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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2023
or
Commission File Number 000-15006
CELLDEX THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware
State or other jurisdiction of
incorporation or organization
13-3191702
(I.R.S. Employer
Identification No.)
Perryville III Building, 53 Frontage Road, Suite 220, Hampton, New Jersey 08827
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (908) 200-7500
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class:
Common Stock, par value $.001
Trading Symbol(s)
CLDX
Name of Each Exchange Where Registered:
NASDAQ Capital Market
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 Section 15(d) of the Act. Yes ☐ No ☒
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-
T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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. (Check one):
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect
the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of
the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock held by non-affiliates as of June 30, 2023 was $1.6 billion. Exclusion of shares held by any person
should not be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the actions of the management or policies of the registrant, or
that such person is controlled by or under common control with the registrant.
The number of shares of common stock outstanding at February 14, 2024 was 55,900,679 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for our 2024 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report.
Auditor Firm ID: 238
Auditor Name: PricewaterhouseCoopers LLP
Auditor Location: Boston, Massachusetts
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CELLDEX THERAPEUTICS, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2023
TABLE OF CONTENTS
Part I
Item 1.
Item 1A.
Item 1B.
Item 1C.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Item 16.
Signatures
Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
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Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This Annual Report on Form 10-K contains
forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-
looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions,
estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be
beyond our control and which may cause our actual results, performance or achievements to be materially different from future results,
performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical
fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of
words such as “may,” “will,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,”
“estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and
expressions of the future.
There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-
looking statement made by us. These factors include, but are not limited to:
● our dependence on product candidates that are still in development stages;
● our ability to successfully complete research and further development, including preclinical and clinical studies;
● our anticipated timing for preclinical development, regulatory submissions, commencement and completion of clinical trials
and product approvals;
● our ability to negotiate strategic partnerships, where appropriate, for our drug candidates;
● our ability to manage multiple clinical trials for a variety of drug candidates at different stages of development;
● the cost, timing, scope and results of ongoing preclinical and clinical testing;
● our expectations of the attributes of our product and development candidates, including pharmaceutical properties, efficacy,
safety and dosing regimens;
● the cost, timing and uncertainty of obtaining regulatory approvals for our drug candidates;
● the availability, cost, delivery and quality of clinical management services provided by our clinical research organization
partners;
● the availability, cost, delivery and quality of clinical and commercial-grade materials produced by our own manufacturing
facility or supplied by contract manufacturers, suppliers and partners;
● our ability to commercialize our drug candidates and the growth of the markets for those drug candidates;
● our ability to develop and commercialize products before competitors that are superior to the alternatives developed by such
competitors;
● our ability to develop technological capabilities, including identification of novel and clinically important targets, exploiting our
existing technology platforms to develop new drug candidates and expand our focus to broader markets for our existing targeted
therapeutics;
● the cost of paying the regulatory approval milestone under the merger agreement by which we acquired Kolltan
Pharmaceuticals, Inc. (“Kolltan”) and our related settlement agreement with Kolltan;
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● our ability to raise sufficient capital to fund our preclinical and clinical studies and to meet our long-term liquidity needs, on
terms acceptable to us, or at all. If we are unable to raise the funds necessary to meet our long-term liquidity needs, we may
have to delay or discontinue the development of one or more programs, discontinue or delay ongoing or anticipated clinical
trials, discontinue or delay our commercial manufacturing efforts, discontinue or delay our efforts to expand into additional
indications for our drug product candidates, license out programs earlier than expected, raise funds at significant discount or on
other unfavorable terms, if at all, or sell all or part of our business;
● our ability to protect our intellectual property rights and our ability to avoid intellectual property litigation, which can be costly
and divert management time and attention;
● our ability to develop and commercialize products without infringing the intellectual property rights of third parties; and
● the factors listed under “Risk Factors” in this Annual Report on Form 10-K.
All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place
undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated
by reference into this report. We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the
forward-looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations,
beliefs and projections in good faith, and we believe they have a reasonable basis. However, we cannot assure you that our expectations,
beliefs or projections will result or be achieved or accomplished.
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Item 1. BUSINESS
Overview
PART I
Celldex Therapeutics, Inc., which we refer to as “Celldex,” “we,” “us,” “our” or the “Company,” is a biopharmaceutical company
dedicated to exploring the science of mast cell biology and developing therapeutic antibodies which have the ability to engage the human
immune system and/or directly affect critical pathways to improve the lives of patients with severe inflammatory, allergic, autoimmune
and other devastating diseases. Our drug candidates include monoclonal and bispecific antibodies designed to address mast cell mediated
diseases for which available treatments are inadequate.
We are focusing our efforts and resources on the continued research and development of
● Barzolvolimab (also referred to as CDX-0159), a monoclonal antibody that specifically binds the KIT receptor and potently
inhibits its activity, which is currently being studied across multiple mast cell driven diseases including
-
-
-
Chronic Urticarias: In November 2023, we announced that our Phase 2 study in chronic spontaneous urticaria (CSU)
achieved the primary efficacy endpoint (statistically significant mean change from baseline to week 12 of urticaria
activity score compared to placebo) and was well tolerated. The study is ongoing and patients will continue to receive
barzolvolimab for 52 weeks of treatment; we plan to report topline 52 week data in the second half of 2024. We are
currently planning for the initiation of Phase 3 studies in CSU in summer 2024. A Phase 2 study in chronic inducible
urticaria (CIndU) is currently enrolling patients and we expect to report data from this study in the second half of
2024;
Prurigo Nodularis (PN): In November 2023, we reported positive data from a Phase 1b study in PN that supports
further development of barzolvolimab in this indication and we are currently planning for the initiation of a Phase 2
study in PN in early 2024;
Eosinophilic Esophagitis (EoE): A Phase 2 study in EoE was initiated in June 2023 and enrollment is ongoing.
● Our next generation bispecific antibody platform to support pipeline expansion with additional candidates for inflammatory
diseases and oncology. Targets are being selected based on new science as well as their compatibility to be used in bispecific
antibody formats with our existing antibody programs. Development is focused on emerging, important pathways controlling
inflammatory diseases or immunity to tumors.
Our goal is to build a fully integrated, commercial-stage biopharmaceutical company that develops important therapies for patients
with unmet medical needs. We believe our program assets provide us with the strategic options to either retain full economic rights to our
innovative therapies or seek favorable economic terms through advantageous commercial partnerships. This approach allows us to
maximize the overall value of our technology and product portfolio while best ensuring the expeditious development of each individual
product.
Our future success depends upon many factors, including our ability, and that of any licensees and collaborators that we may have,
to successfully develop, obtain regulatory approval for and commercialize our drug candidates. We have had no commercial revenues
from sales of our drug candidates, and we have had a history of operating losses. It is possible that we may not be able to successfully
develop, obtain regulatory approval for, or commercialize, our drug candidates, and we are subject to a number of risks that you should
be aware of before investing in us. These risks are described more fully in “Item 1A. Risk Factors.”
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Clinical Development Programs
Barzolvolimab (also referred to as CDX-0159)
Barzolvolimab is a humanized monoclonal antibody that specifically binds the receptor tyrosine kinase KIT and potently inhibits its
activity. KIT is expressed in a variety of cells, including mast cells, and its activation by its ligand SCF regulates mast cell growth,
differentiation, survival, chemotaxis and degranulation. Barzolvolimab is designed to block KIT activation by disrupting both SCF
binding and KIT dimerization. By targeting KIT, barzolvolimab has been shown to inhibit mast cell activity and decrease mast cell
numbers, which we believe could provide potential clinical benefit in mast cell related diseases.
Barzolvolimab was initially studied in chronic spontaneous urticaria (CSU) and chronic inducible urticaria (CIndU), diseases where
mast cell degranulation plays a central role in the onset and progression of the disease. Phase 1 studies in CSU and CIndU were
successfully completed and Phase 2 studies are ongoing. In November 2023, we reported that barzolvolimab achieved the primary
efficacy endpoint in the ongoing Phase 2 CSU study, with a statistically significant mean change from baseline to week 12 of UAS7
(weekly urticaria activity score) compared to placebo and was well tolerated. We are currently planning Phase 3 studies in CSU which
are expected to initiate in summer 2024.
Based on the positive results reported in urticaria, we expanded development of barzolvolimab into additional indications where
mast cells are believed to play an important role. We are conducting an ongoing Phase 2 study in eosinophilic esophagitis (EoE) and are
preparing to initiate a Phase 2 study in prurigo nodularis (PN) in early 2024 after reporting positive data from a Phase 1b study in PN in
late 2023. We continue to assess potential opportunities for barzolvolimab in other diseases where mast cells play an important role, such
as dermatologic, respiratory, allergic, gastrointestinal and ophthalmic conditions.
Chronic Spontaneous Urticaria (CSU)
CSU presents as itchy hives, angioedema or both for at least six weeks without a specific trigger; multiple episodes can play out over
years or even decades. It is one of the most frequent dermatologic diseases with a prevalence of 0.5-1.0% of the total population or up to
approximately 1 to 3 million patients in the United States (Weller et al. 2010. Hautarzt. 61(8), Bartlett et al. 2018. DermNet.Org).
Approximately 50% of patients with CSU achieve symptomatic control with antihistamines. Omalizumab, an IgE inhibitor, provides
relief for roughly half of the remaining antihistamine refractory patients. Consequently, there is a need for additional therapies.
We have completed a Phase 1b randomized, double-blind, placebo-controlled multi-center study of barzolvolimab in CSU. The
study was designed to assess the safety of multiple ascending doses of barzolvolimab in patients with CSU who remain symptomatic
despite treatment with antihistamines. Secondary and exploratory objectives included pharmacokinetic and pharmacodynamic
assessments, clinical activity outcomes and quality of life assessments. Barzolvolimab was administered intravenously as add on
treatment to H1-antihistamines, either alone or in combination with H2-antihistamines and/or leukotriene receptor agonists. 45 patients
with moderate to severe CSU refractory to antihistamines were enrolled and treated [35 barzolvolimab (n=9 in 0.5 mg/kg; n=8 in 1.5
mg/kg; n=9 in 3.0 mg/kg; n=9 in 4.5 mg/kg) and 10 placebo].
At saturating doses (1.5 mg/kg and higher), barzolvolimab resulted in rapid, marked and durable responses in patients with moderate
to severe CSU refractory to antihistamines. The 1.5 mg/kg, 3.0 mg/kg and 4.5 mg/kg dose groups showed similar markedly improved
urticaria symptoms, including rapid onset of responses (as early as 1 week after the first dose) and prolonged disease control with
sustained durability up to 24 weeks. Patients with prior omalizumab therapy also had similar symptom improvement as all patients.
● Mean reduction from baseline in weekly urticaria activity score (UAS7) at week 12 was 67% in the 1.5 mg/kg dose group
(n=8), 67% in the 3.0 mg/kg dose group (n=9) and 82% in the 4.5 mg/kg dose group (n=9). Mean reduction from baseline in
UAS7 at week 24 was 80% in the 1.5 mg/kg dose group (n=7), 70% in the 3.0 mg/kg dose group (n=6) and 77% in the 4.5
mg/kg dose group (n=7).
● Complete response (UAS7=0) at week 12 was 57% in the 1.5 mg/kg dose group, 44% in the 3.0 mg/kg dose group and 67% in
the 4.5 mg/kg dose group. Complete response (UAS7=0) at week 24 was 57% in the 1.5 mg/kg dose group, 67% in the 3.0
mg/kg dose group and 43% in the 4.5 mg/kg dose group.
