(iii) of the PHSA applies to such other
Party. If either Party receives any equivalent Biosimilar Application or otherwise becomes aware that such an equivalent
Biosimilar Application has been filed in any other jurisdiction in the Territory, either Party shall, within [***] of receipt of such
Biosimilar Application or becoming aware that such Biosimilar Application has been filed, notify the other Party. [***].
(d) Cooperation. If a Party brings any suit, action or proceeding under this Section 7.3, the non-enforcing Party
shall agree to be joined as party plaintiff if required for the enforcing Party to bring any such suit, action or proceeding, at the
cost and expense of the enforcing Party. The non-enforcing Party will provide reasonable assistance to the enforcing Party,
including by providing access to relevant documents and other evidence and making its employees available, subject to the
enforcing Party’s reimbursement of any costs and expenses incurred by the non-enforcing Party in providing such assistance.
(e) Expenses and Recoveries. The enforcing Party bringing a claim, suit or action under this Section 7.3 shall
be solely responsible for any expenses incurred by such Party as a result of such claim, suit or action. If such Party recovers
monetary damages in such claim, suit or action, such recovery shall first be allocated to the reimbursement of any expenses,
including attorneys’ fees, incurred by the Parties in such litigation (including, for this purpose, a reasonable allocation of
expenses of internal counsel). If such recovery is insufficient to cover all such costs and expenses of both Parties, it shall be
shared in proportion to the total of such costs and expenses incurred by each Party. If after such reimbursement any amounts
remain from such damages or other sums recovered, such remaining amounts shall be [***]; provided that, [***].
(f) Settlement. The enforcing Party shall not enter into any settlement or compromise of any suit, action or
proceeding pursuant to Section 7.3 (other than pursuant to Section 7.3(g)), (i) in a manner that would diminish the rights or
interests of the non-enforcing Party or admit the invalidity or unenforceability of any Patent Controlled by the non-enforcing
Party without the prior written consent of the non-enforcing Party, such consent not to be unreasonably withheld; or (ii) that
would impose any cost or liability on the non-enforcing Party, without the non-enforcing’s Party’s prior written consent, at the
non-enforcing Party’s sole discretion.
(g) Other Infringement of Patents. For any and all infringement of any Sole Program Patent other than as
provided elsewhere in this Section 7.3, (i) Alpine shall have the sole right, but not the obligation, to bring an appropriate suit or
other action against any person or entity engaged in such other infringement of any such Sole Program Patent owned by Alpine
that is not a Horizon Controlled Patent or Alpine Controlled Patent, in its sole discretion, and shall bear all related expenses and
retain all related recoveries and (ii) Horizon shall have the sole right, but not the obligation, to bring an appropriate suit or other
action against any person or entity engaged in infringement of any Sole Program Patent owned by Horizon or any other Patents
owned or Controlled by Horizon that relate to any Licensed Compound or Licensed Product, in its sole discretion, and shall bear
all related expenses and retain all related recoveries,
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and the other Party shall provide reasonable assistance and cooperation as set forth in Section 7.3(d), in such enforcement action,
including joining such action as a party plaintiff if required by applicable Laws to pursue such action, at the request and expense
of the Party bringing the suit or action.
7.4 Infringement of Third Party Rights. If any Licensed Compound or Licensed Product used or sold by Horizon, its
Affiliates or Sublicensees becomes the subject of a Third Party’s claim or assertion of infringement of a Patent within the
Territory, Horizon shall promptly notify Alpine and the Parties shall agree on and enter into a “common interest agreement”
wherein the Parties agree to their shared, mutual interest in the outcome of such potential dispute, and thereafter, the Parties shall
promptly meet to consider the claim or assertion and the appropriate course of action. Horizon shall be solely responsible for the
defense of any such infringement claims (provided that Horizon shall provide to Alpine the ability to join such action, at Alpine’s
request and expense) to pursue such action in which a Patent asserted by a Third Party under this Section 7.4, claims (a) the
composition of matter or use, sale, offer for sale, or importation in the Field of any Licensed Compound or Licensed Product or
(b) the manufacture of any such Licensed Compound or Licensed Product using the process employed by Alpine as of the
Effective Date (any such patent, “Subject Patent”). To the extent related to the Subject Patent, [***].
7.5 Patent Term Extension. In the event Horizon desires to seek a patent term extension (including any pediatric
exclusivity extensions as may be available) or supplemental protection certificate or their equivalents in any country for any
Licensed Patent or Joint Program Patent, then the Parties shall meet and discuss such request in good faith, provided that [***]
7.6 Regulatory Data Protection. To the extent required by or permitted by Law, Horizon will, at its sole discretion,
decide (with a primary goal of optimizing Regulatory Exclusivity for Licensed Compounds and Licensed Products) whether to
list with the applicable Regulatory Authorities during the Term any applicable Horizon Controlled Patent claiming any Licensed
Compound or Licensed Product that Horizon intends to, or has begun to, Commercialize, and that has become the subject of a
Regulatory Approval Application submitted to the FDA. Such listings may include all so called “Purple Book” listings required
under the Hatch-Waxman Act or listing of Patents as provided in the patent dispute resolution procedures of the Biologics Price
Competition and Innovation Act of 2009 or under Section 351(l) of the PHSA or similar provisions in the Territory during the
Term.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES; COVENANTS; DISCLAIMERS
8.1 Mutual Representations and Warranties. Each Party hereby represents and warrants to the other Party as follows:
Laws of the jurisdiction in which it is incorporated; and
(a) as of the Effective Date, it is a corporation duly organized, validly existing, and in good standing under the
(b) as of the Effective Date, (i) it has the corporate power and authority and the legal right to enter into this
Agreement and perform its obligations hereunder; (ii) it has taken all necessary corporate action on its part required to authorize
the execution and delivery of this Agreement and the performance of its obligations hereunder; and (iii) this Agreement has been
duly executed and delivered on behalf of such Party, and constitutes a legal, valid, and binding obligation of such Party that is
enforceable against it in accordance with its terms.
32
8.2 Additional Representations and Warranties of Alpine. Alpine represents and warrants to Horizon, as of the
Effective Date, as follows:
(a) Alpine has (i) the right under the Licensed Technology to grant the licenses to Horizon as purported to be
granted pursuant to this Agreement, (ii) sufficient legal or beneficial title in the Licensed Technology to grant the licenses to
Horizon as purported to be granted pursuant to this Agreement, and (iii) [***];
(b) there are no license or other agreements with any Third Party to which Alpine or any of its Affiliate is a party
regarding the [***] of (i) any Licensed Know-How or (ii) other Information Controlled by Alpine or its Affiliates as of the
Effective Date, in each case, contemplated to be provided by Alpine to Horizon hereunder, as to which the absence of rights
under such license or other agreement would be [***] Horizon’s ability to (x) [***], or (y) Develop, Manufacture,
Commercialize, make, have made, use, sell, offer for sale, import and otherwise exploit Licensed Compounds and Licensed
Products in the Field in the Territory;
(c) Alpine owns all right, title, and interest in the Patents listed on Exhibit H and such listed Patents represent all
Patents owned or otherwise Controlled by Alpine that relate to Licensed Know-How or the exploitation thereof under this
Agreement, as such activities are contemplated as of the Effective Date;
(d) to its Knowledge, neither Alpine nor any of its Affiliates owns or has any other rights (by license, sublicense
or otherwise) to any (i) [***], other than the Licensed Compounds, or (ii) under any Information, Patents or other intellectual
property rights that are [***] for the Development, Manufacturing, Commercialization, use, sale, offer for sale, importation or
other exploitation of any Licensed Existing Program Compound (including as incorporated into a Licensed Existing Program
Product) in the Field, other than the Licensed Technology;
(e) [***];
(f) [***];
(g) [***];
(h) [***];
(i) [***];
(j) [***];
(k) [***];
(l) [***];
(m) [***];
(n) [***];
(o) [***];
(p) to its Knowledge, Alpine has provided to Horizon [***]; and
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(q) [***].
8.3 Mutual Covenants.
(a) No Debarment. In the course of the Development of Licensed Compounds and Licensed Products or the
conduct of the Research Programs, each Party shall not knowingly use any employee or consultant who has ever been debarred or
is the subject of debarment or convicted of a crime for which an entity or person could be debarred (including by the FDA under
21 U.S.C. § 335a (or subject to a similar sanction of any other Governmental Authority)). Each Party shall notify the other Party
promptly upon becoming aware that any of its employees or consultants has been debarred or is the subject of debarment
proceedings by any Regulatory Authority.
(b) Compliance. Each Party and its Affiliates shall comply in all material respects with all applicable Laws in
the Development, Manufacture, and Commercialization of Licensed Compounds and Licensed Products and the conduct of the
Research Programs performed under this Agreement, including the statutes, regulations and written directives of the FDA, the
EMA and any Regulatory Authority having jurisdiction in the Territory, the FD&C Act, the Prescription Drug Marketing Act, the
Federal Health Care Programs Anti-Kickback Law, 42 U.S.C. §§ 1320a-7b(b), the statutes, regulations and written directives of
Medicare, Medicaid and all other health care programs, as defined in 42 U.S.C. §§ 1320a-7b(f), and the Foreign Corrupt
Practices Act of 1977, each as may be amended from time to time.
8.4 Additional Covenants.
(a) Alpine represents and warrants to and covenants with Horizon during the Term that all of Alpine’s employees
and officers involved in research and development of the Licensed Technology, Research Program IP, Licensed Compounds, or
Licensed Products shall be obligated to assign to Alpine all inventions relating to such Licensed Technology, Research Program
IP, Licensed Compounds, or Licensed Products and to maintain as confidential the Confidential Information of Alpine;
(b) Horizon represents and warrants to and covenants with Alpine that during the Term all of Horizon’s
employees and officers involved in Development of the Licensed Compounds or the Licensed Products shall be obligated to
assign to Horizon all inventions relating to such Licensed Compounds or the Licensed Products and to maintain as confidential
the Confidential Information of Horizon; and
(c) Alpine represents and warrants to and covenants with Horizon that during the Term Alpine shall not (i) sell,
assign or otherwise transfer the Licensed Technology to any Third Party, except to the extent permitted by, and in compliance
with, a transaction permitted by Section 12.6, or (ii) grant to any Third Party any right or license under the Licensed Technology
that conflicts with the rights and licenses granted to Horizon hereunder.
8.5 Disclaimer. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NO REPRESENTATIONS OR
WARRANTIES WHATSOEVER, WHETHER EXPRESS OR
INCLUDING WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR NON-
MISAPPROPRIATION OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS, ARE MADE OR GIVEN BY OR ON
BEHALF OF A PARTY, AND ALL REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF
LAW OR OTHERWISE, ARE HEREBY EXPRESSLY EXCLUDED. Without limiting the generality of the foregoing, (a)
neither Party
IMPLIED,
34
represents or warrants as to the success of any study or test conducted by such Party pursuant to this Agreement or the safety or
usefulness for any purpose of the technology, right or materials it provides hereunder, or that either Party will be successful in
obtaining any patent rights, or that any patents will issue based on a pending application; and (b) each Party specifically disclaims
any guarantee that the Licensed Compounds or Licensed Products will be successful, in whole or in part.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by Alpine. Alpine shall defend, indemnify, and hold Horizon and its Affiliates and their respective
officers, directors, employees, and agents (the “Horizon Indemnitees”) harmless from and against any and all Third Party
claims, suits, proceedings, damages, expenses (including court costs and reasonable attorneys’ fees and expenses) and recoveries
(collectively, “Claims”) to the extent that such Claims arise out of, are based on, or result from (a) the performance by or on
behalf of Alpine or its Affiliates of any obligations of Alpine with respect to Licensed Compounds or Licensed Products (only as
to the Licensed Compound contained therein) under this Agreement, including activities conducted pursuant to the Deliverables
Plan, (b) the breach of any of Alpine’s obligations under this Agreement, including Alpine’s representations, warranties, and
covenants set forth herein, (c) the willful misconduct or negligence of Alpine or its Affiliates in performing under this
Agreement, or (d) if applicable, the Development, Manufacture or Commercialization of any Terminated Products by or on
behalf of Alpine or its Affiliates or (sub)licensees. The foregoing indemnity obligation shall not apply to the extent that (i) the
Horizon Indemnitees fail to comply with the indemnification procedures set forth in Section 9.3 and Alpine’s defense of the
relevant Claims is actually prejudiced by such failure, or (ii) any Claim arises from, is based on, or results from any act or
omission for which Horizon is obligated to indemnify the Alpine Indemnitees under Section 9.2.
9.2 Indemnification by Horizon. Horizon shall defend, indemnify, and hold Alpine and its Affiliates and their
respective officers, directors, employees, and agents (the “Alpine Indemnitees”) harmless from and against any and all Claims to
the extent that such Claims arise out of, are based on, or result from (a) the Development, Manufacture or Commercialization of
Licensed Compounds or Licensed Products by or on behalf of Horizon or its Affiliates or Sublicensees, (b) the breach of any of
Horizon’s obligations under this Agreement, including Horizon’s representations, warranties, and covenants set forth herein, or
(c) the willful misconduct or negligence of Horizon or its Affiliates in performing under this Agreement. The foregoing
indemnity obligation shall not apply to the extent that (i) the Alpine Indemnitees fail to comply with the indemnification
procedures set forth in Section 9.3 and Horizon’s defense of the relevant Claims is actually prejudiced by such failure, or (ii) any
Claim arises from, is based on, or results from any act or omission for which Alpine is obligated to indemnify the Horizon
Indemnitees under Section 9.1.
9.3 Indemnification Procedures. The Party claiming indemnity under this Article 9 (the “Indemnified Party”) shall
give written notice to the Party from whom indemnity is being sought (the “Indemnifying Party”) promptly after learning of
such Claim. The Indemnified Party shall provide the Indemnifying Party with reasonable assistance, at the Indemnifying Party’s
expense, in connection with the defense of the Claim for which indemnity is being sought and, if the Indemnifying Party has
failed to assume defense of such Claim within the time period required by Law to respond to any such Claim and the Indemnified
Party has thereafter assumed and is conducting the defense of the Claim, the Indemnifying Party shall provide the Indemnified
Party with reasonable assistance, at the Indemnifying Party’s expense, in connection with the
35
defense of the Claim for which the indemnity is being sought. The Indemnified Party may participate in and monitor such
defense with counsel of its own choosing at its sole expense; provided, however, the Indemnifying Party shall have the right to
assume and conduct the defense of the Claim with counsel of its choice. The Indemnifying Party shall not settle any Claim
without the prior written consent of the Indemnified Party, not to be unreasonably withheld, conditioned or delayed. For clarity,
the Indemnified Party may freely withhold its consent to a settlement of a claim with respect to Claims if (a) such settlement does
not include a complete release from liability of the Indemnified Party or if such settlement would involve undertaking an
obligation (including the payment of money by an Indemnified Party), (b) would bind or impair the Indemnified Party or (c)
includes any admission of wrongdoing or that any intellectual property or proprietary right of the Indemnified Party or this
Agreement is invalid, narrowed in scope or unenforceable. So long as the Indemnifying Party is actively defending the Claim in
good faith, the Indemnified Party shall not settle or compromise any such Claim without the prior written consent of the
Indemnifying Party. If the Indemnifying Party does not assume and conduct the defense of the Claim as provided above, (i) the
Indemnified Party may defend against, consent to the entry of any judgment, or enter into any settlement with respect to such
Claim in any manner the Indemnified Party may deem reasonably appropriate (and the Indemnified Party need not consult with,
or obtain any consent from, the Indemnifying Party in connection therewith), and (ii) the Indemnifying Party shall remain
responsible to indemnify the Indemnified Party as provided in this Article 9.
9.4 Limitation of Liability. EXCEPT WITH RESPECT TO ANY DAMAGES AVAILABLE FOR A PARTY’S
BREACH OF CONFIDENTIALITY OBLIGATIONS IN ARTICLE 10 OR ITS OBLIGATIONS IN SECTION 2.8, AND
WITHOUT LIMITING OR RESTRICTING THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY
UNDER SECTION 9.1 OR 9.2, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL,
CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES ARISING FROM OR RELATING TO ANY
BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.
9.5 Insurance. Each Party shall procure and maintain insurance adequate to cover its obligations hereunder during the
Term and consistent with normal business practices of companies similarly situated. It is understood that such insurance shall not
be construed to create a limit of either Party’s liability with respect to its indemnification obligations under this Article 9. Each
Party shall provide the other Party with written evidence of such insurance upon request.