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● Well-controlled disease (UCT≥ 12) at week 12 was 75% in the 1.5 mg/kg dose group, 63% in the 3.0 mg/kg dose group and
89% in the 4.5 mg/kg dose group. Well-controlled disease (UCT≥ 12) at week 24 was 75% in the 1.5 mg/kg dose group, 67% in
the 3.0 mg/kg dose group and 67% in the 4.5 mg/kg dose group.
● During post-treatment follow up, 71% (10 of 14) of patients who had been treated with doses greater than or equal to 1.5 mg/kg
and had a complete response (UAS7=0) at week 12, remained urticaria free at week 24 (patients received last dose of
barzolvolimab at week 8).
● Profound and durable improvement in angioedema symptoms as measured through the weekly angioedema activity score
(AAS7) was achieved across all dose levels evaluated with sustained activity observed with the 1.5 mg/kg and greater dose
levels.
● Patients also reported improvements in quality of life outcomes as assessed by the Dermatology Life Quality Index (DLQI)
which surveys patients’ perceptions of symptoms and feelings, daily activities, leisure, work and school performance, personal
relationships and treatment.
● Tryptase suppression, indicative of mast cell depletion, paralleled symptom improvement, demonstrating the impact of mast
cell depletion on CSU disease activity.
● Barzolvolimab was well tolerated. Most AEs were mild or moderate in severity and resolved while on study. The most common
treatment emergent adverse events were hair color changes, COVID-19, headache, neutropenia and urinary tract infections
(UTIs). UTIs and COVID-19 were reported as unrelated to treatment. Generally transient, asymptomatic and mild changes in
hematologic parameters were observed, consistent with observations from prior studies. No pattern of further decrease was
observed with multiple dose administration.
Data from this study were reported across multiple medical meetings, including the American Academy of Allergy, Asthma &
Immunology (AAAAI) Annual Meeting in February 2023, the European Academy of Allergy and Clinical Immunology (EAACI)
Annual Congress in June 2023 and the European Academy of Dermatology & Venereology (EADV) Congress in October 2023.
In June 2022, we initiated dosing in a Phase 2 study in patients with CSU who remained symptomatic despite antihistamine therapy;
in July 2023, we announced that enrollment was complete. The study is being conducted at approximately 75 sites across 9 countries.
The study is a randomized, double-blind, placebo-controlled, parallel group Phase 2 study evaluating the efficacy and safety profile of
multiple dose regimens of barzolvolimab to determine the optimal dosing strategy. 208 patients have been randomly assigned on a
1:1:1:1 ratio to receive subcutaneous injections of barzolvolimab at 75 mg every 4 weeks, 150 mg every 4 weeks, 300 mg every 8 weeks
or placebo during a 16-week placebo-controlled treatment phase. After 16 weeks, patients then enter a 36-week active treatment period,
in which patients receiving placebo or the 75 mg dose are randomized to receive barzolvolimab 150 mg every 4 weeks or 300 mg every 8
weeks; patients already randomized to the 150 mg and 300 mg treatment arms remain on the same regimen as during the placebo-
controlled treatment period. After 52 weeks, patients then enter a follow-up period for an additional 24 weeks. The primary endpoint of
the study is mean change in baseline to week 12 in UAS7 (weekly urticaria activity score). Secondary endpoints include safety and other
assessments of clinical activity including ISS7 (weekly itch severity score), HSS7 (weekly hive severity score) and AAS7 (weekly
angioedema activity score).
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Topline data from this study were presented in November of 2023 and 12 week treatment results were presented at the American
Academy of Allergy, Asthma & Immunology (AAAAI) Annual Meeting in February 2024. Data from the 208 patients randomized in the
study showed that barzolvolimab achieved the primary efficacy endpoint, with a statistically significant mean change from baseline to
week 12 in UAS7 compared to placebo at all dose levels. Secondary and exploratory endpoints in the study were also achieved at week
12 and strongly support the primary endpoint results, including changes in ISS7 and HSS7 and responder analyses. Importantly,
barzolvolimab demonstrated rapid, durable and clinically meaningful responses in patients with moderate to severe CSU refractory to
antihistamines, including patients with prior omalizumab treatment. Demographics and baseline disease characteristics were well
balanced across treatment groups. The majority of patients on study had severe disease (UAS7≥28).
UAS7 Changes
Baseline UAS7 (mean)
LS Mean change at Week 12
LS Mean difference from
placebo (Confidence Interval,
p value)
HSS7 Changes
Baseline HSS7 (mean)
LS Mean change at Week 12
LS Mean difference from
placebo (Confidence Interval,
p value)
ISS7 Changes
Baseline ISS7 (mean)
LS Mean change at Week 12
LS Mean difference from
placebo (Confidence Interval,
p value)
Summary of Clinical Activity Assessments at Week 12
300 mg Q8W
(n=51)
150 mg Q4W
(n=52)
75 mg Q4W
(n=53)
31.33
-23.87
-13.41
30.75
-23.02
-12.55
30.30
-17.06
-6.60
(CI: -17.47, -9.34)
p<0.0001
(CI:-16.56, -8.55)
p<0.0001
(CI:-10.71, -2.49)
p=0.0017
14.92
-12.19
-7.24
15.05
-11.19
-6.24
14.86
-8.25
-3.31
(CI:-9.36, -5.12)
p<0.0001
(CI:-8.33, -4.16),
p<0.0001
(CI:-5.40, -1.22),
p=0.0020
16.42
-11.79
-6.32
15.70
-11.68
-6.21
15.44
-8.62
-3.16
(CI: -8.50, -4.13),
p<0.0001
(CI: -8.38, -4.04),
p<0.0001
(CI: -5.41, -0.91),
p=0.0061
Placebo
(n=51)
30.09
-10.47
14.47
-4.95
15.61
-5.47
Responder Analyses/Clinical Responses
UAS7=0 (Complete Control)
UAS7≤6 (Well-controlled)
37.5%
62.5%
51.1%
59.6%
22.9%
41.7%
6.4%
12.8%
UAS7, HSS7 and ISS7 data were analyzed using ANCOVA model and multiple imputation.
Barzolvolimab demonstrated strong improvement in UAS7 independent of omalizumab status at Week 12. Approximately 20%
(n=41) of enrolled patients received prior treatment with omalizumab and more than half of these patients had omalizumab-refractory
disease. These patients experienced a similar clinical benefit as the overall treated population within their individual dosing groups
consistent with the barzolvolimab mechanism of action.
Barzolvolimab was well tolerated with a favorable safety profile. Most adverse events were mild to moderate in severity; through 12
weeks, the most common treatment emergent adverse events in barzolvolimab treated patients were urticaria/CSU (10%), hair color
changes (9%), and neutropenia/ANC decrease (8%). The rate of infections was similar between barzolvolimab treated patients and
placebo with no association between neutropenia and infections.
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Patients on study will continue to receive barzolvolimab for 52 weeks and we plan to report 52 week data in late 2024. We believe
these results strongly support the further development of barzolvolimab in CSU and are currently planning two Phase 3 studies of
barzolvolimab which we plan to initiate in summer 2024.
Chronic Inducible Urticaria (CIndU)
CIndUs are forms of urticaria that have an attributable cause or trigger associated with them, typically resulting in hives or wheals.
The prevalence of CIndU is estimated at 0.5% of the total population and is reported to overlap in up to 36% of CSU patients (Weller et
al. 2010. Hautarzt. 61(8), Bartlett et al. 2018. DermNet.Org). There are currently no approved therapies for chronic inducible urticarias
other than antihistamines and patients attempt to manage symptoms associated with their disease through avoidance of triggers. We are
currently exploring cold-induced and dermographism (scratch-induced) urticarias in an ongoing Phase 2 study.
We completed a Phase 1b open label clinical trial in CIndU in patients refractory to antihistamines, conducted in Germany. This
study was designed to evaluate the safety of a single intravenous dose (3 mg/kg) of barzolvolimab in patients with cold urticaria (ColdU)
or symptomatic dermographism (SD). The study was expanded to include a cohort (single dose, 3 mg/kg) in patients with cholinergic
urticaria (“CholU”) and a cohort at a lower dose (single dose, 1.5 mg/kg) in ColdU. Patient’s symptoms were induced via provocation
testing that resembles real life triggering situations. Secondary and exploratory objectives included pharmacokinetic and
pharmacodynamic assessments, including changes from baseline provocation thresholds, measurement of tryptase and stem cell factor
levels, clinical activity outcomes, quality of life assessments and measurement of tissue mast cells through skin biopsies.
Generally patients on study had high disease activity at baseline that was poorly controlled and marked impairment in quality of life.
At 3 mg/kg in the ColdU and SD cohorts, safety results were reported for 21 patients and activity results were reported for the 20 patients
who received a full dose of barzolvolimab. At 1.5 mg/kg in the ColdU cohort, safety results were reported for 10 patients and activity
results were reported for the 9 patients who received a full dose of barzolvolimab. At 3 mg/kg in the cholinergic cohort, safety results
were reported for 21 patients and activity results were reported for the 20 patients who received a full dose of barzolvolimab.
Rapid (as early as 1 week) and durable responses were observed in patients as assessed by provocation testing.
● A complete response was achieved in 95% (n=19/20) of patients with ColdU and SD treated with a single dose at 3 mg/kg
(n=10/10 ColdU; n=9/10 SD), including 3 patients who experienced insufficient response to prior omalizumab treatment. The
median duration (range) of complete response through the 12-week observation period was 77+ days (29–86; n=10) for patients
with ColdU and 57+ days (16–70; n=9) for patients with SD. A UCT score of ≥12 (well controlled) was achieved by 80%
(n=16/20) of the patients within week 4 post-treatment. By week 8, all patients (100%; n=20/20) achieved well-controlled
urticaria, which was sustained to week 12 post-dose by 80% (n=16/20) of patients. Complete urticaria control (UCT=16) was
achieved by 35% (n=7/20), 65% (n=13/20), and 40% (n=8/20) at weeks 4, 8, and 12, respectively.
● A complete response was achieved in 100% (n=9 of 9) patients with ColdU treated with a single dose at 1.5 mg/kg, including 4
patients with disease refractory to omalizumab. The median duration of complete response through the 12-week observation
period was 51+ days (7+ weeks). Following barzolvolimab administration, all patients achieved well controlled disease
(UCT>12) with 7 of 9 achieving complete control (UCT=16).
● A complete response was achieved in 56% (n=5 of 9) patients with cholinergic urticaria treated with a single dose at 3 mg/kg.
Most responses remained durable through to week 12. 63% (5/8) patients reported well controlled disease (UCT ≥12) at week 8
and 50% (4/8) at week 12, respectively.
● Patients also reported improvements in quality of life outcomes as assessed by the Dermatology Life Quality Index (DLQI)
which surveys patients’ perceptions of symptoms and feelings, daily activities, leisure, work and school performance, personal
relationships and treatment.
● A single dose of barzolvolimab led to marked decreases in tryptase and in skin mast cells. The kinetics correlated with
improvements in provocation testing and clinical activity, consistent with a central role for mast cells in the pathogenesis of
ColdU and SD. This confirmed that serum tryptase level is a robust pharmacodynamic biomarker for assessing mast cell burden
and clinical activity in inducible urticaria and potentially in other diseases with mast cell driven involvement.
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● Barzolvolimab was well tolerated across all cohorts. In the 3 mg/kg ColdU and SD cohorts, most adverse events were mild, and
the most common (≥3 patients) were hair color changes (76%; n=16/21), infusion reactions (43%; n=9/21), taste changes (38%;
n=8/21), nasopharyngitis (24%; n=5/21), malaise (24%; n=5/21), and headache (19%; n=4/21). Hair color changes (generally
small areas of hair color lightening) and taste disorders (generally partial changes of ability to taste salt or umami) are
consistent with inhibiting KIT signaling in other cell types and completely resolved over time during follow-up. One patient
with a history of fainting experienced loss of consciousness during infusion. The patient rapidly recovered. Importantly, no
evidence of mast cell activation as measured by serum tryptase monitoring was observed in this patient. Barzolvolimab was
also generally well tolerated by patients in the 1.5 mg/kg ColdU cohort and the 3.0 mg/kg cholinergic cohort with a similar
safety profile to that reported previously. Across the Phase 1b inducible urticaria study, mean hematology parameters generally
remained within the normal ranges—an important finding for a KIT inhibitor. Mild, transient, and asymptomatic decreases in
hemoglobin and white blood cell parameters occurred for some patients.
● Long term follow up data was collected from the 3.0 mg/kg cohorts in cold urticaria and symptomatic dermographism. 14
patients consented to the optional evaluation (6 cold, 8 symptomatic dermographism); 10 of the 14 still had complete control of
their disease as assessed by provocation testing at week 12. Data were collected at one or more timepoints beyond week 12
through week 36. Most patients had return of symptoms and/or loss of urticaria control between 12 and 36 weeks. Remarkably,
two patients remained provocation negative at 36 weeks, and four had well controlled disease (UCT ≥12) 36 weeks post dosing.
Serum tryptase exhibits a similar rate of recovery as clinical symptoms, while skin mast cells return at a slower rate. Tissue KIT
signaling, as approximated by SCF levels, was rapidly inhibited after dose administration and fully reactivated approximately
18 weeks after dosing. Tryptase levels return to pretreatment levels during follow up, while mast cells continue to recover. Drug
related adverse events noted during the study all resolved.
Data from this study were reported in Allergy (Nov 2022) and across multiple medical meetings, including the GA²LEN Global
Urticaria Forum (GUF) in December and the European Academy of Allergy and Clinical Immunology (EAACI) Annual Congress in
June 2022.
In July 2022, we announced that the first patient had been dosed in a Phase 2 study in patients with CIndU who remain symptomatic
despite antihistamine therapy. The study is being conducted at approximately 85 sites across approximately 12 countries. The
randomized, double-blind, placebo-controlled, parallel group Phase 2 study is evaluating the efficacy and safety profile of multiple dose
regimens of barzolvolimab in patients with CIndU to determine the optimal dosing strategy. Approximately 180 patients in 2 cohorts
(differentiated by CIndU subtype) including 90 patients with cold urticaria and 90 patients with symptomatic dermographism will be
randomly assigned on a 1:1:1 ratio to receive subcutaneous injections of barzolvolimab at 150 mg every 4 weeks, 300 mg every 8 weeks
or placebo during a 20-week treatment phase. Patients will then enter a follow-up phase for an additional 24 weeks. In addition, the study
includes the option for patients who have symptoms following the treatment phase, including patients who were on placebo, to enroll in
an open label extension where all patients receive 300 mg of barzolvolimab every 8 weeks. The primary endpoint of the study is the
percentage of patients with a negative provocation test at week 12 (using TempTest(R) and FricTest(R)). Secondary endpoints include
safety and other assessments of clinical activity including CTT (Critical Temperature Threshold), CFT (Critical Friction Threshold) and
WI-NRS (Worst itch numeric rating scale). Data from this study are expected in the second half of 2024.
Prurigo Nodularis (PN)
We have expanded clinical development of barzolvolimab into prurigo nodularis (PN). PN is a chronic skin disease characterized by
the development of hard, intensely itchy (pruritic) nodules on the skin. Mast cells through their interactions with sensory neurons and
other immune cells are believed to play an important role in amplifying chronic itch and neuroinflammation, both of which are a
hallmark of PN. There is currently only one FDA approved therapy for PN, representing an area of significant unmet need. Industry
sources estimate there are approximately 154,000 patients in the United States with PN who have undergone treatment within the last 12
months and, of these, approximately 75,000 would be biologic-eligible.
We have completed a Phase 1b multi-center, randomized, double-blind, placebo-controlled intravenous study in PN. Data from the
study, including 24 weeks of follow-up, were presented at the 12th World Congress on Itch (WCI) held in November 2023. 24 adults
(evaluable: n=23 safety; n=22 efficacy) with moderate to severe PN were randomized across three arms: (1) barzolvolimab 3.0 mg/kg
(n=9), barzolvolimab 1.5 mg/kg (n=7) and placebo (n=8). The primary endpoint of the study was safety; key secondary endpoints include
changes from baseline in Worst Itch-Numerical Rating Scale (WI-NRS) & Investigator Global Assessment (IGA). The primary timepoint
for evaluation of clinical activity was 8 weeks; patients were followed for safety and efficacy endpoints to 24
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weeks. Patients on study generally had moderate to severe disease with mean baselines scores across all arms of 8.6 for WI-NRS and 3.3
for IGA.
A single IV dose of 3.0 mg/kg barzolvolimab resulted in rapid and durable reductions in itch and healing of skin lesions in patients
with moderate to severe PN and that barzolvolimab was generally well tolerated.
● At week 8, the percentage of patients with ≥4-point decrease in WI-NRS was 57% and 43% for the single dose 3.0 or 1.5 mg/kg
barzolvolimab arms, respectively, and 25% for the placebo arm; this level of response generally persisted out to week 16. In the
3.0 mg/kg arm, a ≥4-point decrease in WI-NRS reduction was seen as early as the first week and reached a high of 71% of
patients at week six which was distinct from both the 1.5 mg/kg barzolvolimab and placebo arms.
% of Subjects with ≥4-point decrease in WI-NRS
Dose
Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8
1.5 mg/kg
3.0 mg/kg
placebo
0
14
0
14
29
0
29
29
13
14
29
13
29
57
25
29
71
38
29
57
38
43
57
25
● At week 8, 29% of patients achieved clear or almost clear skin according to IGA following a single dose of barzolvolimab 3.0
mg/kg. This effect was noted as early as week 2 (the first clinic visit) and was maintained out to week 12/16. No patients treated
at 1.5 mg/kg barzolvolimab or placebo achieved clear or almost clear skin according to IGA through week 8. 2 additional
patients in the 1.5 mg/kg arm, 2 additional patients in the 3.0 mg/kg arm and 1 patient on placebo had IGA 0/1 at timepoints
between weeks 8 and 24.
Dose
1.5 mg/kg
3.0 mg/kg
placebo
% of Subjects with IGA 0/1
Baseline
Week 2
Week 4
Week 8
0
0
0
0
14
0
0
14
0
0
29
0
● Clinical activity was associated with profound serum tryptase reduction. At the 3.0 mg/kg dose, tryptase was profoundly
reduced to, or below, the level of quantification and this level of reduction was maintained at least through 8 weeks. Tryptase
reduction was observed in the 1.5 mg/kg arm but to a lesser extent.
● Adverse Events were generally mild to moderate in intensity and considered unrelated to treatment. During the initial 8 week
observation period in the 3.0 mg/kg dosing arm, an anaphylactic reaction occurred in a complicated patient with multiple
comorbidities; the event fully resolved without sequelae. Generally, AEs seen during the 24-week follow-up period were
consistent with comorbidities commonly observed in the PN population.
We are currently planning for the initiation of a Phase 2 subcutaneous study in PN in early 2024. This randomized, double-blind,
placebo-controlled, parallel group study will evaluate the efficacy and safety profile of 2 dose levels of barzolvolimab compared to
placebo in approximately 120 patients with moderate to severe PN who had inadequate response to prescription topical medications, or
for whom topical medications are medically inadvisable (such as concerns for safety). Patients will be randomly assigned on a 1:1:1 ratio
to receive barzolvolimab injections of 150 mg Q4W after an initial loading dose of 450 mg, 300 mg Q4W after an initial loading dose of
450 mg, or placebo during a 24‑week Treatment Phase. Participants will then enter a follow-up phase with no study treatment for an
additional 16 weeks through week 40. The primary objective of this study is to evaluate the clinical effect of barzolvolimab, compared to
placebo, on itch response as measured by the proportion of participants with ≥ 4-point improvement in the worst intensity itch per a
numeric rating scale (WI-NRS). Secondary objectives include but are not limited to additional measures of itch response from baseline
compared to different timepoints, the assessment of skin lesions as measured by the Investigator Global Assessment (IGA), QoL
outcomes and safety. The study will include approximately 50 clinical trial centers worldwide, including the United States.
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Eosinophilic Esophagitis (EoE)
In July of 2023, we announced that the first patient had been dosed in a Phase 2 study of eosinophilic esophagitis (EoE). EoE, the
most common type of eosinophilic gastrointestinal disease, is a chronic inflammatory disease of the esophagus characterized by the
infiltration of eosinophils. This chronic inflammation can result in trouble swallowing, chest pain, vomiting and impaction of food in the
esophagus, a medical emergency. Several studies have suggested that mast cells may be an important driver in the disease, demonstrating
that the number and activation state of mast cells are greatly increased in EoE biopsies and that mast cell signatures correlate with
markers of inflammation, fibrosis, pain and disease severity. Currently, there is only one FDA approved therapy for EoE, representing an
area of significant unmet need. Industry sources estimate there are approximately 160,000 patients in the United States with EoE who
have undergone treatment within the last 12 months and, of these, approximately 48,000 would be biologic-eligible. Given the lack of
effective therapies for EoE and barzolvolimab’s potential as a mast cell depleting agent, we believe EoE is an important indication for
future study.
The randomized, double-blind, placebo-controlled, parallel group Phase 2 study is evaluating the efficacy and safety profile of
subcutaneous barzolvolimab in patients with active EoE. To optimize potential efficacy signal in this difficult to treat indication, we have
recently amended the protocol to dose 300 mg every 4 weeks rather than 8 weeks. Approximately 75 patients will be enrolled in total. In
the revised protocol, patients will be randomly assigned on a 1:1 ratio to receive subcutaneous injections of barzolvolimab at 300 mg
every 4 weeks or placebo during a 16-week placebo-controlled treatment phase. Patients then enter a 12-week active treatment phase, in
which all patients will receive barzolvolimab 300 mg every 4 weeks. Patients then enter a follow-up phase for an additional 16 weeks.
The primary endpoint of the study is reducing esophageal intraepithelial infiltration of mast cells as assessed by peak esophageal
intraepithelial mast cell count. Secondary endpoints include the reduction of symptoms of dysphagia and esophageal intraepithelial
infiltration of eosinophils and safety. The study includes approximately 60 clinical trial centers across 8 countries, including the United
States. Enrollment is ongoing.
Additional Barzolvolimab Development Activities
In 2023, we completed the transfer of our current barzolvolimab manufacturing process to a CMO and successfully scaled up the
drug substance manufacturing process to produce larger cGMP batches in support of late-stage trials and to prepare for potential
commercialization. Drug product manufacturing into 1 mL pre-filled syringes has been completed in support of Phase 3 trials. We are in
the process of scaling up our drug product manufacturing. We believe that barzolvolimab can be scaled up to permit drug product
manufacturing in commercial quantities.