ARTICLE 10
CONFIDENTIALITY
10.1 Confidentiality. Each Party agrees that, during the Term and for a period of [***] thereafter, it shall keep
confidential and shall not publish or otherwise disclose and shall not use for any purpose other than as provided for in this
Agreement (which includes the exercise of any rights or the performance of any obligations hereunder) any Confidential
Information furnished to it by the other Party pursuant to this Agreement, except to the extent expressly authorized by this
Agreement or otherwise agreed in writing by the Parties. Each Party will use at least the same standard of care as it uses to
protect proprietary or confidential information of its own (but no less than reasonable care) to ensure that its employees, agents,
consultants, contractors, Sublicensees and other representatives do not disclose or make any unauthorized use of the Confidential
Information of the other Party. Each Party will promptly notify the other upon discovery of any unauthorized use or disclosure of
the Confidential Information of the other Party. The foregoing confidentiality and non-use obligations shall not apply to any
portion of the
36
other Party’s Confidential Information that the receiving Party can demonstrate by competent written proof:
(a) was already known to the receiving Party or any of its Affiliates, other than by previous confidential
disclosure by or on behalf of the disclosing Party or any of its Affiliates, at the time of disclosure by the other Party (provided
that this exception shall not apply to Alpine with respect to any Research Program IP);
receiving Party;
(b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the
(c) becomes generally available to the public or otherwise part of the public domain after its disclosure as
contemplated by this Agreement and other than through any act or omission of the receiving Party in breach of this Agreement;
to the actual or constructive knowledge of the receiving Party, had no obligation of confidentiality to the other Party; or
(d) was disclosed to the receiving Party or any of its Affiliates on a non-confidential basis by a Third Party who,
(e) was independently discovered or developed by the employees, subcontractors, consultants or agents of the
receiving Party or any of its Affiliates without use of or reference to the other Party’s Confidential Information, as evidenced by a
contemporaneous writing.
10.2 Authorized Disclosure. Notwithstanding the obligations set forth in Section 10.1, a Party may disclose the other
Party’s Confidential Information and the terms of this Agreement to the extent:
(a) such disclosure is reasonably necessary (i) to comply with the requirements of Regulatory Authorities with
respect to obtaining and maintaining Regulatory Approval of a Licensed Product; or (ii) for prosecuting or defending litigation as
contemplated by this Agreement;
(b) such disclosure is reasonably necessary to its employees, agents, consultants, contractors, licensees or
Sublicensees on a need-to-know basis for the sole purpose of performing its obligations or exercising its rights under this
Agreement; provided that in each case, the disclosees are bound by written obligations of confidentiality and non-use at least as
restrictive as those contained in this Agreement;
(c) such disclosure is reasonably necessary to any bona fide potential or actual investor, acquirer, merger partner,
licensee, sublicensee, or other financial or commercial partner for the sole purpose of evaluating an actual or potential
investment, acquisition or other business relationship; provided that, in connection with such disclosure, such Party shall inform
each disclosee of the confidential nature of such Confidential Information, and the disclosees are bound by written obligations of
confidentiality and non-use consistent with those contained in this Agreement; or
(d) such disclosure is reasonably necessary to comply with applicable Laws, including regulations promulgated
by applicable security exchanges, court order, administrative subpoena or order or otherwise necessary for submitting
information to the Internal Revenue Service or other Governmental Authority.
37
Notwithstanding the foregoing, in the event a Party is required to make a disclosure of the other Party’s Confidential Information
pursuant to Section 10.2(a) or 10.2(d), such Party shall promptly notify the other Party of such required disclosure and shall use
reasonable efforts to obtain, or to assist the other Party in obtaining, a protective order preventing or limiting the required
disclosure. Any information disclosed pursuant to Section 10.2(a) through Section 10.2(d) shall still be deemed Confidential
Information and subject to the restrictions set forth in this Agreement, including the foregoing provisions of Article 10.
10.3 Technical Publication. During the Term, [***]. A Party seeking to publish a publication containing Confidential
Information of the other Party (including any joint Confidential Information) shall provide the other Party the opportunity to
review and comment on such proposed publication (or where a copy of such publication or presentation is not available at such
time, a draft or outline of such publication or description of such presentation) that relates to any Licensed Compound or
Licensed Product at least [***] prior to its intended submission for publication. The other Party shall provide the Party seeking
publication with its comments in writing, if any, as promptly as practicable after receipt of such proposed publication. The Party
seeking publication shall consider in good faith any comments thereto provided by the other Party and shall comply with the
other Party’s request to remove any and all of such other Party’s Confidential Information from the proposed publication. In
addition, the Party seeking publication shall delay the submission for a period up to [***] in the event that the other Party can
demonstrate reasonable need for such delay, including the preparation and filing of a patent application (or, in the case that a
Party has a compelling business justification, for a longer period reasonably selected by that Party). Each Party agrees to
acknowledge the contributions of the other Party and its employees in all publications as scientifically appropriate.
10.4 Publicity; Terms of Agreement.
disclosure authorized in this Article 10 and the special authorized disclosure provisions set forth in this Section 10.4.
(a) The Parties agree that the terms of this Agreement are the Confidential Information of both Parties, subject to
(b) Public announcement of the execution of this Agreement shall be made substantially in the form of the joint
press release attached hereto as Exhibit K, on or promptly after the Effective Date.
(c) After release of such joint press release in Exhibit K, if either Party desires to make a public announcement
concerning the terms of this Agreement, such Party shall, except as otherwise provided herein, give reasonable prior advance
notice of the proposed text of such announcement to the other Party for its prior review and approval (not to be unreasonably
withheld, conditioned, or delayed). A Party commenting on such a proposed press release by the other Party shall provide its
comments, if any, within [***] after receiving the press release from the other Party. Notwithstanding the foregoing, a Party shall
have the right to make a public announcement or press release of the achievement of significant events in Development
(including achievement of each milestone event set forth in Sections 6.4(a) and 6.4(b) and Sections 6.5(a) and 6.5(b)) or
Commercialization of any Licensed Product in the Territory, even if beyond what may be strictly required by applicable Law and
the rules of recognized stock exchanges, to the extent consistent with such Party’s own disclosure practices, subject to prior
notice of such public announcement or press release to the other Party. The principles to be observed in such disclosures shall be
accuracy, compliance with applicable Law and regulatory guidance documents, reasonable sensitivity to potential negative
reactions of applicable Regulatory Authorities and the need to keep investors and others informed regarding the requesting
Party’s business, including as required by the rules of recognized stock exchanges.
38
Except as provided in this subsection (c) or permitted under Section 10.2, no press release shall include the other Party’s
Confidential Information without the prior written consent of such other Party. In relation to the other Party’s review of such an
announcement, such other Party may make specific, reasonable comments on such proposed press release within the prescribed
time for commentary. Neither Party shall be required to seek the permission of the other Party to repeat any information
regarding the terms of this Agreement that has already been publicly disclosed by such Party, or by the other Party, in accordance
with this Section 10.4, provided such information remains accurate as of such time.
(d) The Parties acknowledge that either or both Parties may be obligated to file a copy of this Agreement and
summaries of the terms hereof with the U.S. Securities and Exchange Commission or other Governmental Authority as
reasonably required to comply with applicable Laws or the rules of a nationally-recognized securities exchange. Each Party shall
be entitled to make such filings, provided that it requests confidential treatment of the commercial terms, sensitive technical
terms and other terms of this Agreement that a Party reasonably deems sensitive or competitive to the extent such confidential
treatment is reasonably available to such Party; provided that the foregoing obligation to request confidential treatment shall not
apply with respect to any disclosure of this Agreement by either Party to the U.S. Internal Revenue Service or similar
Governmental Authority outside the U.S. In the event of any such filing, each Party will provide the other Party with a copy of
this Agreement and related filings marked to show provisions for which such Party intends to seek confidential treatment and
shall reasonably consider and incorporate the other Party’s comments thereon to the extent consistent with the legal requirements
and the rules of any nationally recognized securities exchange, with respect to the filing Party, governing disclosure of material
agreements and material information to be publicly filed.
10.5 Equitable Relief. Each Party acknowledges that its breach of this Article 10 may cause irreparable harm to the
other Party, which cannot be reasonably or adequately compensated in damages in an action at law. By reasons thereof, each
Party agrees that the other Party shall be entitled to seek, in addition to any other remedies it may have under this Agreement or
otherwise, to obtain preliminary and permanent injunctive and other equitable relief to prevent or curtail any actual or threatened
breach of the obligations relating to Confidential Information set forth in this Article 10 by the other Party.
10.6 Attorney-Client Privilege. Neither Party is waiving, nor will be deemed to have waived or diminished, any of its
attorney work product protections, attorney-client privileges or similar protections and privileges recognized under the applicable
law of any jurisdiction as a result of disclosing information pursuant to this Agreement, or any of its Confidential Information
(including Confidential Information related to pending or threatened litigation) to the receiving Party, regardless of whether the
disclosing Party has asserted, or is or may be entitled to assert, such privileges and protections. The Parties may become joint
defendants in proceedings to which the information covered by such protections and privileges relates and may determine that
they share a common legal interest in disclosure between them that is subject to such privileges and protections, and in such
event, may enter into a joint defense agreement setting forth, among other things, the foregoing principles, but are not obligated
to do so.
ARTICLE 11
TERM AND TERMINATION
11.1 Term. This Agreement shall become effective on the Effective Date and, unless earlier terminated pursuant to this
Article 11, shall remain in effect until expiration of the Royalty Term for all Licensed Products in the Territory (the “Term”).
[***].
39
11.2 Termination for Convenience. Horizon may terminate this Agreement (a) in its entirety or (b) [***] (a “Program
Termination”) at any time and for any reason or for no reason upon delivery of (A) at least [***] prior written notice to Alpine if
no [***] has occurred with respect to a Licensed Product and (B) at least [***] prior written notice to Alpine if [***] has
occurred with respect to a Licensed Product.
11.3 Termination for Breach. Each Party (the “Non-Breaching Party”) shall have the right, without prejudice to any
other remedies available to it at law or in equity, to terminate this Agreement in its entirety upon written notice to the other Party
if the other Party materially breaches its obligations under this Agreement and, after receiving written notice identifying such
material breach in reasonable detail, fails to cure such material breach within [***] after receipt of such notice (the “Cure
Period”), or if such material breach (excluding any failure to pay any undisputed amounts due hereunder) is not susceptible to
cure within the Cure Period, fails to deliver to the Non-Breaching Party within the Cure Period a written plan that is reasonably
calculated to resolve such material breach within a specified period (not to exceed [***]) and does not cure such material breach
within the period specified in such plan. [***].
11.4 Termination for Patent Challenge. In the event Horizon or any of its Affiliates or Sublicensees challenges under
any court action or proceeding, or before any patent office, the validity, patentability, enforceability, or non-infringement of any
Licensed Patent, or initiates a reexamination of any Licensed Patent, or assists any Third Party to conduct any of the foregoing
activities (each, a “Challenge”), Alpine will have the right to terminate this Agreement in accordance with the following terms.
In the event the Challenge is by Horizon or its Affiliate, Alpine may terminate this Agreement within [***] of the Challenge
unless Horizon withdraws such Challenge. [***].
11.5 Termination for Insolvency. Each Party shall have the right to terminate this Agreement upon delivery of written
notice to the other Party in the event that (a) such other Party files in any court or agency pursuant to any statute or regulation of
any jurisdiction a petition in bankruptcy or insolvency or for reorganization or similar arrangement for the benefit of creditors or
for the appointment of a receiver or trustee of such other Party or its assets, (b) such other Party is served with an involuntary
petition against it in any insolvency proceeding and such involuntary petition has not been stayed or dismissed within [***] of its
filing, or (c) such other Party makes an assignment of substantially all of its assets for the benefit of its creditors.
11.6 Consequences of Termination. Upon any termination of this Agreement, except as otherwise set forth in this
Section 11.6 and Section 11.7, all licenses and rights granted by either Party under this Agreement shall terminate; [***].
(a) Existing Program Termination. In the event that this Agreement is terminated by Horizon pursuant to
Section 11.2 or by Alpine pursuant to Section 11.3, 11.4 or 11.5 with respect to the Existing Program, Licensed Existing Program
Compounds and Licensed Existing Program Products, and Alpine provides written notice to Horizon within [***] after the
effective date of such termination, that Alpine wishes to continue development or commercialization with respect to any such
Licensed Existing Program Products, (i) clause (b) below shall apply if such termination becomes effective [***] (ii) if clause (i)
does not apply, [***].
(b) Rights to Licensed Existing Program Product(s). Only in the event described in Section 11.6(a), the
following terms of this Section 11.6(b) shall apply.
(i) Regulatory Materials. [***].
40
(ii) Technology Licenses. [***].
(iii) Trademarks. [***].
direct license from Alpine to the furthest extent possible.
(iv) Sublicensees. Subject to Section 2.4(a)(iv), Horizon’s Sublicensees shall continue in effect as a
smooth, orderly and prompt transition of the Terminated Product(s) to Alpine or its designee(s).
(v) General Assistance. Horizon agrees to fully cooperate with Alpine and its designee(s) to facilitate a
(vi) Costs and Expenses. [***].
(c) Research Program Termination. In the event that this Agreement is terminated with respect to any
Research Program(s), Research Program Compounds and Research Program Products, this Section 11.6(c) shall apply. If such
termination was by Horizon pursuant to Section 11.2 or by Alpine pursuant to Section 11.3, 11.4 or 11.5 with respect to such
Research Program(s), [***]. Except to the extent the Parties enter into such separate agreement with respect to any Research
Program Product(s), if a Research Program Product is Developed or Commercialized by Horizon or any of its Affiliates or
Sublicensees, all of Horizon’s payment and other obligations [***] shall continue to apply, including after any termination of this
Agreement, except any termination [***].
11.7 Survival. Termination or expiration of this Agreement shall not affect any liabilities of the Parties under this
Agreement that have accrued prior to the date of termination or expiration. Notwithstanding anything to the contrary, the
following provisions shall survive any expiration or termination of this Agreement: [***].
11.8 No Limitation on Remedies. Notwithstanding anything to the contrary in this Agreement, termination or
expiration of this Agreement shall not relieve the Parties of any liability or obligation which accrued hereunder prior to the
effective date of such termination or expiration nor prejudice either Party’s right to obtain performance of any obligation. Subject
to the terms and conditions of this Agreement, each Party shall be free to seek (without restriction as to the number of times it
may seek) damages, costs and remedies that may be available at Law or in equity and shall be entitled to offset the amount of any
damages and costs obtained in a final, non-appealable judgment (or judgment from which no appeal was taken within the
allowable time period) of monetary damages or costs (as permitted by this Agreement) against the other Party against any
amounts otherwise due to such other Party under this Agreement.
12.1 English Language; Governing Law; Jurisdiction; Disputes.
ARTICLE 12
MISCELLANEOUS
interpretation of, and any dispute regarding, the terms of this Agreement.
(a) English Language. This Agreement was prepared in the English language, which language shall govern the
(b) Governing Law. This Agreement and all disputes arising out of or related to this Agreement or any breach
hereof shall be governed by and construed under the laws of the State of New York, U.S., without giving effect to any choice of
law principles that would require
41
the application of the laws of a different jurisdiction and excluding the United Nations Conventions on Contracts for the
International Sale of Goods. For clarification and notwithstanding Section 12.1(d) below, any dispute relating to the inventorship,
scope, validity, enforceability or infringement of any patent right shall be governed by and construed and enforced in accordance
with the patent laws of the applicable jurisdiction.
(c) Disputes. Unless otherwise set forth in this Agreement, in the event of any controversies or claims arising
out of, relating to or in connection with any provision of this Agreement (“Dispute”), such Dispute shall be referred to the
President of Alpine (or his or her designee) and the Chief Strategy Officer of Horizon (or his or her designee) for good faith
negotiations attempting to resolve the Dispute.
(d) Arbitration. Should the designated executive officers of the Parties be unable to resolve such Dispute within
[***] after such Dispute has first been referred to them, then the Dispute shall be finally settled by binding arbitration by a panel
of [***] arbitrators pursuant to the then-current Commercial Arbitration Rules of the American Arbitration Associations (“AAA
Rules”), except where they conflict with this Section 12.1(d) shall control. Each Party shall nominate [***] arbitrator and the
[***] Party-nominated arbitrators shall then nominate the [***] arbitrator, who shall serve as the presiding arbitrator, within [***]
after the second arbitrator’s appointment. The arbitrators shall not be [***] and each arbitrator shall have at least [***] of
pharmaceutical industry experience. At the request of a Party, the arbitral tribunal shall have the discretion to order the disclosure
of specified documents by the Parties. Such a request shall identify the document(s) with a reasonable degree of specificity and
establish the relevance of the document(s) to the arbitration.
the arbitration shall be English.
(i) Seat; Language. The seat, or legal place, of arbitration shall be New York City, NY. The language of
(ii) Relief. Except as otherwise specifically limited in this Agreement, including Section 9.4, the arbitral
tribunal shall have the power to grant any remedy or relief that it deems appropriate, whether provisional or final, including
injunctive relief. Each Party retains the right to apply to any court of competent jurisdiction for interim and/or conservatory
measures, including pre-arbitral attachments or preliminary injunctions, and any such request shall not be deemed incompatible
with, or a waiver of, this agreement to arbitrate. The arbitration award shall be final and binding on the Parties, and the Parties
undertake to carry out any award without delay. Judgment on the award may be entered in any court of competent jurisdiction.
(iii) Costs. Each Party shall bear its own legal fees. The arbitrators shall assess their costs, fees and
expenses against the Party losing the arbitration unless they believe that neither Party is the clear winner, in which case the
arbitrators shall divide such fees, costs and expenses according to their discretion. The arbitrators, in the arbitrators’ discretion,
may award reimbursement of attorney’s fees to the prevailing Party.