In February 2022, we reported interim data after completing the in-life dosing portion of our six-month chronic toxicology study in
non-human primates. The only clinically adverse finding at the completion of dosing was a profound impact on spermatogenesis, an
expected and well understood effect of KIT inhibition. As a standard part of toxicology studies, some animals from each group continued
to be observed through a recovery period to understand the reversibility of any adverse findings. Due to the very high concentrations of
barzolvolimab at the end of dosing, the recovery period was approximately one year. As we expected, and consistent with previous
findings with KIT blocking antibodies, we were pleased to report in December 2022, that during this recovery period spermatogenesis
fully recovered in all male animals as measured by both sperm count and motility. The final histologic analysis and study report were
completed in early 2023 and were consistent with previously reported results. We are encouraged with these findings and believe these
data strongly support continued development of barzolvolimab.
Bispecific Platform
Our next generation bispecific antibody platform is supporting the expansion of our pipeline with additional candidates for
inflammatory diseases and oncology. Targets are being selected based on new science as well as their compatibility to be used in
bispecific antibody formats with our existing antibody programs. Development is focused on emerging, important pathways controlling
inflammatory diseases or immunity to tumors.
CDX-585
CDX-585 combines our proprietary highly active PD-1 blockade and anti-ILT4 blockade to overcome immunosuppressive signals in
T cells and myeloid cells, respectively. ILT4 is emerging as an important immune checkpoint on myeloid cells and is thought to
contribute to resistance to PD-1 blockade. Interactions of PD-1 and ILT4 with their ligands are known to deliver immune suppressive
signals that can attenuate anti-tumor immune responses. The concept behind CDX-585 is to simultaneously inhibit both T cell and
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myeloid suppressive signals to potentiate the anti-tumor activity of both cell types, and potentially overcome PD-1 resistance. In
preclinical studies, CDX-585 was demonstrated to be a potent inhibitor of PD-1 signaling in comparison to the approved PD-1 antibody,
nivolumab. In addition, CDX-585 activated and promoted a strong inflammatory phenotype in human macrophage and dendritic cell
cultures. Together these activities of CDX-585 enhanced the response in a mixed lymphocyte reaction assay above that observed for
either parental mAb or the combination of the PD-1 and ILT4 mAbs. The in vivo efficacy of CDX-585 was also demonstrated in a
melanoma humanized mouse model. CDX-585 has successfully completed GMP manufacturing and IND-enabling studies to support
clinical development. CDX-585 will initially be developed for the treatment of solid tumors either as monotherapy or in combination
with other oncologic treatments.
In late May 2023, we announced that the first patient had been dosed in the Phase 1 study of CDX-585. This open-label, multi-
center, intravenous study of CDX-585 is being evaluated in patients with advanced or metastatic solid tumors that have progressed
during or after standard of care therapy. The dose-escalation phase of the study (n=~30 patients) is designed to determine a maximum
tolerated dose (MTD) and to select CDX-585 dose(s) for future evaluation in tumor specific expansion cohorts. In the first phase,
increasing doses of CDX-585 will be administered intravenously (0.03 mg/kg up to 10.0 mg/kg) every 2 weeks until confirmed disease
progression, intolerance, or for a maximum of 2 years. In the second phase, potential expansion cohorts will evaluate the safety,
tolerability and biologic effects, including anti-tumor activity, of selected dose level(s) of CDX-585 in specific tumor types. Enrollment
is ongoing.
Partnerships
We may enter into co-development and commercialization partnerships for any of our programs where appropriate. In the past, we
have entered into collaborative partnership agreements with pharmaceutical and other companies and organizations that provided
financial and other resources, including capabilities in research, development, manufacturing, and sales and marketing, to support our
research and development programs and may enter into more of them in the future.
Partnership agreements may terminate without benefit to us if the underlying products are not fully developed. If we fail to meet our
obligations under these agreements, they could terminate, and we might need to enter into relationships with other collaborators and to
spend additional time, money and other valuable resources in the process. We cannot predict whether our collaborators will continue
their development efforts or, if they do, whether their efforts will achieve success. Many of our collaborators face the same kinds of risks
and uncertainties in their businesses that we face. A delay or setback to a partner will, at a minimum, delay the commercialization of any
affected drug candidates, and may ultimately prevent it. Moreover, any partner could breach its agreement with us or otherwise not use
best efforts to promote our products. A partner may choose to pursue alternative technologies or products that compete with our
technologies or drug candidates. In either case, if a partner failed to successfully develop one of our drug candidates, we would need to
find another partner. Our ability to do so would depend upon our legal right to do so at the time and whether the product remained
commercially viable.
Research Collaboration and License Agreements
We have entered into license agreements whereby we have received licenses or options to license technology, specified patents
and/or patent applications. These license and collaboration agreements generally provide for royalty payments equal to specified
percentages of product sales, annual license maintenance fees, continuing patent prosecution costs and potential future milestone
payments to third parties upon the achievement of certain development, regulatory and/or commercial milestones. Summarized below are
our significant research collaboration and license agreements for our current clinical drug candidates.
Yale University (Yale)
Under a license agreement with Yale, we may be required to make a one-time payment to Yale of $3.0 million with respect to
barzolvolimab upon achievement of a specified commercial milestone. In addition, we may be required to pay a low single-digit royalty
on annual worldwide net sales of barzolvolimab. Unless earlier terminated by us or Yale, the Yale license agreement is due to expire no
later than May 2038 but may expire earlier on a country-by-country basis under specified circumstances.
Competition
The biotechnology and pharmaceutical industry is intensely competitive and subject to rapid and significant technological change.
Many of the products that we are attempting to develop and commercialize will be competing with existing therapies. Other
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companies are pursuing the development of new therapies that target the same diseases and conditions that we are targeting and may
compete directly with our drug candidates. We face competition from companies, major universities and research institutions in the
United States and abroad, including a number of large pharmaceutical companies, as well as firms specialized in the development and
production of targeted therapies and immune modulators. Some of our competitors possess substantially greater financial, technical and
human resources than we do.
The competitors of which we are aware that have initiated a Phase 3 study or have obtained marketing approval for a potentially
competitive drug to barzolvolimab for treatment of CSU, CIndU, PN and EoE include: Allakos (lirentelimab for EoE), Celltrion (CT-
P39; omalizumab biosimilar for CSU), Galderma/Chugai (nemolizumab for PN), Novartis (remibrutinib for CSU), and Regeneron/Sanofi
(Dupixent for CSU, CIndU, PN and EoE).
Our competitors may utilize discovery technologies and techniques or partner with collaborators in order to develop products more
rapidly or successfully than us or our collaborators are able to. In addition, some competitors have significantly greater experience than
we have in conducting preclinical and nonclinical testing and human clinical trials of drug candidates, scaling up manufacturing
operations and obtaining regulatory approvals of drugs and manufacturing facilities. Accordingly, our competitors may succeed in
obtaining regulatory approval for drugs more rapidly than we do. If we obtain regulatory approval and commence commercial sales of
our drug candidates, we also will compete with respect to manufacturing efficiency and sales and marketing capabilities, areas in which
we currently have limited experience.
In addition, academic institutions, government agencies and other public and private organizations conducting research may seek
patent protection with respect to potentially competitive products or technologies and may establish exclusive collaborative or licensing
relationships with our competitors. Moreover, technology controlled by third parties that may be advantageous to our business may be
acquired or licensed by our competitors, thereby preventing us from obtaining technology on commercially reasonable terms, if at all. We
will also compete for the services of third parties that may have already developed or acquired internal biotechnology capabilities or
made commercial arrangements with other biopharmaceutical companies to target the diseases on which we have focused both in the
U.S. and outside of the U.S.
We also face competition in recruiting and retaining highly qualified scientific personnel and consultants and in the development and
acquisition of technologies.
Our competitive position will depend upon our ability to attract and retain qualified personnel, obtain patent protection or otherwise
develop proprietary products or processes and secure sufficient capital resources for the often lengthy period between technological
conception and commercial sales. We will require substantial capital resources to complete development of some or all of our drug
candidates, obtain the necessary regulatory approvals and successfully manufacture and market our drug candidates. In order to secure
capital resources, we anticipate having to sell additional capital stock, which would dilute existing stockholders. We may also attempt to
obtain funds through research grants and agreements with commercial collaborators. However, these types of funding are uncertain
because they are at the discretion of the organizations and companies that control the funds. As a result, we may not receive any funds
from grants or collaborations. Alternatively, we may borrow funds from commercial lenders, likely at high interest rates, which would
increase the risk of any investment in us.
Manufacturing
We are a research and development company and have limited experience in commercial manufacturing. To conduct late-stage
clinical trials, as well as manufacture and commercialize our drug candidates, we engage Contract Manufacturing Organizations (CMOs)
to manufacture our drug candidates on a large scale at a competitive cost and in accordance with current Good Manufacturing Practices
(cGMP) and U.S. and foreign regulatory requirements, as applicable. We also rely on CMOs for labeling and storage for studies inside
and outside the U.S.
We currently operate our own cGMP manufacturing facility in Fall River, Massachusetts, to produce drug substance for our current
and planned early-stage clinical trials. Our Fall River manufacturing facility has 250L and 1000L bioreactor capacity and is able to
manufacture in compliance with FDA and EU regulations, allowing us to distribute drug candidates to clinical sites in the U.S., EU and
ROW for early-stage clinical trials. We have manufactured barzolvolimab and CDX-585 drug substance in our Fall River facility for our
current and planned Phase 1 and Phase 2 clinical trials. All products are then filled at CMOs. Any manufacturing failures or compliance
issues at contract manufacturers could cause delays in our Phase 1 and Phase 2 clinical studies for these drug candidates.
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Our barzolvolimab drug product is currently administered subcutaneously. The subcutaneous formulation will allow for potential
self-administration at home setting versus the need for intravenous dosing in a hospital or clinic setting. The subcutaneous form could
improve the patient experience if the product becomes available commercially. In 2023, we completed the transfer of our current
barzolvolimab manufacturing process to a CMO and successfully scaled up the drug substance manufacturing process to produce larger
cGMP batches in support of late-stage trials and to prepare for potential commercialization. Drug product manufacturing into 1 mL pre-
filled syringes has been completed in support of Phase 3 trials. We are in the process of scaling up our drug product manufacturing. We
believe that barzolvolimab can be scaled up to permit drug product manufacturing in commercial quantities.
Commercial Organization
We have limited commercial experience in marketing, sales, distribution and product reimbursement. We have the capability to
provide current and future market insights to our research and development organization regarding our potential drug candidates. In the
future, we may choose to expand our commercial team and build a full-scale commercial organization which we believe could provide us
the opportunity to retain marketing rights to our drug candidates and commercialize such products ourselves where we deem appropriate
or pursue strategic partnerships to develop, sell, market and distribute our drug candidates where we deem appropriate.
Patents, Licenses and Proprietary Rights
In general, our intellectual property strategy is to protect our technology by filing patent applications and obtaining patent rights
covering our own technology, both in the United States and in foreign countries that we consider important to our business. In addition,
we have acquired and will seek to acquire as needed or desired, exclusive rights of others through assignment or license to complement
our portfolio of patent rights. We also rely on trade secrets, unpatented know-how and technological expertise and innovation to develop
and maintain our competitive position.
Patents
The successful development and marketing of products by us will depend in part on our ability to create and maintain intellectual
property, including patent rights. We are the owner or exclusive licensee to proprietary patent positions in the areas of immunotherapy
technologies and antibody technologies. Although we continue to pursue patent protection for our products, no assurance can be given
that any pending application will issue as a patent, that any issued patent will have a scope that will be of commercial benefit or that we
will be able to successfully enforce our patent position against infringers. We routinely review our patent portfolio and adjust our
strategies for prosecution and maintenance of individual cases according to a number of factors, including program priorities, stage of
development and patent term.
The key patents and patent applications owned by us or licensed to us that we consider important to our current clinical programs
include the following (except where stated otherwise, the indicated and estimated patent expiry dates are the estimated normal
expirations if all maintenance fees and annuities are paid when due, and do not include any possible additional terms for Patent Term
Adjustments (PTAs), Patent Term Extensions (PTEs), other term extensions or Supplementary Protection Certificates (SPCs), if these
may be secured in due course):
● We own a portfolio of patents and patent applications directed to barzolvolimab and other anti-KIT receptor antibodies. These
patents and patent applications include claims directed to particular anti-KIT antibody compositions of matter, including
barzolvolimab compositions of matter, and methods of using such antibodies. A composition of matter patent has been issued in
the U.S. which would have an estimated patent expiry date in 2034 (this includes additional term due to PTA, but does not
include any PTE if this may be secured in due course) and further U.S. patent applications are pending. Patents have also been
issued in Europe, Japan, Canada, China, Australia, New Zealand, Israel, India, the Republic of Korea, the Russian Federation,
Singapore, Brazil, Mexico, South Africa and certain other countries. Where issued the foregoing would have estimated normal
patent expiry dates ranging from 2032 to 2033. Further (later filed) patent applications (relating to Fc sequences used in
barzolvolimab and certain uses of barzolvolimab) are pending in the U.S., the European Patent Office, Japan, Canada, China,
Australia, New Zealand, Israel, India, the Republic of Korea, the Eurasian Patent Office, Brazil, Mexico and South Africa. If,
when and where issued the latter would have estimated normal patent expiry dates in 2042.
● We own a family of patent applications directed to anti-ILT4 antibody sequences used in CDX-585 as compositions of matter.
Patent applications in this family are pending in the U.S., the European Patent Office, Japan, Canada, China,
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Australia, New Zealand, Israel, India, the Republic of Korea, the Eurasian Patent Office, Singapore, Brazil, Mexico and South
Africa. If, when and where issued the foregoing would have estimated normal patent expiry dates in 2042. We also have rights
outside of China, Taiwan, Hong Kong and Macao in further pending international and regional and national patent applications
relating to the bispecific antibody CDX-585. Of these, a co-owned international patent application which includes composition
of matter claims directed to the bispecific antibody CDX-585 is pending in the international phase, and licensed regional and
national patent applications which include composition of matter claims directed to the anti-PD-1 antibody sequences used in
CDX-585 are pending in the U.S., the European Patent Office, Japan, Canada, Australia and the Republic of Korea. If, when
and where issued the foregoing would have estimated normal patent expiry dates ranging from 2041 to 2042.
There can be no assurance that patent applications owned by or licensed to us will result in granted patents or that, if granted, the
resultant patents will afford protection against competitors with similar technology. It is also possible that third parties may obtain patents
or other proprietary rights that may be necessary or useful to us. In cases where third parties are first to invent a particular product or
technology, it is possible that those parties will obtain patents that will be sufficiently broad to prevent us from using important
technology or from further developing or commercializing important drug candidates and immunotherapeutic systems. If licenses from
third parties are necessary but cannot be obtained, commercialization of the covered products might be delayed or prevented. Even if
these licenses can be obtained, they would probably require us to pay ongoing royalties and other costs, which could be substantial.
Although a patent has a statutory presumption of validity in the United States, the issuance of a patent is not conclusive as to validity
or as to the enforceable scope of the patent claims. The validity or enforceability of a patent after its issuance by the Patent and
Trademark Office can be challenged in litigation. As a business that uses a substantial amount of intellectual property, we face a
heightened risk of intellectual property litigation. If the outcome of the litigation is adverse to the owner of the patent, third parties may
then be able to use the invention covered by the patent without authorization or payment. There can be no assurance that our issued
patents or any patents subsequently issued to or licensed by us will not be successfully challenged in the future. In addition, there can be
no assurance that our patents will not be infringed or that the coverage of our patents will not be successfully avoided by competitors
through design innovation.
We are aware that others, including universities and companies, have filed patent applications and have been granted patents in the
United States and other countries which claim subject matter potentially useful or necessary to the commercialization of our products.
The ultimate scope and validity of existing or future patents which have been or may be granted to third parties, and the availability and
cost of acquiring rights in those patents necessary to the manufacture, use or sale of our products presently cannot be determined by us.
Third parties may have or may obtain valid and enforceable patents or proprietary rights that could block us from developing
products using our technology, including:
● certain patents and pending patent applications in the United States and foreign countries relating to particular receptors,
antigens and antigenic fragments targeted by our current drug candidates; and
● certain patents and pending patent applications in the United States and foreign countries relating to antibodies targeting certain
receptors and other targets including anti-ILT4 antibodies, anti-PD-1 antibodies, anti-SCF antibodies, anti-TSLP antibodies and
certain other antibodies and their sequences and uses.
In addition to the patents referred to in the previous paragraphs, there may be other patent applications and issued patents belonging
to competitors that may require us to alter our drug candidates and immunotherapeutic delivery systems, pay licensing fees or cease some
of our activities. If our drug candidates conflict with patents that have been or may be granted to competitors, universities or others, the
patent owners could bring legal action against us claiming damages and seeking to enjoin manufacturing and marketing of the patented
products. If any of these actions is successful, in addition to any potential liability for damages, we could be required to obtain a license
in order to continue to manufacture or market the affected products. There can be no assurance that we would prevail in any such action
or that any license required under any such third-party patent would be made available on acceptable terms or at all. We believe that there
may be significant litigation in the biotechnology industry regarding patent and other intellectual property rights. If we become involved
in that litigation, we could consume substantial resources.
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Licenses
We have entered into significant license agreements relating to technologies that are being developed by us. Typically, institutions
have granted us an exclusive worldwide license (with right to sublicense) to make, use and sell products embodying the licensed
technology, subject to the reservation by the licensor of a non-exclusive right to use the technologies for non-commercial research
purposes. Generally, the term of each license is through the expiration of the last of the patents issued with respect to the technologies
covered by the license and/or a specified period from first commercial sale on a territory-by- territory basis. We have generally agreed to
use reasonable efforts to develop and commercialize licensed products and to achieve specified milestones and pay license fees,
milestone payments and royalties based on the net sales of the licensed products or to pay a percentage of sublicense income. If we
breach our obligations, the licensor has the right to terminate the license, and, in some cases, convert the license to a non-exclusive
license. Generally, we control and are responsible for the cost of defending the patent rights of the technologies that we license.
Proprietary Rights
We also rely on unpatented technology, trade secrets and confidential information, and no assurance can be given that others will not
independently develop substantially equivalent information and techniques or otherwise gain access to our know-how and information,
or that we can meaningfully protect our rights in such unpatented technology, trade secrets and information. We require each of our
employees, consultants and advisors to execute a confidentiality agreement at the commencement of an employment or consulting
relationship with us. The agreements generally provide that all inventions conceived by the individual in the course of employment or in
providing services to us and all confidential information developed by, or made known to, the individual during the term of the
relationship shall be the exclusive property of us and shall be kept confidential and not disclosed to third parties except in limited
specified circumstances. There can be no assurance, however, that these agreements will provide meaningful protection for our
information in the event of unauthorized use or disclosure of such confidential information.
Government Regulation
Our activities and products are significantly regulated by a number of governmental entities, including the U.S. Food and Drug
Administration, or FDA, in the United States and by comparable authorities in other countries. These entities regulate, among other
things, the manufacture, testing, safety, effectiveness, labeling, documentation, advertising and sale of our products. We must obtain
regulatory approval from the FDA and comparable authorities in other countries, as applicable, for our drug candidates before we can
commercialize such drugs in the U.S. and foreign jurisdictions. Product development within this regulatory framework takes a number of
years and involves the expenditure of substantial resources. Many drug candidates that initially appear promising ultimately do not reach
the market because they are found to be unsafe or ineffective when tested. Our inability to commercialize a product would impair our
ability to earn future revenues.
FDA Approval Process
In the United States, the FDA regulates drugs and biological products under the Federal Food, Drug, and Cosmetic Act, or FDCA,
the Public Health Service Act, or PHSA, and implementing regulations. The process of obtaining regulatory approvals and the
subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial
time and financial resources. Failure to comply with the applicable United States requirements at any time during the product
development process, approval process or after approval may subject an applicant to a variety of administrative or judicial sanctions,
such as the FDA’s refusal to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of untitled
or warning letters, product recalls, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of
government contracts, restitution, disgorgement of profits, civil penalties and criminal prosecution.
The process required by the FDA before a drug or biological product may be marketed in the United States generally involves the
following:
● completion of preclinical studies and formulation studies in compliance with the FDA’s good laboratory practice, or GLP,
regulations;
● submission to the FDA of an investigational new drug, or IND, application which must become effective before human clinical
trials may begin;
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● approval by an independent institutional review board, or IRB, at each clinical site before each trial may be initiated;
● performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to
establish the safety and efficacy of the proposed drug or biological product for each indication;
● submission to the FDA of a new drug application, or NDA, or a biologics license application, or BLA, as applicable;
● satisfactory completion of an FDA advisory committee review, if applicable;
● satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to
assess compliance with cGMP requirements and to assure that the facilities, methods and controls are adequate to preserve the
drug’s identity, strength, quality and purity; and
● FDA review and approval of the NDA or BLA.
We expect that all of our clinical drug candidates will be subject to review as biological products under BLA standards.
Data obtained at any stage of testing is susceptible to varying interpretations, which could delay, limit or prevent regulatory
approval. Moreover, during the regulatory process, new or changed drug approval policies may cause unanticipated delays or rejection of
our product. We may not obtain necessary regulatory approvals within a reasonable period of time, if at all, or avoid delays or other
problems in testing our products. Moreover, even if we received regulatory approval for a product, the approval may require limitations
on use, which could restrict the size of the potential market for the product.
Clinical Trials
The FDA provides that human clinical trials may begin 30 days after receipt and review of an IND application, unless the FDA
requests additional information or changes to the study protocol within that period. An IND must be sponsored and filed for each of our
proposed drug candidates. Authorization to conduct clinical trials in no way assures that the FDA will ultimately approve the product.
Clinical trials are generally conducted in three sequential phases. In a Phase 1 trial, the product is given to a small number of patients to
test for safety (adverse effects), determine a recommended Phase 2 dose(s) and evaluate any signals of efficacy. Phase 2 trials are
conducted on a limited group of the target patient population; safety, optimal dosage and efficacy are studied. A Phase 3 trial is
performed in a large patient population, generally over a wide geographic area to provide evidence for the safety and efficacy of the
product. The FDA maintains and exercises oversight authority throughout the clinical trial process.
A product’s safety and effectiveness in one clinical trial is not necessarily indicative of its safety and effectiveness in another clinical
trial. Moreover, we may not discover all potential problems with a product even after completing clinical trials on it. Some of our
products and technologies have undergone only preclinical testing. As a result, we do not know whether they are safe or effective for
humans. Also, regulatory authorities may decide, contrary to our findings, that a product is unsafe or not as effective in actual use as its
clinical trial results indicated. This could prevent the product’s widespread use, require its withdrawal from the market or expose us to
liability. The FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the
patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its
institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with
unexpected serious harm to patients. Any such action could materially harm us. Clinical trials are critical to the success of our products
but are subject to unforeseen and uncontrollable delay, including delay in enrollment of patients. Any delay in clinical trials could delay
our commercialization of a product.