(iv) Confidentiality. The existence and content of the arbitral proceeding, including any rulings or
award, shall be kept confidential by the Parties and the arbitrator except to the extent (A) required by applicable Law; (B)
required to protect or pursue a legal right; (C) required to enforce or challenge an award; or (D) approved by written consent of
the Parties. Notwithstanding anything to the contrary herein, either Party may disclose matters relating to the arbitration or the
arbitral proceedings where necessary for the preparation or presentation of a claim or defense in such arbitration. The arbitrators
shall issue appropriate protective orders to safeguard each Party’s Confidential Information.
42
(v) Timing. The hearing shall commence within [***] after the selection of the arbitrators. The award
shall be rendered within [***] of the appointment of the arbitral tribunal, unless the Parties jointly request an extension or the
arbitral tribunal determines, in a reasoned decision, that the interest of justice or the complexity of the case requires that such
limit be extended.
after termination of this Agreement for any reason.
(vi) Survivability. Any duty to arbitrate under this Agreement shall remain in effect and be enforceable
(vii) Patent and Trademark and Other Disputes. Any dispute, controversy or claim relating to the
scope, validity, enforceability or infringement of any Patents or trademarks shall be submitted to a court of competent jurisdiction
in the country in which such patent or trademark rights were granted or arose. Arbitration shall not be applicable to any matter to
be decided by the JRC or by Horizon pursuant to its final decision-making authority with respect to matters within the
jurisdiction of the JRC.
12.2 Entire Agreement; Amendment. This Agreement, including the Exhibits hereto, and the SPA set forth the
complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations, conditions and
understandings between the Parties with respect to the subject matter hereof and supersedes, as of the Effective Date, all prior and
contemporaneous agreements and understandings between the Parties with respect to the subject matter hereof, including the
Confidentiality Agreement. No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon
the Parties unless reduced to writing and signed by an authorized officer of each Party.
12.3 Force Majeure. Both Parties shall be excused from the performance of their obligations under this Agreement to
the extent that such performance is prevented by a Force Majeure and the nonperforming Party promptly provides notice of the
prevention to the other Party. Such excuse shall be continued so long as the condition constituting such Force Majeure continues
and the nonperforming Party takes reasonable efforts to remove the condition. For purposes of this Agreement, “Force Majeure”
means, with respect to a Party, conditions beyond the reasonable control of such Party, including an act of God, war, terrorist act,
labor strike or lock-out, epidemic, fire, earthquake, storm, release of radioactive material into the environment, or like
catastrophe. Notwithstanding the foregoing, a Party shall not be excused from making payments owed hereunder because of a
Force Majeure affecting such Party. If a Force Majeure persists for more than [***], then the Parties will discuss in good faith the
modification of the Parties’ obligations under this Agreement in order to mitigate the delays caused by such Force Majeure.
Notwithstanding anything to the contrary contained in this Section 12.3, the Parties acknowledge and agree that a COVID-19
pandemic and business disruptions related thereto (collectively, the “COVID Event”) are currently occurring as of the Effective
Date and may worsen, and the Parties further acknowledge and agree that, as of the Effective Date, neither the COVID Event, nor
any recurrence thereof, shall constitute a Force Majeure.
12.4 Notices. Any notice required or permitted to be given under this Agreement shall be in writing, shall specifically
refer to this Agreement, and shall be addressed to the appropriate Party at the address specified below or such other address as
may be specified by such Party in writing in accordance with this Section 12.4, and shall be deemed to have been given for all
purposes (a) when received, if hand-delivered or sent by confirmed electronic delivery or a reputable courier service, or (b) [***]
after mailing, if mailed by first class certified or registered airmail, postage prepaid, return receipt requested.
43
If to Alpine: Alpine Immune Sciences, Inc.
188 E Blaine St. Suite 200
Seattle, WA 98102
Attn: [***]
Email: [***]
With a copy to: [***]
With a copy to (which shall not constitute notice):
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304-1050
United States
Attn: Ian B. Edvalson, Esq.
Telephone: (650) 493-9300
Email: [***]
If to Horizon: Horizon Therapeutics Ireland DAC
70 St. Stephen’s Green
Dublin 2, D02 E2X4, Ireland
Attn: [***]
Telephone: +353 1 772 2100
Email: [***]
With a copy to (which shall not constitute notice):
Horizon Therapeutics USA, Inc.
1 Horizon Way
Deerfield, IL 60015-3888
Attn: [***]
Telephone: 224-383-3000
12.5 No Strict Construction; Headings. This Agreement has been prepared jointly by the Parties and shall not be
strictly construed against either Party. Ambiguities, if any, in this Agreement shall not be construed against any Party, irrespective
of which Party may be deemed to have authored the ambiguous provision. The headings of each Article and Section in this
Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the
language contained in the particular Article or Section. Except where the context otherwise requires, wherever used, the singular
shall include the plural and the plural the singular. The use of any gender shall be applicable to all genders. The word “or” is used
in the inclusive sense (and/or) unless the context dictates otherwise because the subjects of the conjunction are mutually
exclusive. The term “including” means “including without limitation,” without limiting the generality of any description
preceding such term. The term “shall” means “will”. In addition, (a) the words “hereof,” “herein,” “hereby” and derivative or
similar words refer to this Agreement (including any Exhibits); (b) provisions that require that a Party or the Parties hereunder
“agree,” “consent” or “approve” or the like shall require that such agreement, consent or approval be specific and in writing,
whether by written agreement, letter
44
or otherwise; and (c) neither Party or its Affiliates shall be deemed to be acting “on behalf of” or “under authority of” the other
Party.
12.6 Assignment. Neither Party may assign or transfer this Agreement or any rights or obligations hereunder without
the prior written consent of the other Party, except that a Party may make such an assignment or transfer without the other Party’s
consent (i) to an Affiliate (for so long as such entity remains an Affiliate), provided that such assigning Party shall remain
responsible for such Affiliate’s conduct or (ii) to a Third Party acquiror or its Affiliate in connection with a Change of Control of
such Party (such Third Party, an “Acquiror”). Any successor or assignee of rights or obligations permitted hereunder shall, in
writing to the other Party, expressly assume performance of such rights or obligations. Any permitted assignment shall be binding
on the successors of the assigning Party. Any assignment or attempted assignment by either Party in violation of the terms of this
Section 12.6 shall be null, void and of no legal effect.
12.7 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all
such other reasonable and customary acts, as may be necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
12.8 Rights in Bankruptcy. All rights and licenses granted under or pursuant to this Agreement by Alpine are, and
shall otherwise be deemed to be, for purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to “intellectual
property” as defined under Section 101 of the Bankruptcy Code. The Parties agree that Horizon, as licensee of such rights under
this Agreement, shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code solely applicable to
the Licensed Compounds, [***] Licensed Technology, and Alpine Libraries, including without limitation Horizon’s right to retain
all licenses to Licensed Technology granted herein. Without limiting the generality of the foregoing, the Parties intend and agree
that any sale of Alpine’s assets under Section 363 of the Bankruptcy Code shall be subject to Horizon’s rights under Section
365(n) with respect to such Licensed Technology, that Horizon cannot be compelled to accept a money satisfaction of its interests
in Licensed Technology, and that any such sale therefore may not be made to a purchaser “free and clear” of Horizon’s license
rights without the consent of Horizon. The Parties further agree that, in the event of the commencement of a bankruptcy
proceeding by or against Alpine under the Bankruptcy Code, Horizon shall be entitled to a complete duplicate of (or complete
access to, as appropriate) any such intellectual property solely applicable to the Licensed Compounds, [***] Licensed
Technology, and Alpine Libraries and all embodiments of such intellectual property, and the same, if not already in its possession,
shall be promptly delivered to them (i) upon any such commencement of a bankruptcy proceeding upon its written request
therefor, unless Alpine elects to continue to perform all of its obligations under this Agreement, or (ii) if not delivered under (i)
above, following the rejection of this Agreement by or on behalf of Alpine upon written request therefor by Horizon. (The Parties
acknowledge and agree that “embodiments” of intellectual property within the meaning of Section 365(n) include without
limitation laboratory notebooks, inventory, research studies, data, and regulatory approvals to the extent such items are solely
applicable to the Licensed Compounds, [***], Licensed Technology and Alpine Libraries). Additionally, if (a) a case under the
Bankruptcy Code is commenced by or against Alpine, (b) this Agreement is rejected as provided in the Bankruptcy Code, and (c)
Horizon elects to retain its rights hereunder as provided in Section 365(n) of the Bankruptcy Code, Alpine (in any capacity,
including debtor-in-possession) and its successors and assigns (including a trustee) shall not interfere with Horizon’s rights under
this Agreement to Licensed Technology (including such embodiments), including any right to obtain such Licensed Technology
(or such embodiments) from another entity, to the extent provided in Section 365(n) of the Bankruptcy Code. All rights, powers
and remedies of Horizon provided herein are in addition to and not in
45
substitution for any and all other rights, powers and remedies now or hereafter existing at law or in equity (including the
Bankruptcy Code) in the event of the commencement of a case under the Bankruptcy Code with respect to Alpine. The Parties
agree that they intend the following rights to extend to the maximum extent permitted by law, and to be enforceable under
Section 365(n) of the Bankruptcy Code: (I) the right of access to any Licensed Technology (including all embodiments thereof)
of Alpine, which is necessary for the development, manufacture, supply, commercialization, sale, import or export of Licensed
Compounds or Licensed Products, in any case solely as provided under this Agreement; and (II) the right to contract directly with
any Third Party to complete the same.
12.9 Severability. If any one or more of the provisions of this Agreement is held to be invalid or unenforceable by any
court of competent jurisdiction from which no appeal can be or is taken, the provision shall be considered severed from this
Agreement and shall not serve to invalidate any remaining provisions hereof. The Parties shall make a good faith effort to replace
any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by the Parties
when entering this Agreement may be realized.
12.10 No Waiver. Any delay in enforcing a Party’s rights under this Agreement or any waiver as to a particular default
or other matter shall not constitute a waiver of such Party’s rights to the future enforcement of its rights under this Agreement,
except with respect to an express written and signed waiver (signed by the Party providing such waiver) relating to a particular
matter for a particular period of time.
12.11 Independent Contractors. Each Party shall act solely as an independent contractor, and nothing in this
Agreement shall be construed to give either Party the power or authority to act for, bind, or commit the other Party in any way.
Nothing herein shall be construed to create the relationship of partners, principal and agent, or joint-venture partners between the
Parties. No Party shall report this Agreement (and the transactions hereunder) as an entity or partnership for any tax purpose
unless required pursuant to a “final determination” in accordance with Section 1313 of the Code.
12.12 No Third Party Beneficiaries. This Agreement is neither expressly nor impliedly made for the benefit of any
party other than the Parties and their successors and permitted assigns, except for the Horizon Indemnitees and Alpine
Indemnitees expressly entitled to indemnification as provided in Article 9 and only in accordance with the terms of such Article
9.
12.13 Counterparts; Electronic Delivery. This Agreement may be executed in counterparts, by original or PDF
signature, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
Signatures to this Agreement transmitted by email in “portable document format” (“.pdf”), or by any other electronic means
intended to preserve the original graphic and pictorial appearance of this Agreement shall have the same effect as physical
delivery of the paper document bearing original signature.
[Signature page follows]
46
In Witness Whereof, the Parties have executed this Agreement by their duly authorized officers as of the Effective Date.
Horizon Therapeutics Ireland DAC
Alpine Immune Sciences, Inc.
By: /s/ William D. Gannon
Name: William D. Gannon
By: /s/ Paul Rickey
Name: Paul Rickey
Title: Director
Title: Senior Vice President and Chief Financial Officer
Exhibit A – Alpine Reserved Sequences
[***]
Exhibit B – Back Up Compound
[***]
49
.
Exhibit C – Deliverables Plan
[***]
Exhibit D – Deliverables Budget
[***]
Exhibit E – Individuals with Knowledge
[***]
Exhibit F – Lead Compound
[***]
Exhibit G – Licensed Know-How
[***]
Exhibit H – Licensed Patents
[***]
Exhibit I – Research Plan
[***]
Exhibit J – List of Countries for Patent Applications
[***]
Exhibit K – Press Release
[See Attached]
Exhibit 10.31
This Stock Purchase Agreement (this “Agreement”) is dated as of December 15, 2021, by and between Alpine Immune Sciences,
Inc., a Delaware corporation (the “Company”), and Horizon Therapeutics Ireland DAC, an Irish company (the “Purchaser”).
STOCK PURCHASE AGREEMENT
RECITALS
The Company and the Purchaser are each executing and delivering this Agreement in reliance upon the exemption from securities
registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Purchaser hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following
terms shall have the meanings indicated in this Section 1.1:
“Acquiring Person” has the meaning set forth in Section 4.4.
“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more
intermediaries, Controls, is controlled by or is under common control with such Person, as such terms are used in and construed under
Rule 405 under the Securities Act.
“Applicable Laws” has the meaning set forth in Section 3.1(qq).
“Agreement” has the meaning set forth in the Preamble.
“Authorizations” has the meaning set forth in Section 3.1(qq).
“Board of Directors” means the board of directors of the Company.
day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“Business Day” means any day except Saturday, Sunday, any day which is a federal legal holiday in the United States or any
“Closing” means the closing of the purchase and sale of the Shares pursuant to this Agreement.
“Closing Date” means a Trading Day to be mutually agreed by the Company and the Purchaser (not to be later than 30 days
from the date of this Agreement) following the execution and delivery of this Agreement and the License and Collaboration Agreement by
the applicable parties thereto and the satisfaction or waiver of all of the conditions set forth in Sections 2.1, 2.2, 5.1 and 5.2 hereof. Subject to
the immediately preceding sentence, the Company and the Purchaser agree that the Closing Date will be December 20, 2021.
“Commission” means the United States Securities and Exchange Commission.
securities into which the Common Stock may hereafter be reclassified or changed into.
“Common Stock” means the Company’s common stock, par value $0.001 per share, and also includes any other class of
to acquire at any time Common Stock, including, without limitation, any
“Common Stock Equivalents” means any securities of the Company or any Subsidiary which would entitle the holder thereof
debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock or other securities that entitle the holder to receive, directly or indirectly, Common
Stock.
“Company” has the meaning set forth in the Preamble.
“Company Counsel” means Wilson Sonsini Goodrich & Rosati, Professional Corporation.
“Company Deliverables” has the meaning set forth in Section 2.2(a).
“Control” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, direct
or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
“DTC” has the meaning set forth in Section 4.1(e).
“Environmental Laws” has the meaning set forth in Section 3.1(dd).
regulations promulgated thereunder.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and
“FDA” has the meaning set forth in Section 3.1(ll).
“GAAP” means U.S. generally accepted accounting principles, as applied by the Company.
“Health Care Laws” has the meaning set forth in Section 3.1(ll).
“HIPAA” has the meaning set forth in Section 3.1(qq).
“Indemnified Person” has the meaning set forth in Section 4.7.
“Intellectual Property Assets” has the meaning set forth in Section 3.1(p).
“Intellectual Property Rights” has the meaning set forth in Section 3.1(p).
“Investment Company Act” has the meaning set forth in Section 3.1(w).
“Legacy Alpine” has the meaning set forth in Section 3.1(p).
the Company and the Purchaser on or about the date hereof.
“License and Collaboration Agreement” means that certain License and Collaboration Agreement to be entered into between
“Material Adverse Effect” has the meaning set forth in Section 3.1(b).
“Money Laundering Laws” has the meaning set forth in Section 3.1(pp).
“New York Courts” means the state and federal courts sitting in the City of New York, Borough of Manhattan.
“OFAC” has the meaning set forth in Section 3.1(kk).
“Off-Balance Sheet Transaction” has the meaning set forth in Section 3.1(gg).
“Outside Date” means the thirtieth day following the date of this Agreement.
“Per Share Purchase Price” means $15.756625 per Share.
2
“Permits” has the meaning set forth in Section 3.1(n).
“Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint
stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not
specifically listed herein.
trading, which, as of the date of this Agreement and the Closing Date, shall be the Nasdaq Global Market.
“Principal Trading Market” means the Trading Market on which the Common Stock is primarily listed on and quoted for
partial proceeding, such as a deposition), whether commenced or threatened.
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or
“Purchaser” has the meaning set forth in the Preamble.
“Purchaser Deliverables” has the meaning set forth in Section 2.2(b).
“Purchaser Party” has the meaning set forth in Section 4.7.
“Regulation S-X” has the meaning set forth in Section 3.1(i).
“Regulatory Authorities” has the meaning set forth in Section 3.1(oo).
“Restricted Period” has the meaning set forth in Section 4.1(b).
“Required Approvals” has the meaning set forth in Section 3.1(e).
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended
“Sarbanes-Oxley Act” has the meaning set forth in Section 3.1(s).
“SEC Reports” has the meaning set forth in Section 3.1(h).
“Secretary’s Certificate” has the meaning set forth in Section 2.2(a)(vii).
“Securities Act” has the meaning set forth in the Recitals.
“Shares” has the meaning set forth in Section 2.1(a).
“Short Sales” include, without limitation, (i) all “short sales” as defined in Rule 200 promulgated under Regulation SHO
under the Exchange Act, whether or not against the box, and all types of direct and indirect stock pledges, forward sale contracts, options,
puts, calls, short sales, swaps, “put equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar arrangements
(including on a total return basis), and (ii) sales and other transactions through non-U.S. broker dealers or foreign regulated brokers (but shall
not be deemed to include the location and/or reservation of borrowable shares of Common Stock).
“Subscription Amount” has the meaning set forth in Section 2.1(a).
“Subsidiaries” means the consolidated subsidiaries of the Company.
“Threshold Amount” means 19.99% of the outstanding shares of Common Stock or the voting power of the Company.
“Trading Affiliate” has the meaning set forth in Section 3.2(i).
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“Trading Day” means (i) a day on which the Common Stock is listed or quoted and traded on its Principal Trading Market
(other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading Market (other than the OTC Bulletin Board), a
day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common
Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported in the
“pink sheets” by Pink Sheets LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the
event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.
“Trading Market” means whichever of the New York Stock Exchange, the NYSE MKT, the Nasdaq Global Select Market,
the Nasdaq Global Market, the Nasdaq Capital Market or the OTC Bulletin Board on which the Common Stock is listed or quoted for trading
on the date in question.
mailing address of 1717 Arch St., Suite 1300 Philadelphia, PA 191036, or any successor transfer agent for the Company.
“Transfer Agent” means Broadridge Corporate Issuer Solutions, Inc., the current transfer agent of the Company, with a
“Treasury” has the meaning set forth in Section 3.2(q).
“XBRL” has the meaning set forth in Section 3.1(i).
ARTICLE II.
PURCHASE AND SALE
2.1 Closing.
(a) Amount. Subject to the terms and conditions set forth in this Agreement, at the Closing, the Company shall issue and
sell to the Purchaser, and the Purchaser shall purchase from the Company, 951,980 shares of Common Stock (the “Shares”) at the Per Share
Purchase Price, for aggregate consideration of $14,999,991.87 (the “Subscription Amount”).
(b) Closing. The Closing of the purchase and sale of the Shares shall take place at the offices of Wilson Sonsini Goodrich
& Rosati, Professional Corporation, 701 Fifth Avenue, Suite 5100, Seattle, WA 98104, on the Closing Date or at such other locations or
remotely by facsimile transmission or other electronic means as the parties may mutually agree.
Subscription Amount via wire transfer of immediately available funds pursuant to the wire instructions attached hereto as Exhibit A.
(c) Form of Payment. On the Closing Date, the Purchaser shall deliver, or cause to be delivered to the Company, the
2.2 Closing Deliveries. (a) On or prior to the Closing, the Company shall issue, deliver or cause to be delivered to the Purchaser the
following (the “Company Deliverables”):
(i) this Agreement, duly executed by the Company;
(ii) instructions to the Transfer Agent to deliver to the Purchaser a book-entry statement evidencing the Shares;
(iii) a certificate of the Secretary of the Company (the “Secretary’s Certificate”), dated as of the Closing Date, (a)
certifying the resolutions adopted by the Board of Directors of the Company or a duly authorized committee thereof approving the
transactions contemplated by this Agreement and the issuance of the Shares, (b) certifying the current versions of the certificate of
incorporation, as amended, and bylaws of the Company and (c) certifying as to the signatures and authority of persons signing this
Agreement and related documents on behalf of the Company, in the form attached hereto as Exhibit B;
(iv) the Compliance Certificate referred to in Section 5.1(i);
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Delaware, as of a date within five (5) Business Days of the Closing Date;
(v) a certificate evidencing the good standing of the Company issued by the Secretary of State of the State of
date within five (5) Business Days of the Closing Date; and
(vi) a certificate of existence and authorization issued by the Secretary of State of the State of Washington, as of a
State of Delaware, as of a date within five (5) Business Days of the Closing Date.
(vii) a certified copy of the Certificate of Incorporation of the Company, as certified by the Secretary of State of the
“Purchaser Deliverables”):
(b) On or prior to the Closing, the Purchaser shall deliver or cause to be delivered to the Company the following (the
(i) this Agreement, duly executed by the Purchaser;
(ii) the Subscription Amount;
(iii) a fully completed and duly executed Accredited Investor Questionnaire, satisfactory to the Company, and
Book-Entry Questionnaire in the forms attached hereto as Exhibits C-1 and C-2, respectively, which Accredited Investor Questionnaire and
Book-Entry Questionnaire must be received by the Company no later than 3:00 p.m., Eastern time, on the Business Day immediately prior to
the Closing Date.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as disclosed in the SEC Reports, the Company hereby represents and
warrants as of the date hereof and the Closing Date (except for the representations and warranties that speak as of a specific date, which shall
be made as of such date), to the Purchaser:
(a) Subsidiaries. The Company does not own or control, directly or indirectly, any corporation, association or other entity
other than the subsidiaries listed in Exhibit 21.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020
except for subsidiaries that in the aggregate would not constitute a “significant subsidiary” (as defined in Rule 405 under the Securities Act).
The Company’s wholly-owned subsidiary, AIS Operating Co., Inc., is a “significant subsidiary” (as defined in Rule 405 under the Securities
Act).
(b) Organization and Qualification. The Company and each of its Subsidiaries have been duly organized, are validly
existing as corporations or limited liability entities and are in good standing under the laws of their respective jurisdictions of organization,
except where the failure to be so duly organized, validly existing and in good standing would not reasonably be expected to have a Material
Adverse Effect. The Company and each of its Subsidiaries are, and will be, duly licensed or qualified as a foreign corporation for the
transaction of business and in good standing under the laws of each other jurisdiction in which their respective ownership or lease of property
or the conduct of their respective businesses requires such license or qualification, and have all corporate power and authority necessary to
own or hold their respective properties and to conduct their respective businesses as described in the SEC Reports, except where the failure to
be so qualified or in good standing or have such power or authority would not, individually or in the aggregate, have a material adverse effect
or would reasonably be expected to have a material adverse effect on or affecting the assets, business, operations, earnings, properties,
condition (financial or otherwise), prospects, stockholders’ equity or results of operations of the Company and the Subsidiaries taken as a
whole, or prevent or materially interfere with the consummation of the transactions contemplated hereby (a “Material Adverse Effect”);
provided, however, that any of the following, either alone or in combination, shall not be deemed a Material Adverse Effect: (i) effects caused
by changes or circumstances affecting general market conditions in the U.S. economy or which are generally applicable to the industry in
which the Company operates, provided that such effects are not borne disproportionately by the Company, (ii) effects resulting from or
relating to the announcement or disclosure of the sale of the Shares or other transactions contemplated hereby, or (iii) effects caused by any
event,
5
occurrence or condition resulting from or relating to the taking of any action in accordance with this Agreement.
(c) Authorization. The Company has all requisite corporate power and authority to execute, deliver and perform its
obligations contemplated by this Agreement. This Agreement has been duly and validly authorized, executed and delivered by the Company.
(d) No Conflicts. The issue and sale of the Shares, the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not (i) conflict with or result in a breach or violation of any of the terms or
provisions of, impose any lien, charge or encumbrance upon any property or assets of the Company and its Subsidiaries, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement, license, lease or other agreement or instrument to which the Company
or any of its subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any of the property or assets of
the Company or any of its Subsidiaries is subject; (ii) result in any violation of the provisions of the certificate of incorporation, charter or
bylaws (or similar organizational documents) of the Company or any of its Subsidiaries; or (iii) result in any violation of any statute or any
judgment, order, decree, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its
Subsidiaries or any of their properties or assets, except, with respect to clauses (i) and (iii), for such conflicts, breaches, violations, liens,
charges, encumbrances or defaults that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(e) Filings, Consents and Approvals. No consent, approval, authorization or order of, or filing, registration or qualification
with, any court or governmental agency or body having jurisdiction over the Company or any of its Subsidiaries or any of their respective
properties or assets is required for the issue and sale of the Shares, the execution, delivery and performance by the Company of this
Agreement, the consummation of the transactions contemplated hereby, except for (i) such consents, approvals, authorizations, orders,
filings, registrations or qualifications as may be required under the Exchange Act, (ii) filings required by applicable state or foreign securities
laws, (iii) the filing of any requisite notices and/or application(s) to the Principal Trading Market for the issuance and sale of the Shares and
the listing of the Shares for trading or quotation, as the case may be, thereon in the time and manner required thereby, and (iv) those that have
been made or obtained prior to the date of this Agreement (collectively, the “Required Approvals”).
(f) Issuance of the Shares. The Shares have been duly authorized and, when issued and paid for in accordance with the
terms of this Agreement, will be duly authorized and validly issued, fully paid and nonassessable and free and clear of all liens, other than
restrictions on transfer provided for herein or imposed by applicable securities laws, and shall not be subject to preemptive or similar rights.
Assuming the accuracy of the representations and warranties of the Purchaser in this Agreement, the Shares will be issued in compliance with
all applicable federal and state securities laws.
(g) Capitalization. The authorized capital of the Company consists of 200,000,000 shares of Common Stock, 30,468,159
shares of which are issued and 29,217,692 shares of which are outstanding as of September 30, 2021, and 10,000,000 shares of preferred
stock, par value $0.001 per share, none of which are currently issued and outstanding as of September 30, 2021. Under the Company’s Plans
(as defined below) (i) options to acquire 5,692,264 shares of Common Stock have been granted and are currently outstanding as of
September 30, 2021, (ii) no restricted shares of Common Stock have been granted and are currently outstanding as of September 30, 2021,
(iii) zero shares of Common Stock have been reserved for issuance as of September 30, 2021 upon the settlement of outstanding restricted
stock units granted under the Company’s Plans, (iv) 652,074 shares of Common Stock remain available for future issuance as of September
30, 2021 to directors, executive officers, employees and consultants of the Company pursuant to the Company’s 2018 Equity Incentive Plan,
as amended, (the “2018 Plan”), and (v) 45,211 shares of Common Stock have been reserved for issuance as of September 30, 2021 under the
Company’s Employee Stock Purchase Plan. Since September 30, 2021 and except as disclosed in the SEC Reports, the Company has not
issued any equity securities, other than those issued pursuant to the 2018 Plan and any of the Company’s other equity incentive plans
disclosed in the SEC Reports (including employee stock purchase plans and any inducement equity plans or awards established in
compliance with Nasdaq Marketplace Rules) (collectively, together with the 2018 Plan, the “Plans”). The Company has outstanding warrants
to purchase 8,851,116 shares of Common Stock as of September 30, 2021 (the “Outstanding
6
Warrants”). Except as set forth in the Company SEC Reports, and other than the shares of Common Stock reserved for issuance under the
2018 Plan and the Outstanding Warrants, there are no outstanding options, rights (including conversion or preemptive rights and rights of
first refusal), proxy or shareholder agreements, or agreements of any kind for the purchase or acquisition from the Company of any of its
securities. The Company has an authorized capitalization as set forth in the SEC Reports, and all of the issued shares of the Company have
been duly authorized and validly issued, are fully paid and non-assessable, conform in all material respects to the description thereof
contained in the SEC Reports and were not issued in violation of any preemptive right, resale right, right of first refusal or similar right. All
of the Company’s options, warrants and other rights to purchase or exchange any securities for shares of the Company’s capital stock have
been duly authorized and validly issued, and conform in all material respects to the description thereof contained in the SEC Reports. All of
the issued shares of capital stock or other ownership interests of each Subsidiary of the Company have been duly authorized and validly
issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims, except for such liens, encumbrances, equities or claims as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. No Person is entitled to preemptive rights, rights of first refusal, rights of participation or similar
rights with respect to any securities of the Company, including with respect to the issuance of Shares contemplated hereby. Except as set forth
in the Company SEC Documents, there are no voting agreements, registration rights agreements or other agreements of any kind between the
Company and any other Person relating to the securities of the Company, including the Shares.
(h) SEC Reports. The Company has filed all reports, schedules, forms, statements and other documents required to be filed
by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such
shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto
and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has
received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension, except
where the failure to file on a timely basis would not have or reasonably be expected to result in a Material Adverse Effect (including, for this
purpose only, any failure that would prevent the Purchaser from using Rule 144 to resell any Shares). As of their respective filing dates, or to
the extent corrected by a subsequent restatement, the SEC Reports complied in all material respects with the requirements of the Securities
Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when
filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were made, not misleading. The Company has never been an
issuer subject to Rule 144(i) under the Securities Act.
(i) Financial Statements. The historical financial statements (including the related notes and supporting schedules) included
in the SEC Reports comply as to form in all material respects with the requirements of Regulation S-X under the Securities Act
(“Regulation S-X”) and present fairly, in all material respects, the financial condition, results of operations and cash flows of the entities
purported to be shown thereby at the dates and for the periods indicated and have been prepared in conformity with GAAP applied on a
consistent basis throughout the periods involved. All disclosures contained in the SEC Reports regarding “non-GAAP financial measures” (as
defined by the rules and regulations of the Commission) comply with Regulation G of the Exchange Act and Item 10 of Regulation S-K of
the Securities Act, to the extent applicable. There are no financial statements (historical or pro forma) that are required to be included in the
SEC Reports that are not so included as required. The interactive data in eXtensible Business Reporting Language (“XBRL”) included or
incorporated by reference in the SEC Reports fairly present the information called for in all material respects and have been prepared in
accordance with the Commission’s rules and guidelines applicable thereto.
(j) Material Changes. Except as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect,
since the date of the latest audited financial statements included in the SEC Reports, and, except as disclosed in a subsequent SEC Report
filed prior to the date hereof, neither the Company nor any of its Subsidiaries has (i) sustained any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order
or decree, (ii) issued or granted any securities (other than pursuant to employee benefit plans, qualified stock option plans or other equity
compensation plans or arrangements existing on the date hereof and disclosed in the SEC Reports), (iii) incurred any material liability or
obligation, direct or
7
contingent, other than liabilities and obligations that were incurred in the ordinary course of business, (iv) entered into any material
transaction not in the ordinary course of business, or (v) declared or paid any dividend on its share capital; and since such date, except as
disclosed in the SEC Reports, there has not been any change in the share capital, long-term debt, net current assets or short-term debt of the
Company or any of its Subsidiaries or any adverse change, or any development involving a prospective adverse change, in or affecting the
condition (financial or otherwise), prospects, results of operations, stockholders’ equity, properties, management or business of the Company
and its Subsidiaries taken as a whole.
(k) Litigation. Except as disclosed in the SEC Reports, there are no legal or governmental proceedings pending to which
the Company or any of its Subsidiaries is a party or of which any property or assets of the Company or any of its Subsidiaries is the subject
that, if determined adversely to the Company, would, in the aggregate, reasonably be expected to have a Material Adverse Effect or would, in
the aggregate, reasonably be expected to have a material adverse effect on the performance of this Agreement or the consummation of the
transactions contemplated hereby; and to the Company’s knowledge, no such proceedings are threatened or contemplated by governmental
authorities or others.
(l) No Labor Dispute; Compliance with Labor Laws. No labor disturbance by or dispute with the employees of the
Company or any of its Subsidiaries exists or, to the knowledge of the Company, is imminent that could reasonably be expected to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in violation of or has received written notice of any violation
with respect to any federal or state law relating to discrimination in the hiring, promotion or pay of employees, nor any applicable federal or
state wage and hour laws, nor any state law precluding the denial of credit due to the neighborhood in which a property is situated, the
violation of any of which could reasonably be expected to have a Material Adverse Effect.
(m) No Default. Except as disclosed in the SEC Reports, neither the Company nor any of its Subsidiaries (i) is in violation
of its certificate of incorporation, charter or bylaws (or similar organizational documents), (ii) is in default, and no event has occurred that,
with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant, condition
or other obligation contained in any indenture, mortgage, deed of trust, loan agreement, license or other agreement or instrument to which it
is a party, by which it is bound or to which any of its properties or assets is subject, (iii) is in violation of any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over it or its property or assets or (iv) has failed to obtain any
license, permit, certificate, franchise or other governmental authorization or permit necessary to the ownership of its property or to the
conduct of its business, except in the case of clauses (ii) and (iii), to the extent any such conflict, breach, violation or default would not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(n) Regulatory Permits. The Company and its Subsidiaries possess all material certificates, authorizations, clearances,
approvals, registrations, exemptions, licenses or permits required by state, federal or foreign regulatory agencies or bodies to conduct their
respective businesses as currently conducted and as described in the SEC Reports (“Permits”), and all such Permits are valid, current and in
full force and effect, except where the failure to so possess or be valid, current and in full force and effect would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in violation of,
or in default under, any of the Permits or has received any notice of proceedings relating to the revocation or modification of, or non-
compliance with, any such certificate, authorization or permit. Neither the Company nor any of its Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any Permits which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would reasonably be expected to result in a Material Adverse Effect. The Company has not received any written
notice denying, revoking or modifying any “approved enterprise,” “benefited enterprise” or “preferred enterprise” status with respect to any
of the Company’s facilities or operations.
(o) Title to Assets. The Company and each of its Subsidiaries have good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned by them, that are material to the business of the Company, in each case
free and clear of all liens, encumbrances and defects, except for such liens, encumbrances and defects as do not materially affect the value of
such property and do not materially interfere with the use made and proposed to be made of such property by the Company and its
Subsidiaries. All assets held under lease by the Company and its Subsidiaries, that are
8
material to the business of the Company, are held by them under valid, subsisting and enforceable leases, with such exceptions as do not
materially interfere with the use made and proposed to be made of such assets by the Company and its Subsidiaries.