Disclosure of Clinical Trial Information
Sponsors of clinical trials of FDA-regulated products, including biological products, are required to register and disclose certain
clinical trial information on the website www.clinicaltrials.gov. Information related to the product, patient population, phase of
investigation, trial sites and investigators, and other aspects of a clinical trial are then made public as part of the registration. Sponsors are
also obligated to disclose the results of their clinical trials after completion. Disclosure of the results of clinical trials can be delayed in
certain circumstances for up to two years after the date of completion of the trial. Competitors may use this publicly available
information to gain knowledge regarding the progress of clinical development programs as well as clinical trial design.
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Marketing Approval
Assuming successful completion of the required clinical testing, the results of the preclinical and clinical studies, together with
detailed information relating to the product’s pharmacology, chemistry, manufacture, controls and proposed labeling, among other things,
are submitted to the FDA as part of an NDA or BLA requesting approval to market the product for one or more indications. FDA
approval of the NDA or BLA is required before marketing of the product may begin in the United States. Under federal law, the
submission of most NDAs and BLAs is additionally subject to a substantial application user fee and the sponsor of an approved NDA or
BLA is also subject to annual prescription drug program fees.
The FDA conducts a preliminary review of all NDAs and BLAs within the first 60 days after receipt before accepting them for filing
based on the agency’s threshold determination that they are sufficiently complete to permit substantive review. The FDA may request
additional information rather than accept an NDA or BLA for filing. In this event, the application must be resubmitted with the additional
information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted
for filing, the FDA begins an in-depth substantive review. The FDA has agreed to specified performance goals in the review of NDAs
and BLAs. Most such applications for non-priority products are reviewed within ten to twelve months after filing, and most applications
for priority review products, that is, drugs and biologics that the FDA determines represent a significant improvement over existing
therapy, are reviewed in six to eight months after filing. The review process may be extended by the FDA for three additional months to
consider certain late-submitted information or clarification regarding information already provided in the submission. The FDA may also
refer applications for novel drugs or biological products or products that present difficult questions of safety or efficacy to an advisory
committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the
application should be approved. The FDA is not bound by the recommendations of an advisory committee, but it considers such
recommendations carefully when making decisions.
Before approving an NDA or BLA, the FDA typically will inspect the facility or facilities where the product is manufactured. The
FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP
requirements and adequate to assure consistent production of the product within required specifications. In addition, before approving an
NDA or BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP and integrity of the clinical data
submitted.
The testing and approval processes require substantial time, effort and financial resources, and each may take many years to
complete. Data obtained from clinical activities are not always conclusive and may be susceptible to varying interpretations that could
delay, limit or prevent regulatory approval. The FDA may not grant approval on a timely basis, or at all. We may encounter difficulties or
unanticipated costs in our efforts to develop our drug candidates and secure necessary governmental approvals, which could delay or
preclude us from marketing our products.
After the FDA’s evaluation of the NDA or BLA and inspection of the manufacturing facilities, the FDA may issue an approval letter
or a complete response letter. An approval letter authorizes commercial marketing of the drug or biological product with specific
prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may
require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies
have been addressed to the FDA’s satisfaction in a resubmission of the NDA or BLA, the FDA will resume review and may subsequently
issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of
information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not
satisfy the regulatory criteria for approval.
Even if the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications,
warnings or precautions be included in the product labeling, require that post- approval studies, including Phase 4 clinical trials, be
conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after
commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, which can
materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based
on the results of post-market studies or surveillance programs. After approval, many types of changes to the approved product, such as
changes in indications, manufacturing changes and labeling, are subject to further testing requirements and FDA review and approval.
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Special Regulatory Procedures
Fast track designation — The FDA is required to facilitate the development and expedite the review of drugs and biologics that are
intended for the treatment of a serious or life-threatening disease or condition and that demonstrate the potential to address unmet
medical needs. Under the fast track program, the sponsor of a new drug or biologic candidate may request the FDA to designate the
product for a specific indication as a fast track product, concurrent with or after the filing of the IND for the drug candidate. A drug that
receives fast track designation is eligible for some or all of the following: (i) more frequent meetings with the FDA to discuss the drug’s
development plan and ensure collection of appropriate data needed to support drug approval; (ii) more frequent written communication
from the FDA about such things as the design of the proposed clinical trials and use of biomarkers; (iii) eligibility for accelerated
approval and priority review, if relevant criteria are met; and (iv) “Rolling Review,” which means that a drug company can submit
completed sections of its BLA or NDA for review by the FDA, rather than waiting until every section of the NDA or BLA is completed
before the entire application can be reviewed. This rolling review is available if the applicant provides and the FDA approves a schedule
for the submission of the remaining information and the applicant pays applicable user fees. However, the FDA’s time period goal for
reviewing a fast track application does not begin until the last section of the NDA or BLA is submitted. In addition, the fast track
designation may be withdrawn by the FDA if it believes that the designation is no longer supported by data emerging in the clinical trial
process.
Priority review — Under FDA policies, a drug candidate may be eligible for priority review. The priority review program provides
for expedited review or an NDA or BLA, typically within a six to eight month time frame from the time a complete application is
accepted for filing. Products regulated by the FDA’s Center for Drug Evaluation and Research, or CDER, are eligible for priority review
if they provide a significant improvement compared to marketed products in the treatment, diagnosis or prevention of a disease. Products
regulated by the FDA’s Center for Biologics Evaluation and Research, or CBER, are eligible for priority review if they provide a
significant improvement in the safety or effectiveness of the treatment, diagnosis or prevention of a serious or life-threatening disease. A
fast track designated drug candidate could be eligible for priority review if supported by clinical data at the time of the BLA or NDA
submission.
Accelerated approval — Under the law and the FDA’s accelerated approval regulations, the FDA may approve a drug or biologic for
a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based on a surrogate
endpoint that is reasonably likely to predict clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than
clinical endpoints. A drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the
completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-
approval studies, or confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the drug from the market
on an expedited basis. All promotional materials for drug candidates approved under accelerated regulations are subject to prior review
by the FDA.
Breakthrough therapy designation — The FDA is also required to expedite the development and review of the application for
approval of drugs that are intended to treat a serious or life-threatening disease or condition where preliminary clinical evidence indicates
that the drug candidate may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints.
Under the breakthrough therapy program, the sponsor of a new drug candidate may request that the FDA designate the drug candidate for
a specific indication as a breakthrough therapy concurrent with, or after, the filing of the IND for the drug candidate.
Orphan drug designation — Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug or biologic intended
to treat a rare disease or condition, which is generally defined as a disease or condition that affects fewer than 200,000 individuals in the
United States. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval
process. The first NDA or BLA applicant to receive FDA approval for a particular active ingredient to treat a particular disease with
FDA orphan drug designation is entitled to a seven-year exclusive marketing period in the United States for that product, for that
indication. During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug or
biologic for the same orphan indication, except in limited circumstances. Among the other benefits of orphan drug designation are tax
credits for certain research and a waiver of the NDA or BLA application user fee.
Pediatric Information
Under the Pediatric Research Equity Act of 2003, an NDA, BLA or supplement to an NDA or BLA must contain data that are
adequate to assess the safety and effectiveness of the drug or biological product for the claimed indications in all relevant pediatric
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subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective.
The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until
after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Under the Food and Drug
Administration Safety and Innovation Act, or FDASIA, the FDA has additional authority to take action against manufacturers not
adhering to pediatric study requirements. Unless otherwise required by regulation, the pediatric data requirements do not apply to
products with orphan drug designation.
Post Approval
Any drug or biological products manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and
continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product
sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most
changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval.
The FDA may impose a number of post-approval requirements as a condition of approval of an NDA or BLA. For example, the
FDA may require post-marketing testing, including Phase 4 clinical trials, and surveillance to further assess and monitor the product’s
safety and effectiveness after commercialization. Regulatory approval of oncology products often requires that patients in clinical trials
be followed for long periods to determine the overall survival benefit of the drug or biologic.
In addition, drug and biologic manufacturers and other entities involved in the manufacture and distribution of approved drugs and
biological products are required to register their establishments with the FDA and state agencies and are subject to periodic unannounced
inspections by the FDA and these state agencies for compliance with cGMP requirements. The FDA was also granted new inspection
authorities under FDASIA. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before
being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and
documentation requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must
continue to expend time, money and effort in the areas of production and quality control to maintain cGMP compliance.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not
maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product,
including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory
requirements, may result in revisions to the approved labeling to add new safety information, imposition of post-market studies or
clinical trials to assess new safety risks or imposition of distribution or other restrictions under a Risk Evaluation and Mitigation Strategy
program. Other potential consequences include, among other things:
● restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product
recalls;
● fines, untitled and warning letters or holds on post-approval clinical trials;
● refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of
product license approvals;
● product seizure or detention, or refusal to permit the import or export of products; or
● consent decrees, injunctions or the imposition of civil or criminal prosecution.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs and
biologics may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA, the
Office of the Inspector General of Health and Human Services and other agencies actively enforce the laws and regulations prohibiting
the promotion of off label uses, and a company that is found to have improperly promoted off label uses may be subject to significant
liability.
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Biosimilars and Exclusivity
The Biologics Price Competition and Innovation Act of 2009 (“BPCIA”) created an abbreviated approval pathway for biological
products shown to be highly similar to, or interchangeable with, an FDA-licensed reference biological product. The FDA has issued
several guidance documents outlining an approach to review and approval of biosimilars.
Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference
product in terms of safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical study or studies.
Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected
to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to
an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered without
increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.
The BPCIA includes, among other provisions, a 12-year exclusivity period from the date of first licensure, or BLA approval, of the
reference product, during which approval of a 351(k) application referencing that product may not be made effective; a four-year
exclusivity period from the date of first licensure of the reference product, during which a 351(k) application referencing that product
may not be submitted; and an exclusivity period for certain biological products that have been approved through the 351(k) pathway as
interchangeable biosimilars.
The BPCIA also establishes procedures for identifying and resolving patent disputes involving applications submitted under section
351(k) of the PHSA.
The BPCIA is complex and its interpretation and implementation by the FDA remains unpredictable. In addition, government
proposals have sought to reduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may
impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate effect, implementation,
and meaning of the BPCIA is subject to uncertainty.
Federal and State Fraud and Abuse, Data Privacy and Security and Transparency Laws
In addition to FDA restrictions on marketing and promotion of pharmaceutical products, several other types of federal and state laws
have been applied to restrict certain marketing business practices in the biopharmaceutical and medical device industries in recent years.
These laws include, without limitation, state and federal anti-kickback statutes and false claims statutes and false claims laws, data
privacy and security laws, as well as transparency laws regarding payments or other items of value provided to health care providers.
Applicable state law may be broader in scope than federal law and may apply regardless of payor, in addition to items and services
reimbursed under Medicaid and other state programs. If our operations are found to be in violation of any of the health regulatory laws
described above or any other laws that apply to us, we may be subject to penalties, including potentially significant criminal and civil
and/or administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government health care
programs, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, 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. To
the extent that any of our products are sold in a foreign country, we may be subject to similar foreign laws, which may include, for
instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws and implementation of
corporate compliance programs and reporting of payments or transfers of value to health care professionals.