(p) Patents and Trademarks. To the knowledge of the Company, the Company and its Subsidiaries own or possess the valid
right to use all (i) patents, patent applications, trademarks, trademark registrations, service marks, service mark registrations, internet domain
name registrations, copyrights, copyright registrations, licenses and trade secret rights (collectively, “Intellectual Property Rights”) and
(ii) inventions, software, works of authorships, trademarks, service marks, trade names, databases, formulae, know how, Internet domain
names and other intellectual property (including trade secrets and other unpatented and/or unpatentable proprietary confidential information,
systems, or procedures) (collectively, “Intellectual Property Assets”) necessary to conduct their respective businesses as currently conducted,
and as proposed to be conducted and described in the SEC Reports. The Company and its subsidiaries have not received written notice of any
challenge, which is still pending, by any other person to the rights of the Company and its Subsidiaries with respect to any Intellectual
Property Rights or Intellectual Property Assets owned or used by the Company or its Subsidiaries, except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. To the knowledge of the Company, the Company and its Subsidiaries’
respective businesses as now conducted do not give rise to any material infringement of, any material misappropriation of, or other material
violation of, any valid and enforceable Intellectual Property Rights of any other person. To the knowledge of the Company, all licenses for
the use of the Intellectual Property Rights described in the SEC Reports are valid, binding upon and enforceable by or against the parties
thereto in accordance with their terms. The Company has complied in all material respects with, and is not in breach nor has received any
asserted or threatened claim of material breach of any Intellectual Property license, and the Company has no knowledge of any material
breach by any other person to any Intellectual Property license to which the Company is a party. No claim has been made, and is currently
pending, against the Company alleging the infringement by the Company of any patent, trademark, service mark, trade name, copyright,
trade secret, license in or other Intellectual Property Right or franchise right of any person, and, to the knowledge of the Company, there are
no facts that would form a reasonable basis for such claim, except as would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. The Company has taken all reasonable steps to protect, maintain and safeguard its Intellectual Property
Rights, including the execution of appropriate nondisclosure and confidentiality agreements. The consummation of the transactions
contemplated hereby will not result in the loss or impairment of or payment of any additional amounts with respect to, nor require the consent
of any other person in respect of, the Company’s right to own, use, or hold for use any of the Intellectual Property Rights as owned, used or
held for use in the conduct of the business as currently conducted. To the knowledge of the Company, no employee of Legacy Alpine and,
since July 24, 2017, no employee of the Company is in, or has ever been, in violation in any material respect of any term of any employment
contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, non-
disclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation relates to such employee’s
employment with the Company, or actions undertaken by the employee while employed with the Company. For purposes of this section,
“Legacy Alpine” means Alpine Immune Sciences, Inc., which was the surviving entity following its merger with a wholly-owned subsidiary
of Nivalis Therapeutics, Inc. on July 24, 2017 and renamed as AIS Operating Co., Inc.
(q) Insurance. Except as would not reasonably be expected to have a Material Adverse Effect, the Company and each of its
Subsidiaries maintain insurance from nationally recognized, in the applicable country, insurers in such amounts and covering such risks as is
commercially reasonable in accordance with customary practices for companies engaged in similar businesses and similar industries for the
conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar
businesses in similar industries. All insurance policies of the Company and its Subsidiaries are in full force and effect; the Company and each
of its Subsidiaries are in compliance with the terms of such policies in all material respects; neither the Company nor any of its Subsidiaries
has received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be
made in order to continue such insurance; there are no material claims by the Company or any of its Subsidiaries under any such policy or
instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; and neither the Company
nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not reasonably be
expected to have a Material Adverse Effect.
9
(r) Transactions With Affiliates and Employees. No relationship, direct or indirect, exists between or among the Company,
on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company, on the other hand, that is required to be
described in the SEC Reports that is not so described.
(s) Internal Accounting Controls. The Company and each of its Subsidiaries maintain internal accounting controls designed
to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or specific authorization, (ii) transactions are recorded as necessary to
permit preparation of the Company’s financial statements in conformity with GAAP and to maintain accountability for its assets, (iii) access
to the Company’s assets is permitted only in accordance with management’s general or specific authorization, (iv) the recorded accountability
for the Company’s assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any
differences, and (v) the interactive data in XBRL included or incorporated by reference in the SEC Reports fairly present the information
called for in all material respects and are prepared in accordance with the Commission’s rules and guidelines applicable thereto (it being
understood that this subsection shall not to require the Company to comply with Section 404 of the Sarbanes-Oxley Act of 2002, as amended,
and the rules and regulations promulgated thereunder (collectively, the “Sarbanes-Oxley Act”) as of an earlier date than it would otherwise be
required to so comply under applicable law). Except as disclosed in the SEC Reports, as of the date of the most recent balance sheet of the
Company and its consolidated subsidiaries audited by Ernst & Young LLP, there were no material weaknesses in the Company’s internal
controls.
(t) Sarbanes-Oxley Compliance. There is and has been no failure on the part of the Company or, to the knowledge of the
Company, any of the Company’s directors or officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act
that are applicable to the Company or its directors or officers in their capacities as directors or officers of the Company.
(u) No Other Brokers. Neither the Company nor any of its Subsidiaries is a party to any contract, agreement or
understanding with any person that would give rise to a valid claim against any of them for a brokerage commission, finder’s fee or like
payment in connection with the offering and sale of the Shares.
(v) Private Placement. Assuming the accuracy of the Purchaser’s representations and warranties set forth in Section 3.2 of
this Agreement and the accuracy of the information disclosed in the Accredited Investor Questionnaire provided by the Purchaser, no
registration under the Securities Act is required for the offer and sale of the Shares by the Company to the Purchaser hereunder. Assuming the
making and the obtaining of the Required Approvals, the issuance and sale of the Shares hereunder does not contravene the rules and
regulations of the Trading Market.
(w) Investment Company The Company is not, and will not be, after giving effect to the offer and sale of the Shares and
the application of the proceeds therefrom as described in Section 4.6, (i) required to register as an “investment company” (within the meaning
of the Investment Company Act of 1940, as amended (the “Investment Company Act”)) or (ii) a “business development company” (as defined
in Section 2(a)(48) of the Investment Company Act).
(x) Registration Rights. Except as disclosed in the SEC Reports, there are no contracts, agreements or understandings
between the Company and any person granting such person the right to require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned or to be owned by such person.
(y) Exchange Act Registration and Listing of the Common Stock. The Company’s Common Stock is registered pursuant to
Section 12(b) of the Exchange Act and listed on the Principal Trading Market; the Company has taken no action designed to, or reasonably
likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from
the Principal Trading Market, nor has the Company received any notification that the Commission or FINRA is contemplating terminating
such registration or listing.
10
(z) Application of Takeover Protections; Rights Agreements. The Company and the Board of Directors have taken all
necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision under the Company’s charter documents or the laws of its state
of incorporation that is or could reasonably be expected to become applicable to the Purchaser as a result of the Purchaser and the Company
fulfilling their obligations or exercising their rights hereunder, including, without limitation, the Company’s issuance of the Shares and the
Purchaser’s ownership of the Shares.
(aa) No Integrated Offering. Assuming the accuracy of the Purchaser’s representations and warranties set forth in
Section 3.2, none of the Company, its Subsidiaries nor, to the knowledge of the Company, any of its Affiliates or any Person acting on its
behalf has, directly or indirectly, at any time within the past six (6) months, made any offers or sales of any Company security or solicited
any offers to buy any security under circumstances that would (i) eliminate the availability of the exemption from registration under the
Securities Act in connection with the offer and sale by the Company of the Shares as contemplated hereby or (ii) cause the offering of the
Shares pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of any applicable law, regulation or
stockholder approval provisions, including, without limitation, under the rules and regulations of any Trading Market on which any of the
securities of the Company are listed or designated.
(bb) Tax Matters. The Company and each of its Subsidiaries have filed all federal, state, local and foreign tax returns
required to be filed through the date hereof, subject to permitted extensions (except where the failure to file would not individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect), and have paid all taxes due (except where the failure to pay would not
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect), and no tax deficiency has been determined
adversely to the Company or any of its Subsidiaries, nor does the Company have any knowledge of any tax deficiencies that have been, or
would reasonably be expected to be asserted against the Company, that would, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(cc) Environmental Matters. Except as disclosed in the SEC Reports, the Company and each of its Subsidiaries (i) are, and
at all times since January 1, 2015 were, in compliance with all laws, regulations, ordinances, rules, orders, judgments, decrees, permits or
other legal requirements of any governmental authority, including without limitation any international, foreign, national, state, provincial,
regional, or local authority, relating to pollution, the protection of human health or safety, the environment, or natural resources, or to use,
handling, storage, manufacturing, transportation, treatment, discharge, disposal or release of hazardous or toxic substances or wastes,
pollutants or contaminants (collectively, “Environmental Laws”) applicable to such entity, which compliance includes, without limitation,
obtaining, maintaining and complying with all permits and authorizations and approvals required by Environmental Laws to conduct their
respective businesses, and (ii) have not received written notice or otherwise have knowledge of any actual or alleged violation of
Environmental Laws, or of any actual or potential liability for or other obligation concerning the presence, disposal or release of hazardous or
toxic substances or wastes, pollutants or contaminants, except in the case of clause (i) or (ii) where such non-compliance, violation, liability
or other obligation would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Except as
described in the SEC Reports, (x) there are no proceedings that are pending, or to the Company’s knowledge, threatened, against the
Company or any of its Subsidiaries under Environmental Laws in which a governmental authority is also a party, other than such proceedings
regarding which it is reasonably believed no monetary sanctions of $100,000 or more will be imposed, (y) the Company and its Subsidiaries
are not aware of any issues regarding compliance with Environmental Laws, including any pending or proposed Environmental Laws, or
liabilities or other obligations under Environmental Laws or concerning hazardous or toxic substances or wastes, pollutants or contaminants,
that could reasonably be expected to have a material effect on the capital expenditures, earnings or competitive position of the Company and
its Subsidiaries and (z) none of the Company and its Subsidiaries anticipates material capital expenditures relating to Environmental Laws.
general advertising.
(dd) No General Solicitation. The Company has not offered or sold any of the Shares by any form of general solicitation or
(ee) Foreign Corrupt Practices Act. Neither the Company nor any of its Subsidiaries, nor, to the knowledge of the
Company, any director, officer, agent, employee or other person associated with or acting on behalf of the Company or any of its
Subsidiaries, has: (i) used any corporate funds for any unlawful
11
contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, the Organization for Economic Co-operation and Development Convention on Bribery of Foreign
Public Officials in International Business Transactions, and the rules and regulations thereunder and any other similar foreign or domestic
law or regulation; or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. The Company has
instituted and maintains policies and procedures designed to ensure continued compliance with the laws and regulations referenced in clause
(iii) of this paragraph.
(ff) Off Balance Sheet Arrangements. There are no transactions, arrangements or other relationships between and/or among
the Company, and/or, to the knowledge of the Company, any of its Affiliates and any unconsolidated entity, including, but not limited to, any
structural finance, special purpose or limited purpose entity (each, an “Off-Balance Sheet Transaction”) that could reasonably be expected to
materially affect the Company’s liquidity or the availability of or requirements for its capital resources, including those Off-Balance Sheet
Transactions described in the Commission’s Statement about Management’s Discussion and Analysis of Financial Conditions and Results of
Operations (Release Nos. 33-8056; 34-45321; FR-61), and are required to be described in the SEC Reports, which have not been described as
required.
(gg) Acknowledgment Regarding Purchaser’s Purchase of the Shares. The Company acknowledges and agrees that the
Purchaser is acting solely in the capacity of an arm’s length purchaser with respect to this Agreement and the transactions contemplated
hereby. The Company further acknowledges that Purchaser is not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by Purchaser or any of its respective
representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to the Purchaser’s
purchase of the Shares. The Company further represents to the Purchaser that the Company’s decision to enter into this Agreement has been
based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
(hh) Regulation M Compliance. The Company and its controlled affiliates have not taken, directly or indirectly, any action
designed to or that has constituted or that could reasonably be expected to cause or result in the stabilization or manipulation of the price of
any security of the Company in connection with the offering of the Shares.
(ii) PFIC. Subject to the qualifications and assumptions set forth in the SEC Reports, the Company is not, and upon the sale
of the Shares contemplated hereby does not expect to become, a “passive foreign investment company” (as defined in Section 1297 of the
Internal Code Revenue Code of 1986, as amended, and the regulations promulgated thereunder).
(jj) OFAC. Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer,
agent, employee or controlled affiliate of the Company or any of its Subsidiaries is currently subject to any U.S. sanctions administered by
the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly use the
proceeds of the offering of the Shares, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner
or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by
OFAC.
(kk) Compliance with Healthcare Laws and Regulations. The Company and, to the knowledge of the Company, its
directors, officers, employees, and agents (while acting in such capacity) are, and at all times prior to the date hereof have been, in
compliance with, all health care laws and regulations applicable to the Company or any of its product candidates or activities, including
development and testing of pharmaceutical products, kickbacks, recordkeeping, documentation requirements, the hiring of employees (to the
extent governed by Health Care Laws, as defined below), quality, safety, privacy, security, licensure, accreditation or any other aspect of
developing and testing health care or pharmaceutical products (collectively, “Health Care Laws”), except where such noncompliance would
not, individually or in the aggregate, have a Material Adverse Effect. The Company has not received any notification, correspondence or any
other written or oral communication, including notification of any pending or threatened claim, suit,
12
proceeding, hearing, enforcement, investigation, arbitration or other action from any governmental authority, including, without limitation,
the U.S. Food and Drug Administration (“FDA”), the U.S. Drug Enforcement Administration, the Centers for Medicare & Medicaid Services
and the U.S. Department of Health and Human Services Office of Inspector General, of potential or actual non-compliance by, or liability of,
the Company under any Health Care Laws. To the Company’s knowledge, there are no facts or circumstances that would reasonably be
expected to give rise to liability of the Company under any Health Care Laws, except that would not individually or in the aggregate have a
Material Adverse Effect.
Act).
(ll) Shell Company. The Company is not an “ineligible issuer” (as defined in Rule 405 promulgated under the Securities
(mm) No Additional Agreements. Other than the License and Collaboration Agreement, the Company does not have any
agreement or understanding with the Purchaser with respect to the transactions contemplated hereby other than as specified herein or, except
as disclosed to the Purchaser in writing, any written agreement regarding the confidentiality and use of confidential information.
(nn) Clinical Trials. The clinical and pre-clinical trials conducted by or on behalf of or sponsored by the Company, or in
which the Company has participated, that are described in the SEC Reports or the results of which are referred to in the SEC Reports, were
and, if still pending, are being conducted in accordance with standard medical and scientific research procedures and all applicable statutes,
rules and regulations of the FDA and comparable drug regulatory agencies outside of the United States to which they are subject
(collectively, the “Regulatory Authorities”), including, without limitation, 21 C.F.R. Parts 50, 54, 56, 58 and 312, and current Good Clinical
Practices and Good Laboratory Practices; the descriptions in the SEC Reports of the results of such studies and trials are accurate and
complete and fairly present the data derived from such trials; the Company has no knowledge of any other trials the results of which are
inconsistent with or otherwise call into question the results described or referred to in the SEC Reports; the Company and its Subsidiaries
have each operated and are currently in compliance with all applicable statutes, rules and regulations of the Regulatory Authorities, except
where such noncompliance would not, individually or in the aggregate, have a Material Adverse Effect; and neither the Company, nor any of
its Subsidiaries, has received any written notices, correspondence or other communication from the Regulatory Authorities or any
governmental authority which threatens the termination or suspension of any clinical or pre-clinical trials that are described in the SEC
Reports or the results of which are referred to in the SEC Reports, and there are no reasonable grounds for same.
(oo) Anti-Money Laundering Compliance. The operations of the Company and its Subsidiaries are and have been
conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations
thereunder and any applicable related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental
agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending
or, to the knowledge of the Company, threatened.
(pp) Compliance with Applicable Laws and Regulations. Except as disclosed in the SEC Reports, the Company and its
Subsidiaries: (i) are and at all times have been in compliance with all statutes, rules and regulations applicable to the ownership, testing,
development, manufacture, packaging, processing, use, distribution, marketing, advertising, labeling, promotion, sale, offer for sale, storage,
import, export or disposal of any product manufactured or distributed by the Company including, without limitation the Federal Food, Drug
and Cosmetic Act (21 U.S.C. §301 et seq.), the Public Health Service Act (42 U.S.C. §201 et seq.), the federal Anti-Kickback Statute (42
U.S.C. §1320a-7b(b)), the civil False Claims Act (31 U.S.C. §3729 et seq.), the administrative False Claims Law (42 U.S.C. §1320a-7b(a)),
the federal Physician Payment Sunshine Act (42 U.S.C. §1320a-7h), the Civil Monetary Penalties Law (42 U.S.C. §1320a-7a), the exclusion
laws (42 U.S.C. §1320a-7), all criminal laws relating to health care fraud and abuse, including, but not limited to, 18 U.S.C. §286-287, the
criminal health care fraud provisions of the Health Insurance Portability and Accountability Act of 1996 (18 U.S.C. §1035 and 1347)
(“HIPAA”), Medicare (Title XVIII of the Social Security Act), Medicaid (Title XIX of the Social Security Act), HIPAA, as amended by the
Health Information Technology for Economic and Clinical Health Act of 2009, and the Patient Protection and Affordable Care Act of 2010,
as amended by the Health Care and Education Affordability Reconciliation
13
Act of 2010, the regulations promulgated pursuant to such laws, and any successor government programs and comparable state laws,
regulations relating to Good Clinical Practices and Good Laboratory Practices, collection and reporting requirements and the processing of
any applicable rebate, chargeback or adjustment, under applicable rules and regulations relating to the Medicaid Drug Rebate Program (42
U.S.C. §1396r-8), any state supplemental rebate program, Medicare average sales price reporting (42 U.S.C. §1395w-3a), the Public Health
Service Act (42 U.S.C. §256b), the VA Federal Supply Schedule (38 U.S.C. §8126) or under any state pharmaceutical assistance program or
U.S. Department of Veterans Affairs agreement, and any successor government programs, and all other local, state, federal, national,
supranational and foreign laws, manual provisions, policies and administrative guidance relating to the regulation of the Company
(collectively, the “Applicable Laws”), except where such noncompliance would not, individually or in the aggregate, have a Material Adverse
Effect; (ii) have not received any written notice from any court or arbitrator or governmental or regulatory authority or third party alleging or
asserting noncompliance with any Applicable Laws or any Permits and supplements or amendments thereto required by any such Applicable
Laws (“Authorizations”); (iii) possess all Authorizations and such Authorizations are valid and in full force and effect and are not in violation
of any term of any such Authorizations; (iv) have not received written notice of any claim, action, suit, proceeding, hearing, enforcement,
investigation arbitration or other action from any court or arbitrator or governmental or regulatory authority or third party alleging that any
product operation or activity is in violation of any Applicable Laws or Authorizations nor is any such claim, action, suit, proceeding, hearing,
enforcement, investigation, arbitration or other action threatened; (v) have not received any written or, to the Company’s knowledge, oral
notice that any court or arbitrator or governmental or regulatory authority has taken, is taking or intends to take, action to limit, suspend,
materially modify or revoke any Authorizations nor is any such limitation, suspension, modification or revocation threatened; (vi) have filed,
obtained, maintained or submitted all material reports, documents, forms, notices, applications, records, claims, submissions and supplements
or amendments as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications,
records, claims, submissions and supplements or amendments were complete and accurate in all material respects on the date filed (or were
corrected or supplemented by a subsequent submission); and (vii) are not a party to and have no ongoing reporting obligations pursuant to
any corporate integrity agreements, monitoring agreements, consent decrees, settlement orders or similar agreements with or imposed by any
governmental or regulatory authority. Neither the Company, any of its Subsidiaries nor any of its or their respective officers, directors,
employees or, to the Company’s knowledge of the Company, agents, has been excluded, suspended or debarred from or otherwise ineligible
for participation in any U.S. federal health care program or human clinical research or, to the knowledge of the Company, is subject to a
governmental inquiry, investigation, proceeding or other similar action that could reasonably be expected to result in debarment, suspension,
ineligibility or exclusion.
(qq) Absence of Settlement Agreements or Undertakings. Except as disclosed in the SEC Reports, the Company is not a
party to any corporate integrity agreements, monitoring agreements, consent decrees, settlement orders, or similar agreements with or
imposed by any governmental authority.
(rr) Material Contracts. There are no contracts or other documents required to be described in the SEC Reports or filed as
exhibits to the SEC Reports pursuant to Item 601 of Regulation S-K that are not described and filed as required. The statements made in the
SEC Reports, insofar as they purport to constitute summaries of the terms of the contracts and other documents described and filed pursuant
to Item 601 of Regulation S-K, constitute accurate summaries of the terms of such contracts and documents in all material respects. Except as
disclosed in the SEC Reports, neither the Company nor any of its Subsidiaries has knowledge that any other party to any such contract or
other document filed pursuant to Item 601 of Regulation S-K has any intention not to render full performance as contemplated by the terms
thereof.
(ss) Disclosure Controls. The Company and each of its Subsidiaries maintain disclosure controls and procedures (as
defined in Rule 13a-15(e) under the Exchange Act) designed to ensure that the information required to be disclosed by the Company and its
Subsidiaries in the reports they file or submit under the Exchange Act is accumulated and communicated to management of the Company and
its Subsidiaries, including their respective principal executive officers and principal financial officers, as appropriate, to allow timely
decisions regarding required disclosure to be made, and such disclosure controls and procedures are effective in all material respects to
perform the functions for which they were established.
production or manufacture of critical technologies within the meaning of
(tt) Defense Production Act of 1950. The Company does not engage in the design, fabrication, development, testing,
14
the Defense Production Act of 1950, as amended, including all implementing regulations thereof and has no current intention of engaging in
such activities in the future.
(uu) No “Bad Actor” Disqualification. The Company has exercised reasonable care, in accordance with SEC rules and
guidance, to determine whether any Covered Person (as defined below) is subject to any of the “bad actor” disqualifications described in
Rule 506(d)(1)(i) through (viii) under the Securities Act (“Disqualification Events”). To the Company’s knowledge, no Covered Person is
subject to a Disqualification Event, except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) under the Securities Act. The
Company has complied, to the extent applicable, with any disclosure obligations under Rule 506(e) under the Securities Act. “Covered
Persons” are those persons specified in Rule 506(d)(1) under the Securities Act, including the Company; any predecessor or affiliate of the
Company; any director, executive officer, other officer participating in the offering, general partner or managing member of the Company;
any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power; any
promoter (as defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of the sale of the Shares;
and any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of
the Shares (a “Solicitor”), any general partner or managing member of any Solicitor, and any director, executive officer or other officer
participating in the offering of any Solicitor or general partner or managing member of any Solicitor.
3.2 Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants as of the date hereof and as of
the Closing Date to the Company as follows:
(a) Organization; Authority. The Purchaser is an entity duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization with the requisite corporate, limited liability company or partnership power and authority to enter into
and to consummate the transactions contemplated hereby and otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of this Agreement by the Purchaser and performance by the Purchaser of the transactions contemplated by this Agreement have
been duly authorized by all necessary corporate or, if the Purchaser is not a corporation, such partnership, limited liability company or other
applicable like action, on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the
Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it
in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable
principles of general application.
(b) No Conflicts. The execution, delivery and performance by the Purchaser of this Agreement and the consummation by
the Purchaser of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of the
Purchaser, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the
Purchaser is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities
laws) applicable to the Purchaser, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which
would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Purchaser to
perform its obligations hereunder.
(c) Investment Intent. The Purchaser understands that the Shares are “restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and that Purchaser is acquiring the Shares as principal for its own account and
not with a view to, or for distributing or reselling such Shares or any part thereof in violation of the Securities Act or any applicable state
securities laws, provided, however, that by making the representations, warranties and covenants of the Purchaser in this Agreement, except
as set forth in Section 4.1(b), the Purchaser is not agreeing to hold any of the Shares for any minimum period of time and may, subject to the
provisions of this Agreement, sell or otherwise dispose of all or any part of the Shares pursuant to an effective registration statement under
the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities laws. The
Purchaser is acquiring the Shares hereunder in the ordinary course of its business. The Purchaser does not presently have any agreement, plan
or understanding, directly or indirectly, with any
15
Person to distribute or effect any distribution of any of the Shares (or any securities which are derivatives thereof) to or through any person or
entity; the Purchaser is not a registered broker-dealer under Section 15 of the Exchange Act or an entity engaged in a business that would
require it to be so registered as a broker-dealer.
investor” as defined in Rule 501(a) under the Securities Act.
(d) Purchaser Status. At the time the Purchaser was offered the Shares, it was, and at the date hereof it is an “accredited
(e) General Solicitation. The Purchaser is not purchasing the Shares as a result of any advertisement, article, notice or other
communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general advertisement.
(f) Experience of the Purchaser. The Purchaser, either alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective
investment in the Shares, and has so evaluated the merits and risks of such investment. The Purchaser is able to bear the economic risk of an
investment in the Shares and, at the present time, is able to afford a complete loss of such investment.
(g) Acknowledgment of Risks.
(i) The Purchaser acknowledges and understands that its investment in the Shares involves a significant degree of
risk, including, without limitation: (i) the Company remains a development stage business with limited operating history and requires
substantial funds in addition to the proceeds from the sale of the Shares; (ii) an investment in the Company is speculative, and only one who
can afford the loss of their entire investment should consider investing in the Company and the Shares; (iii) the Purchaser may not be able to
liquidate its investment; (iv) transferability of the Shares is extremely limited; (v) in the event of a disposition of the Shares, the Purchaser
could sustain the loss of its entire investment; and (vi) the Company has not paid any dividends on its Common Stock since inception and
does not anticipate the payment of dividends in the foreseeable future. Such risks are more fully set forth in the public filings made by the
Company with the Commission;
(ii) The Purchaser is able to bear the economic risk of holding the Shares for an indefinite period, and has
knowledge and experience in financial and business matters such that it is capable of evaluating the risks of the investment in the Shares; and
(iii) The Purchaser has, in connection with the Purchaser’s decision to purchase Shares, not relied upon any
representations or other information (whether oral or written) other than as set forth in the representations and warranties of the Company
contained herein, and the Purchaser has, with respect to all matters relating to this Agreement and the offer and sale of the Shares, relied
solely upon the advice of the Purchaser’s own counsel and has not relied upon or consulted any counsel to the Company.
(h) Access to Information. The Purchaser acknowledges that it has had the opportunity to review the SEC Reports and has
been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares; (ii) access to
information about the Company and the Subsidiaries and their respective financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information
that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision
with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf of the Purchaser or its
representatives or counsel shall modify, amend or affect the Purchaser’s right to rely on the truth, accuracy and completeness of the SEC
Reports and the Company’s representations and warranties contained in this Agreement. The Purchaser has sought such accounting, legal and
tax advice as it has considered necessary to make an informed decision with respect to its acquisition of the Shares.
Purchaser was first contacted by the Company or any other Person regarding
(i) Certain Trading Activities. Other than with respect to the transactions contemplated herein, since the time that the
16
the transactions contemplated hereby, neither the Purchaser nor any Affiliate of the Purchaser which (x) had knowledge of the transactions
contemplated hereby, (y) has or shares discretion relating to the Purchaser’s investments or trading or information concerning the Purchaser’s
investments, including in respect of the Shares, and (z) is subject to the Purchaser’s review or input concerning such Affiliate’s investments
or trading (each a “Trading Affiliate”) has directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with
the Purchaser or Trading Affiliate, effected or agreed to effect any purchases or sales of the securities of the Company (including, without
limitation, any Short Sales involving the Company’s securities). The Purchaser has maintained the confidentiality of all disclosures made to it
in connection with this transaction (including the existence and terms of this transaction).
(j) Brokers and Finders. No Person will have, as a result of the transactions contemplated by this Agreement, any valid
right, interest or claim against or upon the Company or the Purchaser for any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on behalf of the Purchaser.
(k) Independent Investment Decision. The Purchaser has independently evaluated the merits of its decision to purchase
Shares pursuant hereto, and the Purchaser confirms that it has not relied on the advice of any other Purchaser’s business and/or legal counsel
in making such decision. The Purchaser understands that nothing in this Agreement or any other materials presented by or on behalf of the
Company to the Purchaser in connection with the purchase of the Shares constitutes legal, tax or investment advice. The Purchaser has
consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its
purchase of the Shares.
(l) Reliance on Exemptions. The Purchaser understands that the Shares being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon
the truth and accuracy of, and the Purchaser’s compliance with, the representations, warranties, agreements, acknowledgements and
understandings of the Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of the Purchaser
to acquire the Shares.
(m) No Governmental Review. The Purchaser understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or endorsement of the Shares or the fairness or suitability
of the investment in the Shares nor have such authorities passed upon or endorsed the merits of the offering of the Shares.
apply to sales of Common Stock and other activities with respect to the Common Stock by the Purchaser.
(n) Regulation M. The Purchaser is aware that the anti-manipulation rules of Regulation M under the Exchange Act may
(o) Beneficial Ownership. The purchase of the Shares by the Purchaser at the Closing will not result in the Purchaser
(individually or together with any other Person with whom the Purchaser has identified, or will have identified, itself as part of a “group” in a
public filing made with the Commission involving the Company’s securities) (when added to any other securities of the Company that it or
they then own or have the right to acquire) acquiring, or obtaining the right to acquire, in excess of the Threshold Amount on a post
transaction basis that assumes that such Closing shall have occurred. The Purchaser does not presently intend to, alone or together with
others, make a public filing with the Commission to disclose that it has (or that it together with such other Persons have) acquired, or
obtained the right to acquire, as a result of such Closing (when added to any other securities of the Company that it or they then own or have
the right to acquire), in excess of the Threshold Amount on a post transaction basis that assumes that each Closing shall have occurred.
Shares was made (if an entity) are located at the address immediately below the Purchaser’s name on its signature page hereto.
(p) Residency. The Purchaser’s residence (if an individual) or offices in which its investment decision with respect to the
(q) Anti-Money Laundering Laws. The Purchaser represents and warrants to, and covenants with, the Company that: (i) the
Purchaser is in compliance with the regulations administered by the U.S. Department of the Treasury (“Treasury”) Office of Foreign Assets
Control; (ii) the Purchaser, its
17
parents, subsidiaries, affiliated companies, officers, directors and partners, and to the Purchaser’s knowledge, its stockholders, owners,
employees, and agents, are not on the List of Specially Designated Nationals and Blocked Persons maintained by Treasury and have not been
designated by Treasury as a financial institution of primary money laundering concern subject to special measures under Section 311 of the
USA PATRIOT Act, Pub. L. 107-56; (iii) to the Purchaser’s knowledge, the funds to be used to acquire the Shares are not derived from
activities that contravene applicable anti-money laundering laws and regulations; (iv) the Purchaser is in compliance with all other applicable
anti money laundering laws and regulations and has implemented anti money laundering procedures that comply with applicable anti-money
laundering laws and regulations, including, as applicable, the requirements of the Bank Secrecy Act, as amended by the USA PATRIOT Act,
Pub. L. 107 56; and (v) to the best of its knowledge (A) none of the funds to be provided by the Purchaser are being tendered on behalf of a
person or entity who has not been identified to the Purchaser, and (B) upon the reasonable request of the Company, the Purchaser agrees to
re-certify in writing the representations, warranties and covenants provided in this paragraph.
(r) No “Bad Actor” Disqualification Events. Neither (i) the Purchaser, (ii) any of its directors, executive officers, other
officers that may serve as a director or officer of any company in which it invests, general partners or managing members, nor (iii) any
beneficial owner of the Company’s voting equity securities (in accordance with Rule 506(d) of the Securities Act) held by the Purchaser is
subject to any Disqualification Event, except for Disqualification Events covered by Rule 506(d)(2)(ii) or (iii) or (d)(3) under the Securities
Act and disclosed reasonably in advance of the Closing in writing in reasonable detail to the Company.
(s) Representations by Non-United States Persons. If Purchaser is not a United States person, the Purchaser hereby
represents that the Purchaser has satisfied the laws of the Purchaser’s jurisdiction in connection with any invitation to subscribe for the
Shares or any use of this Agreement, including (i) the legal requirements within the Purchaser’s jurisdiction for the purchase of the Shares,
(ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained and
(iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale or transfer of the
Shares. The Purchaser’s subscription and payment for, and the Purchaser’s continued beneficial ownership of, the Shares will not violate any
applicable securities or other laws of the Purchaser’s jurisdiction.
The Company and the Purchaser each acknowledge and agree that no party to this Agreement has made or makes any representations
or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Article III.
4.1 Transfer Restrictions.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
(a) Compliance with Laws. Notwithstanding any other provision of this Article IV, the Purchaser covenants that the Shares
may be disposed of only pursuant to an effective registration statement under, and in compliance with the requirements of, the Securities Act,
or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, and in
compliance with any applicable state and federal securities laws. In connection with any transfer of the Shares other than (i) pursuant to an
effective registration statement, (ii) to the Company, (iii) pursuant to Rule 144 (provided that the Purchaser provides the Company with
reasonable assurances (in the form of seller and, if applicable, broker representation letters) that the securities may be sold pursuant to such
rule) or (iv) in connection with a bona fide pledge as contemplated in Section 4.1(d), the Company may require the transferor thereof to
provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such
transferred Shares under the Securities Act or applicable state securities law. As a condition of transfer (other than a transfer pursuant to
clauses (i), (ii), (iii) or (iv) above and otherwise made in compliance with the terms of this Agreement), any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement with
respect to such transferred Shares.