In addition, the United States Foreign Corrupt Practices Act, or FCPA, prohibits corporations and individuals from engaging in
certain activities to obtain or retain business or to influence a person working in an official capacity. It is illegal to pay, offer to pay or
authorize the payment of anything of value to any official of another country, government staff member, political party or political
candidate in an attempt to obtain or retain business or to otherwise influence a person working in that capacity. In many countries, the
health care professionals we may interact with may meet the FCPA’s definition of a foreign government official.
Foreign Regulation
In order to market any therapeutic or diagnostic product outside of the United States, we need to comply with numerous and varying
regulatory requirements of other countries regarding safety and efficacy and governing, among other things, clinical trials, marketing
authorization, commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we
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need to obtain the necessary approvals by the comparable regulatory authorities of foreign countries before we can commence clinical
trials or marketing of the product in those countries. The approval process varies from country to country and can involve additional
product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from
and be longer than that required to obtain FDA approval. Regulatory approval in one country does not ensure regulatory approval in
another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others.
Under the EU regulatory system, we will submit all of our marketing authorization applications under the centralized procedure. The
centralized procedure is compulsory for medicines produced by biotechnology, or are for the treatment of cancer, or officially designated
as ‘orphan medicines.’ The centralized procedure provides for the grant of a single marketing authorization that is valid for all EU
member states. As in the United States, we may apply for designation of a drug candidate as an orphan drug for the treatment of a
specific indication in the EU before the application for marketing authorization is made. The European Medicines Agency (“EMA”)
grants orphan medicinal product designation to promote the development of products that may offer therapeutic benefits for life-
threatening or chronically debilitating conditions affecting not more than five in 10,000 people in the EU. Orphan drugs in Europe enjoy
economic and marketing benefits, including a 10-year market exclusivity period for the approved indication, but not for the same
product, unless another applicant can show that its product is safer, more effective or otherwise clinically superior to the orphan-
designated product.
Other Regulatory Processes
From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions
governing the testing, approval, manufacturing and marketing of products regulated by the FDA.
In addition to new legislation, FDA regulations and policies are often revised or interpreted by the agency in ways that may
significantly affect our business and our products. It is impossible to predict whether further legislative changes will be enacted or
whether FDA regulations, guidance, policies or interpretations will change or what the effect of such changes, if any, may be.
Third-Party Payor Coverage and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any drug products for which we obtain regulatory
approval. Sales of any of our drug candidates, if approved, will depend, in part, on the extent to which the costs of the drugs will be
covered by third-party payors, including government health programs such as Medicare and Medicaid, as well as commercial health
insurers, such as managed care organizations. The process for determining reimbursement rates is separate from the payor coverage
decision. Therefore, despite obtaining coverage, reimbursement rates may be lower than expected, which can result in larger out-of-
pocket payments for the patient.
In order to secure coverage and reimbursement for any drug that might be approved for sale, we need to conduct analyses and
pharmaco-economic studies in order to demonstrate the incremental medical benefit over and above the generally-accepted standard of
care and cost-effectiveness of the drug. Our drug candidates may not be considered medically necessary, provide insufficient incremental
medical benefit, or may not be deemed cost-effective. A payor’s decision to provide coverage for a drug product does not imply that an
adequate reimbursement rate will be approved.
The containment of health care costs has become a priority of federal, state and foreign governments, and the prices of drugs have
been a focus in this effort. Given that the Inflation Reduction Act is now in place, potential implications for the biopharma industry are
being assessed. In the meantime, third-party payors are increasingly challenging the prices charged for medical products and services and
examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. If these
third-party payors do not consider our drugs to be cost-effective compared to other available therapies, they may not cover our drugs
after approval as a benefit under their plans or, if they do, the level of reimbursement and/or restrictions in formulary placement may be
such that they would significantly limit projected sales volumes. In addition to third-party payors, we will also need to negotiate
formulary placement with hospitals, health systems and certain independent delivery networks. Such negotiations may be more
protracted than anticipated and may be compromised because of similar considerations, relating to insufficient incremental medical
benefit and/or cost-effectiveness.
Pricing and reimbursement schemes vary widely from country to country. For example, certain EU member states may approve a
specific price and volume for a drug product after which incremental revenues or profits need to be paid back by way of rebates. They
may also institutionalize utilization restrictions, curb physicians’ drug budgets, provide conditional reimbursement schemes that
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require additional evidence to be generated post-marketing authorization, etc. The downward pressure on health care costs in general,
including prescription drugs, has been evident in EU markets for some time and is now a major focus of federal and state governments in
the U.S. As a result, increasingly high barriers are being erected to the pricing and reimbursement of new drugs, despite regulatory
efforts to bring drugs to market sooner. Cross- border trade has existed for some time in the EU, allowing pharmacies in one country to
import, at a lower price, drug from another country, further exerting pricing pressures across the EU. There is U.S. legislation that
establishes a process for states to import less expensive drugs from Canada to the U.S. In January 2024, the FDA authorized the state of
Florida to establish such a program, although Florida must take several other steps before drugs begin to be imported. There can be no
assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and
pricing arrangements for any of our drugs.
The marketability of any drugs for which we receive regulatory approval for commercial sale may suffer if third-party payors and/or
hospital administrators fail to provide adequate coverage, reimbursement or formulary placement. Coverage policies, third-party
reimbursement rates and drug pricing regulations may change in the future. In addition, the States may continue to consider legislation of
their own which could further restrict the ability to freely price drugs and/or curb utilization in the U.S. Even if favorable coverage and
reimbursement status is attained for one or more drugs for which we receive regulatory approval, less favorable coverage policies and
reimbursement rates may be implemented in the future.
Employees
As a mission driven organization, we believe the engagement and dedication of our employees is central to our success and employ
talented individuals who have the skills and expertise to help us achieve our goals.
As of December 31, 2023, we had 160 full-time employees, 26 of whom have Ph.D. and/or M.D. degrees. Of these employees, 136
were engaged in or directly support research and development activities. We consider our relationship with our employees to be good.
We believe that our success depends in large part on our ability to attract and retain experienced and skilled employees. We endeavor
to provide competitive compensation and benefits packages designed to attract, retain and reward talented individuals who possess the
skills necessary to support our business objectives, assist in the achievement of our strategic goals and increase stockholder value. We
employ a pay for performance philosophy. Annual salary increases, incentive bonuses and stock option grants are available to all
employees and are based on merit and include individual and corporate performance factors.
Much of our success is rooted in the diversity of our teams and our commitment to inclusion. We value diversity at all levels and
continue to focus on extending our diversity and inclusion initiatives across our entire workforce. We believe that our business benefits
from the different perspectives that a diverse workforce brings.
We are committed to the health, safety and well-being of our employees at all times. We follow federal, state and local rules and
guidelines to ensure the safety of our workforce and provide resources to assist our employees in managing their overall physical and
mental health.
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Research and Development
We have dedicated a significant portion of our resources to our efforts to develop our drug candidates. We incurred research and
development expenses of $118.0 million, $82.3 million and $53.3 million during the years ended December 31, 2023, 2022 and 2021,
respectively. We anticipate that a significant portion of our operating expenses will continue to be related to research and development in
2024 as we continue to advance our drug candidates through clinical development.
Corporate and Available Information
We are incorporated in Delaware. Our website is located at http://www.celldex.com. On our website, investors can obtain, free of
charge, a copy of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, our Code of
Conduct and Business Ethics, including disclosure related to any amendments or waivers thereto, other reports and any amendments
thereto filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934, as amended, as soon as reasonably practicable
after we file such material electronically with, or furnish it to, the Securities and Exchange Commission, or the SEC. None of the
information posted on our website is incorporated by reference into this Annual Report. The SEC also maintains a website at
http://www.sec.gov that contains reports, proxy and information statements and other information regarding us and other companies that
file materials with the SEC electronically.
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Item 1A. RISK FACTORS
You should consider carefully these risk factors together with all of the information included or incorporated by reference in this
Annual Report in addition to our financial statements and the notes to our financial statements. This section includes forward-looking
statements.
The following is a discussion of the risk factors that we believe are material to us at this time. These risks and uncertainties are not
the only ones facing us, and there may be additional matters that we are unaware of or that we currently consider immaterial. All of these
could adversely affect our business, results of operations, financial condition and cash flows.
Summary of Risk Factors
Risks Related to Our Financial Condition and Capital Requirements
● Risks related to our need for additional capital to fund our operations.
● Risks related to the Merger Agreement and related Settlement Agreement with Kolltan.
Risks Related to Development and Regulatory Approval of Drug Candidates
● Risks related to our ability to fund and complete the research and development activities and obtain regulatory approval for our
program assets.
● Risks related to the extensive and lengthy regulatory scrutiny to which we are subject.
● Risks related to our ability to commence, enroll, manage and complete our clinical trials.
● Risk of serious adverse or unacceptable side effects identified related to our drug candidates.
● We may enter collaboration agreements for our lead drug candidates that may not meet our expectations.
Risks Related to Commercialization of Our Drug Candidates
● Risks related to delays, difficulties or unanticipated costs in establishing sales, marketing and distribution capabilities.
● Risks related to the acceptance of our drug candidates by physicians, patients and third-party payors.
● Risks related to reimbursement decisions by third-party payors.
● Risks, including the terms of FDA approval, that could affect the demand for and sales and profitability of any of our drug
candidates.
● Risks related to the failure to obtain regulatory approvals in foreign jurisdictions and risks related to international operations if
we do obtain regulatory approval in foreign jurisdictions.
Risks Related to Reliance on Third Parties
● Risks related to our reliance on third parties.
Risks Related to Business Operations
● Risks related to strategic transactions.
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● Risks related to managing our growth.
● Risks related to our ability to integrate and modify our technologies to create new drugs.
● Risks related to computer systems that we and third parties use and potential security breaches.
● Risks related to hazardous materials.
● Risks related to product liability claims.
Risks Related to Intellectual Property
● Risks related to intellectual property.
Regulatory Risks
● Risks related to the regulatory approval process for our drugs.
● Risks related to changes in product candidate manufacturing or formulation.
● Risks related to our compliance with laws and regulations.
Risks Related to Our Capital Stock
● Risks related to our history of losses and uncertainty of future profitability.
● Risks relates to the volatility of our common stock.
● Risks related to our use of our net operating loss carryforwards.
General Risk Factors
● Risks related to internal controls over financial reporting.
● Risks that our competitors may develop technologies that make ours obsolete.
● Risks related to health epidemics and outbreaks.
● Risks related to the global economy and supply chain disruptions.
● Risks related to the loss of our key executives and scientists.
● Risks that our employees may engage in misconduct or other improper activities.
● Risks related to our compliance with the Nasdaq Listing Rules.
Risks Related to Our Financial Condition and Capital Requirements
We currently have no product revenue and will need to raise capital to operate our business.
To date, we have generated no product revenue and cannot predict when and if we will generate product revenue. We had an
accumulated deficit of $1.4 billion as of December 31, 2023. Until, and unless, we complete clinical trials and other development
activity, and receive approval from the FDA and other regulatory authorities, for our drug candidates, we cannot sell our drugs and
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will not have product revenue. We expect to spend substantial funds to continue the research, development and testing of our products
that are in the preclinical and clinical testing stages of development and to prepare to commercialize products in anticipation of FDA
approval. Therefore, for the foreseeable future, we will have to fund all of our operations and development expenditures from cash on
hand, equity or debt financings, licensing fees and grants. Additional financing will be required to meet our liquidity needs. If we do not
succeed in raising additional funds on acceptable terms, we might not be able to complete planned preclinical and clinical trials or obtain
approval of any drug candidates from the FDA and other regulatory authorities. In addition, we could be forced to discontinue product
development, reduce or forego sales and marketing efforts, forego attractive business opportunities or curtail operations. Any additional
sources of financing could involve the issuance of our equity securities, which would have a dilutive effect on our stockholders. No
assurance can be given that additional financing will be available to us when needed on acceptable terms, or at all.