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(b) Restricted Period. During the period beginning from the date of this Agreement and continuing to and including the
date six months after the date of this Agreement (the “Restricted Period”), the Purchaser shall not, and shall cause its Affiliates not to,
without the prior consent of the Company, directly or indirectly, transfer (i) the Shares, (ii) any securities issued in respect of the Shares as a
result of any stock split, stock dividend, share exchange, merger, consolidation or similar recapitalization, or (iii) any securities issued as (or
issuable upon the exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in
exchange or in replacement of, the Shares. Notwithstanding the foregoing, this Section 4.1(b) shall not apply to (i) the transfer of the Shares
to Affiliates of the Purchaser, (ii) the transfer of the Shares pursuant to a bona fide third party tender offer, merger, consolidation or other
similar transaction that is approved by the Board of Directors of the Company, made to all holders of Common Stock involving a Change of
Control (as defined below), provided that in the event that the tender offer, merger, consolidation or other such transaction is not completed,
the Common Stock owned by the Purchaser shall remain subject to the restrictions contained in this Agreement or (iii) the pledge of, or grant
of a security interest in, the Shares in connection with any loan or financing arrangement secured by all or substantially all of Purchaser’s
assets, including, without limitation, Purchaser’s existing credit agreement. For purposes of this Section 4.1(b), “Change of Control” shall
mean the transfer (whether by tender offer, merger, consolidation or other similar transaction), in one transaction or a series of related
transactions, to a person or group of affiliated persons, of the Company’s voting securities if, after such transfer, such person or group of
affiliated persons would hold more than 50% of the outstanding voting securities of the Company (or the surviving entity).
(c) Sale Volume Limitation. Following the expiration of the Restricted Period, without the prior approval of the Company,
the Purchaser shall not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant for the sale or, or otherwise dispose of or transfer during any calendar month greater than twenty percent (20.0%)
of the aggregate number of Shares held by the Purchaser or its Affiliates as of the last day of the Restricted Period.
and a restrictive legend in substantially the following form, until such time as they are not required under Section 4.1(e):
(d) Legends. Any certificates or book-entry notations shall bear any legend as required by the “blue sky” laws of any state
THE OFFER AND SALE OF THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN EACH CASE IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY AND ITS TRANSFER AGENT OR (II) UNLESS SOLD PURSUANT TO RULE 144
UNDER THE SECURITIES ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A LOAN OR FINANCING ARRANGEMENT
SECURED BY ALL OR SUBSTANTIALLY ALL OF THE HOLDER’S ASSETS; PROVIDED THAT
IN CONNECTION WITH ANY FORECLOSURE OR TRANSFER OF THE SECURITIES, THE
TRANSFEROR SHALL COMPLY WITH THE PROVISIONS HEREIN AND IN THE STOCK
PURCHASE AGREEMENT, AND UPON FORECLOSURE OR TRANSFER OF THE SECURITIES,
SUCH FORECLOSING PERSON OR TRANSFEREE SHALL COMPLY WITH ALL PROVISIONS
CONTAINED HEREIN AND IN THE STOCK PURCHASE AGREEMENT.
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The Company acknowledges and agrees that Purchaser may from time to time pledge, and/or grant a security interest in, some or all
of the legended Shares in accordance with applicable securities laws, pursuant to a loan or financing arrangement secured by all or
substantially all of Purchaser’s assets, including, without limitation, Purchaser’s existing credit agreement. Such a pledge would not be
subject to approval or consent of the Company and no legal opinion of legal counsel to the pledgee, secured party or pledgor shall be
required in connection with the pledge, but such legal opinion shall be required in connection with a subsequent transfer or foreclosure
following default by the Purchaser of the pledge. No notice shall be required of such pledge, but Purchaser shall promptly notify the
Company of any such subsequent transfer or foreclosure. The Purchaser acknowledges that the Company shall not be responsible for any
pledges relating to, or the grant of any security interest in, any of the Shares or for any agreement, understanding or arrangement between the
Purchaser and its pledgee or secured party. At the Purchaser’s expense, the Company will execute and deliver such reasonable documentation
as the Purchaser may reasonably request in connection with a pledge or transfer of the Shares. The Purchaser acknowledges and agrees that,
except as otherwise provided in Section 4.1(e), any Shares subject to a pledge or security interest as contemplated by this Section 4.1(d) shall
continue to bear the legend set forth in this Section 4.1(d) and be subject to the restrictions on transfer set forth in Section 4.1.
(e) Removal of Legends.
(i) The Company agrees that at such time as any legend is no longer required under this Article IV, it will, no later
than two (2) Business Days following the delivery by the Purchaser to the Company or the Company’s transfer agent of a request to remove
such legend, together with such representations and covenants of the Purchaser or the Purchaser’s executing broker as the Company may
reasonably require in connection therewith, deliver or cause to be delivered to the Purchaser a book entry position representing such shares
that is free from any such legend. The Company shall not make any notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this Article IV. Any certificates for Shares subject to legend removal shall be
transmitted by the transfer agent of the Company to the Purchaser by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company (“DTC”). All costs and expenses related to the removal of the legends and the reissuance of any Shares shall be
borne by the Company.
(ii) The restrictive legend set forth in Section 4.1(d) above shall be removed and the Company shall issue a
certificate or book entry position without such restrictive legend or any other restrictive legend to the holder of the applicable shares upon
which it is stamped or issue to such holder by electronic delivery with the applicable balance account at DTC or in physical certificated
shares, if appropriate, if (i) such Shares are sold or transferred pursuant to Rule 144 (if the transferor is not an affiliate of the Company); or
(ii) such Shares are eligible for sale without the requirement for the Company to be in compliance with the current public information
required under Rule 144 as to such securities and without volume or manner-of-sale restrictions. Subject to receipt of such representations,
and covenants as are contemplated hereby, at such time as Rule 144 becomes available for the resale of the Shares, without the requirement
for the Company to be in compliance with the current public information required under Rule 144 as to the Shares and without volume or
manner-of-sale restrictions, the Company shall issue to the Company’s transfer agent the instructions with respect to legend removal
consistent with this Article IV. Any fees (with respect to the transfer agent, the Company’s counsel or otherwise) associated with the issuance
of such opinion or the removal of such legend shall be borne by the Company.
(f) Acknowledgement. The Purchaser acknowledges its primary responsibilities under the Securities Act and accordingly
will not sell or otherwise transfer the Shares or any interest therein without complying with the requirements of the Securities Act. Both the
Company and its Transfer Agent, and their respective directors, officers, employees and agents, may rely on this Section 4.1(f) and the
Purchaser will indemnify and hold harmless each of such persons from any breaches or violations of this Section 4.1(f).
4.2 Furnishing of Information. In order to enable the Purchaser to sell the Shares under Rule 144, for a period of eighteen (18)
months from the Closing, the Company shall use its commercially reasonable efforts to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange
Act. During such eighteen (18) month period, if the Company is not required to file reports pursuant to the
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Exchange Act, it will prepare and furnish to the Purchaser and make publicly available in accordance with Rule 144(c) such information as is
required for the Purchaser to sell the Shares under Rule 144.
4.3 Integration. The Company shall not, and shall use its commercially reasonable efforts to ensure that no Affiliate of the
Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the
Securities Act) that will be integrated with the offer or sale of the Shares in a manner that would require the registration under the Securities
Act of the sale of the Shares to the Purchaser, or that will be integrated with the offer or sale of the Shares for purposes of the rules and
regulations of any Trading Market such that it would require stockholder approval prior to the closing of such other transaction unless
stockholder approval is obtained before the closing of such subsequent transaction.
4.4 Stockholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other
Person, that the Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that the
Purchaser could be deemed to trigger the provisions of any such plan or arrangement, in either case solely by virtue of receiving Shares
hereunder or under any other written agreement between the Company and the Purchaser; provided, however, that the Purchaser does not
own any equity in the Company prior to its purchase of the Shares hereunder.
4.5 Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the
License and Collaboration Agreement and this Agreement and the performance by the parties of their obligations thereunder, or as expressly
required by any applicable securities law, the Company covenants and agrees that neither it, nor any other Person acting on its behalf, will
provide the Purchaser or its agents or counsel with any information regarding the Company that the Company believes constitutes material
non-public information regarding the Company or its Subsidiaries without the express written consent of the Purchaser, unless prior thereto
the Purchaser shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands
and confirms that the Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.
4.6 Use of Proceeds. The Company shall use the net proceeds from the sale of the Shares hereunder for working capital and general
corporate purposes and shall not use such proceeds for the redemption of any Common Stock or Common Stock Equivalents.
4.7 Indemnification. Subject to the provisions of this Section 4.7, the Company will indemnify and hold Purchaser and its directors,
officers, stockholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title), each Person who controls Purchaser (within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, stockholders, agents, members, partners or
employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or
any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees
and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the Company in this Agreement or (b) any action instituted against Purchaser
in any capacity, or its respective Affiliates, by any stockholder of the Company who is not an Affiliate of Purchaser, with respect to any of the
transactions contemplated by this Agreement (unless such action is based upon a breach of Purchaser’s representations, warranties or
covenants under this Agreement or any agreements or understandings Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by the Purchaser which constitutes fraud, gross negligence, willful misconduct,
bad faith or malfeasance). Promptly after receipt by any Purchaser Party (the “Indemnified Person”) of notice of any demand, claim or
circumstances which could reasonably be expected to give rise to a claim or the commencement of any action, proceeding or investigation in
respect of which indemnity may be sought pursuant to this Section 4.7, such Indemnified Person shall promptly notify the Company in
writing and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses; provided,
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however, that the failure of any Indemnified Person so to notify the Company shall not relieve the Company of its obligations hereunder
except to the extent that the Company is actually and materially prejudiced by such failure to notify. In any such proceeding, any Indemnified
Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified
Person unless: (i) the Company and the Indemnified Person shall have mutually agreed to the retention of such counsel; (ii) the Company
shall have failed promptly to assume the defense of such proceeding and to employ counsel reasonably satisfactory to such Indemnified
Person in such proceeding; or (iii) in the reasonable judgment of counsel to such Indemnified Person, representation of both parties by the
same counsel would be inappropriate due to actual or potential differing interests between them; provided, however, that the Company shall
not be responsible for the fees and expenses of more than one counsel for all Indemnified Persons. The Company shall not be liable for any
settlement of any action, claim or proceeding effected without its prior written consent, which consent shall not be unreasonably withheld,
delayed or conditioned. Without the prior written consent of the Indemnified Person, which consent shall not be unreasonably withheld,
delayed or conditioned, the Company shall not effect any settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such
settlement includes an unconditional release of such Indemnified Person from all liability arising out of such proceeding.
4.8 Principal Trading Market Listing. In the time and manner required by the Principal Trading Market, the Company shall prepare
and file with such Principal Trading Market an additional shares listing application covering all of the Shares and shall use its commercially
reasonable efforts to take all steps necessary to cause all of the Shares to be approved for listing on the Principal Trading Market as promptly
as possible thereafter.
4.9 Blue Sky. The Company, on or before the Closing Date, shall take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption from or to qualify the Shares for sale to the Purchaser under applicable securities or “Blue Sky”
laws of the states of the United States (or to obtain an exemption from such qualification).
4.10 Delivery of Shares After Closing. Subject to the satisfaction of the Purchaser’s obligations under this Agreement, the
Company shall deliver, or cause to be delivered, a book-entry statement evidencing the Shares within two (2) Trading Days after the Closing
Date.
ARTICLE V.
CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions Precedent to the Obligations of the Purchaser to Purchase Shares. The obligation of the Purchaser to acquire Shares
at the Closing is subject to the fulfillment to the Purchaser’s satisfaction, on or prior to the Closing Date, of each of the following conditions,
any of which may be waived by the Purchaser:
(a) Representations and Warranties. The representations and warranties of the Company contained herein shall be true and
correct in all material respects (except for those representations and warranties which are qualified as to materiality or Material Adverse
Effect, in which case such representations and warranties shall be true and correct in all respects) as of the date hereof and as of the Closing
Date, as though made on and as of such date, except for such representations and warranties that speak as of a specific date.
agreements and conditions required by this Agreement to be performed, satisfied or complied with by it at or prior to the Closing.
(b) Performance. The Company shall have performed, satisfied and complied in all material respects with all covenants,
(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by this Agreement.
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(d) Consents. The Company shall have obtained in a timely fashion any and all consents, permits, approvals, registrations
and waivers necessary for consummation of the purchase and sale of the Shares (including all Required Approvals), all of which shall be and
remain so long as necessary in full force and effect.
reasonably be expected to have a Material Adverse Effect.
(e) Adverse Changes. Since the date hereof, no event or series of events shall have occurred that has had or would
shall have not received any notice objecting to the listing of the Shares from the Nasdaq Stock Market.
(f) Listing. The Company shall have made all required submissions to the Nasdaq Stock Market regarding the Shares and
(g) No Suspensions of Trading in Common Stock. The Common Stock shall not have been suspended, as of the Closing
Date, by the Commission or the Principal Trading Market from trading on the Principal Trading Market nor shall suspension by the
Commission or the Principal Trading Market have been threatened, as of the Closing Date, either (A) in writing by the Commission or the
Principal Trading Market or (B) by falling below the minimum listing maintenance requirements of the Principal Trading Market.
Section 2.2(a).
(h) Company Deliverables. The Company shall have delivered the Company Deliverables in accordance with
(i) Compliance Certificate. The Company shall have delivered to the Purchaser a certificate, dated as of the Closing Date
and signed by its Chief Executive Officer or its Chief Financial Officer, dated as of the Closing Date, certifying to the fulfillment of the
conditions specified in Sections 5.1(a) and (b) in the form attached hereto as Exhibit D.
(j) Termination. This Agreement shall not have been terminated as to the Purchaser in accordance with Section 6.16 herein.
5.2 Conditions Precedent to the Obligations of the Company to sell the Shares. The Company’s obligation to sell and issue the
Shares at the Closing to the Purchaser is subject to the fulfillment to the satisfaction of the Company on or prior to the Closing Date of the
following conditions, any of which may be waived by the Company:
(a) Representations and Warranties. The representations and warranties made by the Purchaser contained herein shall be
true and correct in all material respects (except for those representations and warranties which are qualified as to materiality, in which case
such representations and warranties shall be true and correct in all respects) as of the date hereof, and as of the Closing Date as though made
on and as of such date, except for representations and warranties that speak as of a specific date.
(b) Performance. The Purchaser shall have performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchaser at or prior to the Closing
Date.
(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by this Agreement.
(d) Consents. The Company shall have obtained in a timely fashion any and all consents, permits, approvals, registrations
and waivers necessary for consummation of the purchase and sale of the Shares (including all Required Approvals), all of which shall be and
remain so long as necessary in full force and effect.
Section 2.2(b).
(e) Purchaser Deliverables. The Purchaser shall have delivered its Purchaser Deliverables in accordance with
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(f) Termination. This Agreement shall not have been terminated in accordance with Section 6.16 herein.
ARTICLE VI.
MISCELLANEOUS
6.1 Fees and Expenses. The Company and the Purchaser shall each pay the fees and expenses of their respective advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such party in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and
duties levied in connection with the sale and issuance of the Shares to the Purchaser.
6.2 Entire Agreement. This Agreement, together with the exhibits and schedules thereto, contains the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior agreements, understandings, discussions and representations, oral or
written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company and the Purchaser will execute and deliver to the other such further
documents as may be reasonably requested in order to give practical effect to the intention of the parties hereunder.
6.3 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered
via facsimile (provided the sender receives a machine-generated confirmation of successful transmission) at the facsimile number specified in
this Section 6.3 prior to 5:00 P.M., New York City time, on a Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number specified in this Section 6.3 on a day that is not a Trading Day or
later than 5:00 P.M., New York City time, on any Trading Day, (c) the Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service with next day delivery specified, and (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be as follows:
If to the Company: Alpine Immune Sciences, Inc.
188 East Blaine Street, Suite 200
Seattle, WA 98102
Telephone No.: (206) 788-4545
Facsimile No.: (206) 316-8383 (with a copy emailed to legal@alpineimmunesciences.com, which shall not
constitute notice)
Attention: Chief Financial Officer
With a copy to (which shall not constitute notice):
Wilson Sonsini Goodrich & Rosati, Professional Corporation
701 Fifth Avenue, Suite 5100
Seattle, WA 98104
Telephone No.: (206) 883-2500
Facsimile No.: (206) 883-2699
Attention: Patrick Schultheis, Michael Nordtvedt and Bryan King
If to the Purchaser: To the address set forth under the Purchaser’s name on the signature page hereof;
or such other address as may be designated in writing hereafter, in the same manner, by such Person.
6.4 Amendments; Waivers; No Additional Consideration. No provision of this Agreement may be waived, modified, supplemented
or amended except in a written instrument signed by the Company and the Purchaser. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a
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waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder
in any manner impair the exercise of any such right.
6.5 Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed
to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rules of strict construction will be applied against any party. This Agreement shall be construed as if
drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.
6.6 Successors and Assigns. The provisions of this Agreement shall inure to the benefit of and be binding upon the parties and their
successors and permitted assigns. This Agreement, or any rights or obligations hereunder, may not be assigned by the Company or the
Purchaser without the prior written consent of the other party, provided that the Purchaser may assign its rights hereunder in whole or in part
to any Person to whom the Purchaser assigns or transfers any Shares in compliance with this Agreement and applicable law so long as such
transferee shall agree in writing to be bound, with respect to the transferred Shares, by the terms and conditions of this Agreement; and
provided further that, for the avoidance of doubt, the foregoing shall not be construed to restrict or limit the Purchaser’s ability to sell,
transfer or otherwise dispose of the Shares in accordance with the terms of this Agreement.
6.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except each Purchaser
Party is an intended third-party beneficiary of Section 4.7.
6.8 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be
governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, employees or agents) shall be
commenced exclusively in the New York Courts. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York
Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed
herein (including, for the avoidance of doubt, with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees
not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any such New York Court, or that such
Proceeding has been commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such Proceeding by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
6.9 Survival. Subject to applicable statute of limitations, the representations, warranties, agreements and covenants contained
herein shall survive the Closing and the delivery of the Shares.
6.10 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile
transmission, or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original
thereof.
6.11 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not in
25
any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.
6.12 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in this Agreement, whenever the
Purchaser exercises a right, election, demand or option hereunder and the Company does not timely perform its related obligations within the
periods therein provided, then the Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights, unless such rescission
or withdrawal would materially prejudice the Company.
6.13 Replacement of the Shares. If any certificate or instrument evidencing any Shares is mutilated, lost, stolen or destroyed, the
Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company and the Transfer Agent of
such loss, theft or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to
indemnify and hold harmless the Company and the Transfer Agent for any losses in connection therewith or, if required by the Transfer
Agent, a bond in such form and amount as is required by the Transfer Agent. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Shares. If a replacement
certificate or instrument evidencing any Shares is requested due to a mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a replacement.
6.14 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of
damages, each of the Purchaser and the Company will be entitled to specific performance hereunder. Except as expressly set forth herein, the
parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation (other than in
connection with any action for a temporary restraining order) the defense that a remedy at law would be adequate.
6.15 Adjustments in Share Numbers and Prices. In the event of any stock split, subdivision, dividend or distribution to all
stockholders of the Company payable in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date
hereof and prior to the Closing, each reference herein to a number of shares or a price per share shall be deemed to be amended to
appropriately account for such event.
6.16 Termination. This Agreement may be terminated and the sale and purchase of the Shares abandoned at any time prior to the
Closing by either the Company or the Purchaser upon written notice to the other, if the Closing has not been consummated on or prior to
5:00 P.M., New York City time, on the Outside Date; provided, however, that the right to terminate this Agreement under this Section 6.16
shall not be available to any Person whose failure to comply with its obligations under this Agreement has been the cause of or resulted in the
failure of the Closing to occur on or before such time. Nothing in this Section 6.16 shall be deemed to release any party from any liability for
any breach by such party of the terms and provisions of this Agreement or to impair the right of any party to compel specific performance by
any other party of its obligations under this Agreement. Upon a termination in accordance with this Section 6.16, the Company and the
Purchaser shall not have any further obligation or liability (including arising from such termination) to the other.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
26
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
ALPINE IMMUNE SCIENCES, INC.
By: /s/ Paul Rickey
Name: Paul Rickey
Title: Senior Vice President and Chief Financial Officer
HORIZON THERAPEUTICS IRELAND DAC
By: /s/ William D. Gannon
Name: William D. Gannon
Title: Director
Tax ID No.: IE6396554L
Purchaser’s Address for Notice and Delivery:
70 St. Stephen’s Green
Dublin 2, D02 E2X4, Ireland
Telephone No.: +353 (0) 1 772 2100
Facsimile No.: +353 (0) 1 772 2101
E-mail Address: legal@horizontherapeutics.com
Attention: General Counsel
[Signature Page to Stock Purchase Agreement]
EXHIBITS:
A: Wire Instructions
B: Form of Secretary’s Certificate
C-1: Accredited Investor Questionnaire
C-2: Book-Entry Questionnaire
D: Form of Officer’s Certificate
EXHIBIT A
WIRE INSTRUCTIONS
EXHIBIT B
FORM OF SECRETARY’S CERTIFICATE
The undersigned hereby certifies that he is the duly elected, qualified and acting Secretary of Alpine Immune Sciences, Inc., a Delaware
corporation (the “Company”), and that as such he is authorized to execute and deliver this certificate in the name and on behalf of the
Company and in connection with the Stock Purchase Agreement, dated as of December 15, 2021, by and among the Company and the
investor party thereto (the “Stock Purchase Agreement”), and further certifies in his official capacity, in the name and on behalf of the
Company, the items set forth below. Capitalized terms used but not otherwise defined herein shall have the meaning set forth in the Stock
Purchase Agreement.
1. Attached hereto as Exhibit A is a true, correct and complete copy of the resolutions duly adopted by the Board of Directors of the
Company. Such resolutions have not in any way been amended, modified, revoked or rescinded, have been in full force and effect
since their adoption to and including the date hereof and are now in full force and effect.
2. Attached hereto as Exhibit B is a true, correct and complete copy of the Certificate of Incorporation of the Company, together with any
and all amendments and certificates of designation thereto currently in effect, and no action has been taken to further amend, modify
or repeal such Certificate of Incorporation, the same being in full force and effect in the attached form as of the date hereof.
3. Attached hereto as Exhibit C is a true, correct and complete copy of the Bylaws of the Company and any and all amendments thereto
currently in effect, and no action has been taken to further amend, modify or repeal such Bylaws, the same being in full force and
effect in the attached form as of the date hereof.
4. Each person listed below has been duly elected or appointed to the position(s) indicated opposite his name and is duly authorized to sign
the Stock Purchase Agreement on behalf of the Company, and the signature appearing opposite such person’s name below is such
person’s genuine signature.
Name
Mitchell H. Gold
Stanford Peng
Paul Rickey
Position
Chief Executive Officer
President and Head of Research and
Development
Chief Financial Officer
Signature
_________________________
_________________________
_________________________
2
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this ____ day of December 2021.
I, Mitchell H. Gold, Chief Executive Officer, hereby certify that Paul Rickey is the duly elected, qualified and acting Secretary of the
Company and that the signature set forth above is his true signature.
Secretary
Chief Executive Officer
3
EXHIBIT A
Resolutions
4
EXHIBIT B
Certificate of Incorporation
5
EXHIBIT C
Bylaws
6
EXHIBIT C-1
ACCREDITED INVESTOR QUESTIONNAIRE
(ALL INFORMATION WILL BE TREATED CONFIDENTIALLY)
To: Alpine Immune Sciences, Inc.
This Investor Questionnaire (“Questionnaire”) must be completed in connection with the offer and sale of the shares of the common stock,
par value $0.001 per share (the “Shares”), of Alpine Immune Sciences, Inc., a Delaware corporation (the “Corporation”). The Shares are
being offered and sold by the Corporation without registration under the Securities Act of 1933, as amended (the “Act”), and the securities
laws of certain states, in reliance on the exemptions contained in Section 4(a)(2) of the Act and in reliance on similar exemptions under
applicable state laws. The Corporation must determine that you meet certain suitability requirements before offering or selling Shares to you.
The purpose of this Questionnaire is to assure the Corporation that you meet the applicable suitability requirements. The information supplied
by you will be used in determining whether you meet such criteria, and reliance upon the private offering exemptions from registration is
based in part on the information herein supplied.
This Questionnaire does not constitute an offer to sell or a solicitation of an offer to buy any security. Your answers will be kept strictly
confidential. However, by signing this Questionnaire, you will be authorizing the Corporation to provide a completed copy of this
Questionnaire to such parties as the Corporation deems appropriate in order to ensure that the offer and sale of the Shares will not result in a
violation of the Act or the securities laws of any state and that you otherwise satisfy the suitability standards applicable to purchasers of the
Shares. You must answer all applicable questions and complete, date and sign this Questionnaire. Please print or type your responses and
attach additional sheets of paper if necessary to complete your answers to any item.
PART A. BACKGROUND INFORMATION
Name of Beneficial Owner of the Shares:
Business Address:
(Number and Street)
(City) (State) (Zip Code)
Telephone Number: (___)
If a corporation, partnership, limited liability company, trust or other entity:
Type of entity:
State of formation: Approximate Date of formation:
Were you formed for the purpose of investing in the securities being offered?
Yes ____ No ____
If an individual:
Residence Address:
(Number and Street)
(City) (State) (Zip Code)
Telephone Number: (___)
Age: __________ Citizenship: ____________ Where registered to vote: _______________
7
Set forth in the space provided below the state(s), if any, in the United States in which you maintained your residence during the past two
years and the dates during which you resided in each state:
Are you a director or executive officer of the Corporation?
Yes ____ No ____
Social Security or Taxpayer Identification No.
PART B. ACCREDITED INVESTOR QUESTIONNAIRE
In order for the Company to offer and sell the Shares in conformance with state and federal securities laws, the following information must
be obtained regarding your investor status. Please initial each category applicable to you as a Purchaser of Shares of the Company.
__ (1) A bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution
as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity;
__ (2) A broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934;
__ (3) An insurance company as defined in Section 2(13) of the Securities Act;
__ (4) An investment company registered under the Investment Company Act of 1940 or a business development company
as defined in Section 2(a)(48) of that Act;
__ (5) A Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958;
__ (6) A plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000;
__ (7) An employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank,
savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan
has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons
that are accredited investors;
__ (8) A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940;
__ (9) An organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, Massachusetts or
similar business trust, a partnership, or a limited liability company, not formed for the specific purpose of acquiring
the Shares, with total assets in excess of $5,000,000;
__ (10) A trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Shares, whose
purchase is directed by a sophisticated person who has such knowledge and experience in financial and business
matters that such person is capable of evaluating the merits and risks of investing in the Company;
8
__ (11) A Rural Business Investment Company as defined in Section 384A of the Consolidated Farm and Rural
Development Act;
__ (12) An investment advisor registered pursuant to Section 203 of the Investment Advisers Act of 1940 or registered
__ (13) An investment advisor relying on the exemption from registering with the SEC under Section 203(l) or (m) of the
pursuant to the laws of a state;
Investment Advisors Act of 1940;
__ (14) An entity, of a type not listed above, not formed for the specific purpose of acquiring the securities offered, owning
investments in excess of $5,000,00 (for purposes of this category, “investments” is defined in Rule 2a51-1(b) under
the Investment Company Act of 1940);
__ (15) A “family office,” as defined in Rule 202(a)(11)(G) 1 under the Investment Advisers Act of 1940 (i) with assets
under management in excess of $5,000,000; (ii) that is not formed for the specific purpose of acquiring the securities
offered; and (iii) whose prospective investment is directed by a person who has such knowledge and experience in
financial and business matters that such family office is capable of evaluating the merits and risks of the prospective
investment (That person must complete question 5 below in this questionnaire);
__ (16) A “family client,” as defined in Rule 202(a)(11)(G) 1 under the Investment Advisers Act of 1940, of a family
office meeting the requirements described in the item above and whose prospective investment in the Company is
directed by such family office by a person who has such knowledge and experience in financial and business matters
that such family office is capable of evaluating the merits and risks of the prospective investment (That person must
complete question 5 below in this questionnaire);
___(17) A natural person whose individual net worth, or joint net worth with that person’s spouse (in each case,
excluding the value of such person’s primary residence), at the time of his purchase exceeds $1,000,000;
___(18) A natural person who had an individual income in excess of $200,000 in each of the two most recent years, or joint
income with that person’s spouse in excess of $300,000, in each of those years, and has a reasonable expectation of
reaching the same income level in the current year;
___(19) An executive officer or director of the Company;
___(20) An entity in which all of the equity owners qualify under any of the above subparagraphs. If the undersigned
belongs to this investor category only, list the equity owners of the undersigned, and the investor category which
each such equity owner satisfies.
A. FOR EXECUTION BY AN INDIVIDUAL:
By
Date
Print Name:
B. FOR EXECUTION BY AN ENTITY:
Entity Name:
By
9
Date
Print Name:
Title:
C. ADDITIONAL SIGNATURES (if required by partnership, corporation or trust document):
By
Date
By
Date
Entity Name:
Print Name:
Title:
Entity Name:
Print Name:
Title:
10
EXHIBIT C-2
BOOK-ENTRY QUESTIONNAIRE
Pursuant to Section 2.2(b) of the Agreement, please provide us with the following information:
The exact name that the Shares are to be registered in (this is the name that will
appear on the book-entry notation(s)). You may use a nominee name if
appropriate:
The relationship between the Purchaser of the Shares and the Registered Holder
listed in response to Item 1 above:
The mailing address, telephone and telecopy number of the Registered Holder
listed in response to Item 1 above:
The Tax Identification Number (or, if an individual, the Social Security Number)
of the Registered Holder listed in response to Item 1 above:
1.
2.
3.
4.
EXHIBIT D
FORM OF OFFICER’S CERTIFICATE
The undersigned, the Chief Executive Officer of Alpine Immune Sciences, Inc., a Delaware corporation (the “Company”), pursuant to
Section 5.1(i) of the Stock Purchase Agreement, dated as of December 15, 2021, by and among the Company and the investor signatory
thereto (the “Stock Purchase Agreement”), hereby represents, warrants and certifies as follows (capitalized terms used but not otherwise
defined herein shall have the meaning set forth in the Stock Purchase Agreement):
1. The representations and warranties of the Company contained in the Stock Purchase Agreement are true and correct in all
material respects (except for those representations and warranties which are qualified as to materiality or Material Adverse
Effect, in which case, such representations and warranties shall be true and correct in all respects) as of the date when made
and as of the date hereof, as though made on and as of such date, except for such representations and warranties that speak as
of a specific date.
2. The Company has performed, satisfied and complied in all material respects with all covenants, agreements and conditions
required by the Stock Purchase Agreement to be performed, satisfied or complied with by it at or prior to the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this certificate this ___ day of __________, _____.
Chief Executive Officer
EXHIBIT 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Registration Statement (Form S-8 No. 333-205220) pertaining to the 2012 Stock Incentive Plan of N30 Pharmaceuticals, Inc., 2015 Equity
Incentive Plan of Nivalis Therapeutics, Inc. and Employee Stock Purchase Plan of Nivalis Therapeutics, Inc.,
Registration Statement (Form S-8 No. 333-211197) pertaining to the Employment Inducement Awards, granted by Nivalis Therapeutics, Inc.,
Registration Statement (Post-Effective Amendment No. 1 on Form S-8 to Form S-4 No. 333-218134) pertaining to the Amended and Restated
2015 Stock Plan of Alpine Immune Sciences, Inc.,
Registration Statement (Form S-8 No. 333-223965) pertaining to the Amended and Restated 2015 Stock Plan, as amended, and the 2015 Equity
Incentive Plan of Alpine Immune Sciences, Inc.,
Registration Statements (Form S-8 Nos. 333-225792, 333-230369, 333-237479, 333-239233, and 333-254446) pertaining to the 2018 Equity
Incentive Plan of Alpine Immune Sciences, Inc.,
Registration Statements (Form S-8 Nos. 333-230372 and 333-258674) pertaining to the Stand-Alone Inducement Stock Option Grants of Alpine
Immune Sciences, Inc.,
Registration Statement (Post-Effective Amendment No. 1 on Form S-3 to Form S-1 No. 333-244409) and related Prospectus of Alpine Immune
Sciences, Inc. for the registration of 7,709,416 shares of its common stock,
Registration Statement (Form S-3 No. 333-256107) of Alpine Immune Sciences, Inc. to offer or sell securities for the aggregate offering price of
up to $150,000,000, and
Registration Statement (Form S-3 No. 333-260971) and related Prospectus of Alpine Immune Sciences, Inc. for the registration of 9,680,844
shares of its common stock
of our report dated March 17, 2022, with respect to the consolidated financial statements of Alpine Immune Sciences, Inc., included in this Annual Report
(Form 10-K) of Alpine Immune Sciences, Inc. for the year ended December 31, 2021.
/s/ Ernst & Young
Seattle, Washington
March 17, 2022
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Mitchell H. Gold, M.D., certify that:
1. I have reviewed this Annual Report on Form 10-K of Alpine Immune Sciences, Inc.;
2. 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;
3. 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;
4. 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:
(a) 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;
(b) 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;
(c) 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
(d) 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) 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
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: March 17, 2022
/s/ Mitchell H. Gold, M.D.
Mitchell H. Gold, M.D.
Executive Chairman and Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Paul Rickey, certify that:
1. I have reviewed this Annual Report on Form 10-K of Alpine Immune Sciences, Inc.;
2. 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;
3. 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;
4. 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:
(a) 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;
(b) 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;
(c) 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
(d) 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) 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
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: March 17, 2022
/s/ Paul Rickey
Paul Rickey
Senior Vice President and Chief Financial Officer
(Principal Accounting Officer and Principal Financial
Officer)
ALPINE IMMUNE SCIENCES, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of Alpine Immune Sciences, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2021, as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mitchell H. Gold, M.D., Executive Chairman and Chief Executive
Officer (Principal Executive Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Mitchell H. Gold, M.D.
Mitchell H. Gold, M.D.
Executive Chairman and Chief Executive Officer
(Principal Executive Officer)
March 17, 2022
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be
retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the Report to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be
incorporated by reference into any filing of Alpine Immune Sciences, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.
ALPINE IMMUNE SCIENCES, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of Alpine Immune Sciences, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2021, as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paul Rickey, Senior Vice President and Chief Financial Officer
(Principal Accounting Officer and Principal Financial Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Paul Rickey
Paul Rickey
Senior Vice President and Chief Financial Officer
(Principal Accounting Officer and Principal Financial Officer)
March 17, 2022
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be
retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the Report to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be
incorporated by reference into any filing of Alpine Immune Sciences, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.