We cannot be certain that we will achieve or sustain profitability in the future. Failure to achieve profitability could diminish our
ability to sustain operations, pay dividends on our common stock, obtain additional required funds and make required payments on our
present or future indebtedness.
We expect to incur future losses and we may never become profitable.
We have incurred operating losses of $154.5 million, $115.2 million and $71.2 million during 2023, 2022 and 2021, respectively,
and expect to incur an operating loss in 2024 and beyond. We believe that operating losses will continue in 2024 and beyond because we
are planning to incur significant costs associated with the development of our drug candidates. During the years ended December 31,
2023, 2022 and 2021, we incurred $32.4 million, $23.8 million and $8.0 million in clinical trial expense and $24.1 million, $4.5 million
and $1.7 million in contract manufacturing expense. Our net losses have had and will continue to have an adverse effect on, among other
things, our stockholders’ equity, total assets and working capital. We expect that losses will fluctuate from quarter to quarter and year to
year, and that such fluctuations may be substantial. We cannot predict when we will become profitable, if at all.
We will need additional capital to fund our operations, including the development, manufacture and potential commercialization of
our drug candidates. If we do not have or cannot raise additional capital when needed, we may be unable to develop and ultimately
commercialize our drug candidates successfully.
We expect to incur significant costs as we develop our drug candidates. The continuing development and commercialization of our
drug candidates requires additional capital beyond our current resources. As of December 31, 2023, we had cash, cash equivalents and
marketable securities of $423.6 million. During the next twelve months and beyond, we will take further steps to raise additional capital
to fund our long-term liquidity needs. Our capital raising activities may include, but may not be limited to, one or more of the following:
● licensing of drug candidates with existing or new collaborative partners;
● possible business combinations;
● issuance of debt; or
● issuance of common stock or other securities via private placements or public offerings.
While we may seek capital through a number of means, there can be no assurance that additional financing will be available on
acceptable terms, if at all, and our negotiating position in capital-raising efforts may worsen as existing resources are used. There is also
no assurance that we will be able to enter into further collaborative relationships. Additional equity financing may be dilutive to our
stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that restrict our ability to
operate as a business; and licensing or strategic collaborations may result in royalties or other terms which reduce our economic potential
from drug candidates under development. If we are unable to raise the funds necessary to meet our liquidity needs, we may have to delay
or discontinue the development of one or more programs, discontinue or delay ongoing or anticipated clinical trials, discontinue or delay
our commercial manufacturing efforts, discontinue or delay our efforts to expand into additional indications for our drug product
candidates, license out programs earlier than expected, raise funds at significant discount or on other unfavorable terms, if at all, or sell
all or part of our business.
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Our stockholders may be subject to substantial dilution if we elect to pay future milestone consideration to the former Kolltan
stockholders in shares of common stock. If we elect to pay future milestone consideration in cash, we would likely need to raise
additional capital.
In connection with the agreement pursuant to which we acquired Kolltan in 2016 (the “Merger Agreement”) as modified by the
definitive settlement agreement (the “Settlement Agreement”) we entered on July 15, 2022 related to litigation arising from the Kolltan
merger, in the event that regulatory approval by the United States Food and Drug Administration or European Medicines Agency of
certain drug candidates are achieved, we will be required to pay to the former stockholders of Kolltan a milestone payment of
$52,500,000, which milestone payment may be made, at our sole election, in cash, in shares of our common stock or a combination of
both, subject to provisions of the Merger Agreement. If we elect to issue shares of our common stock to make this milestone payment,
you will experience further dilution.
We may require additional capital to fund the milestone payment in cash, depending on the facts and circumstances at the time such
payment becomes due. The number of shares of our common stock issuable in connection with a milestone payment, if any, will be
determined based on the average closing price per share of our common stock for the five trading day period ending three calendar days
prior to the achievement of such milestone. If we elect to pay the milestone payment in shares of our common stock, our stockholders
would experience substantial dilution.
Risks Related to Development and Regulatory Approval of Drug Candidates
Our long-term success depends heavily on our ability to fund and complete the research and development activities and obtain
regulatory approval for our program assets.
Only a small minority of all research and development programs ultimately result in commercially successful drugs. Clinical failure
can occur at any stage of clinical development. Clinical and preclinical trials may produce negative or inconclusive results, and we may
decide, or regulators may require us, to conduct additional clinical or preclinical trials. In addition, data obtained from trials are
susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit or prevent
regulatory approval. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will generate the same
results or otherwise provide adequate data to demonstrate the efficacy and safety of a drug candidate. As part of development, we also
must show that we can formulate and manufacture our product candidates in compliance with regulatory requirements.
We will need substantial additional financing to complete the development of our drug candidates and comply with the regulatory
requirements governing this process. Further, even if we complete the development of our drug candidates and gain marketing approvals
from the FDA and comparable foreign regulatory authorities in a timely manner, we cannot be sure that such drug candidates will be
commercially successful in the pharmaceutical market. If the results of clinical trials, the anticipated or actual timing of marketing
approvals, or the market acceptance of any of our drug candidates, if approved, do not meet the expectations of investors or public
market analysts, the market price of our common stock would likely decline.
Our drug candidates are subject to extensive regulatory scrutiny.
All of our drug candidates are at various stages of development, and our activities and drug candidates are significantly regulated by
a number of governmental entities, including the FDA in the United States and by comparable authorities in other countries. These
entities regulate, among other things, the manufacture, testing, safety, effectiveness, labeling, documentation, advertising and sale of
drugs and drug candidates. We or our partners must obtain regulatory approval for a drug candidate in all of these areas before we can
commercialize any of our drug candidates. Product development within this regulatory framework takes a number of years and involves
the expenditure of substantial resources. This process typically requires extensive preclinical and clinical testing, which may take longer
or cost more than we anticipate, and may prove unsuccessful due to numerous factors. Many drug candidates that initially appear
promising ultimately do not reach the market because they are found to be unsafe or ineffective when tested. Companies in the
pharmaceutical, biotechnology and immunotherapeutic drug industries have suffered significant setbacks in advanced clinical trials, even
after obtaining promising results in earlier trials. Our inability to commercialize a drug candidate would impair our ability to earn future
revenues.
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Premarket review of our product candidates by the FDA and/or other regulatory authorities is a lengthy and uncertain process and
approval may be delayed, limited or denied, any of which would adversely affect our ability to generate operating revenues.
We are not permitted to market our drug product candidates in the United States until we receive approval of an application by the
FDA. The time required to obtain approval by the FDA is unpredictable, but typically takes multiple years following the commencement
of clinical trials, and depends upon numerous factors, including the substantial discretion of the FDA and the type, complexity and
novelty of the product candidates involved. Similar processes are used in countries outside of the U.S. We have not submitted a
marketing application such as BLA or NDA to the FDA or any similar application to any other regulatory authority in any jurisdiction.
The FDA has substantial discretion in the drug approval process, including the ability to delay, limit or deny approval of a product
candidate for many reasons. For example, the FDA:
● could determine that the information provided by us as part of an IND or BLA/NDA is inadequate, contains clinical
deficiencies or otherwise fails to demonstrate safety and effectiveness of any of our product candidates for any indication;
● may not find the data from pre-clinical and clinical trials sufficient to support the submission of a marketing application or to
obtain marketing approval, including any findings that the safety risks outweigh clinical and other benefits of our product
candidates;
● may require us to perform additional studies to demonstrate the safety, efficacy, pharmacokinetics, or other properties of our
product candidates prior to approval, or require such studies as a condition of approval;
● may disagree with our clinical trial designs or our interpretation of data from product development manufacturing data,
bioequivalence studies and/or clinical trials, or may change the requirements for approval even after it has reviewed and
commented on the design for our trials;
● may identify deficiencies in the manufacturing processes or facilities of third-party manufacturers with which we enter into
agreements for the supply of the API used in our product candidates;
● may identify deficiencies in our own manufacturing processes or our proposed scale-up of the manufacturing processes or
facilities for the production of our product candidates;
● may approve our product candidates for fewer or more limited indications than we request, or may grant approval contingent on
the performance of costly post-approval clinical trials;
● may change its approval policies or adopt new regulations; or
● may not approve the labeling claims that we believe are necessary or desirable for the successful commercialization of our
product candidates.
The time and expense of the approval process, as well as the unpredictability of future clinical trial results and other contributing
factors, may result in our failure to obtain regulatory approval to market, in the United States or other jurisdictions, barzolvolimab and
other drug candidates that we are developing or may seek to develop in the future, which would significantly harm our business, results
of operations and prospects. In such case, we may also not have the resources to conduct new clinical trials and/or we may determine that
further clinical development of any such drug candidate is not justified and may discontinue any such programs.
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If our drug candidates do not pass required tests for safety and effectiveness, we will not be able to obtain regulatory approval and
derive commercial revenue from them.
In order to succeed, we will need to obtain regulatory approval for our drug candidates. The FDA has not approved any of our drug
candidates for sale to date. Our drug candidates are in various stages of preclinical and clinical testing. Preclinical tests are performed at
an early stage of a product’s development and provide information about a drug candidate’s safety and effectiveness before initiating
human clinical trials. Preclinical tests can last years. If a product passes its preclinical tests satisfactorily and we determine that further
development is warranted, we would file an IND application for the product with the FDA, and, if the FDA gives its approval, we would
begin Phase 1 clinical tests. Phase 1 testing generally lasts between 6 and 24 months. If Phase 1 test results are satisfactory and the FDA
gives its approval, we can begin Phase 2 clinical tests. Phase 2 testing generally lasts between 6 and 36 months. If Phase 2 test results are
satisfactory and the FDA gives its approval, we can begin Phase 3 pivotal studies. Phase 3 studies generally last between 12 and 48
months. Once clinical testing is completed and a BLA or NDA is filed with the FDA, it may take more than a year to receive FDA
approval.
In all cases we must show that a drug candidate is both safe and effective before the FDA, or drug approval agencies of other
countries where we intend to sell the product, will approve it for sale. Our research and testing programs must comply with drug
approval requirements both in the United States and in other countries, since we are developing our drug candidates with the intention to,
or could later decide to, commercialize them both in the U.S. and abroad. A product may fail for safety or effectiveness at any stage of
the testing process. A major risk we face is the possibility that none of our products under development will come through the testing
process to final approval for sale, with the result that we cannot derive any commercial revenue from them after investing significant
amounts of capital in multiple stages of preclinical and clinical testing.
Success in early clinical trials does not ensure that later clinical trials will be successful, and we cannot assure you that any of the
clinical trials that we may conduct will demonstrate consistent or adequate efficacy and safety to obtain regulatory approval.
The results of preclinical studies and early clinical trials may not be predictive of the results of later- stage clinical trials, and interim
results of a clinical trial do not necessarily predict final results. Preclinical and clinical data are susceptible to various interpretations and
analyses, and many companies that have believed their drug candidates performed satisfactorily in preclinical studies and early-stage
clinical trials have nonetheless failed to replicate such results in later-stage clinical trials and subsequently failed to obtain marketing
approval. Drug candidates in later-stage clinical trials may fail to show the desired safety and efficacy despite having progressed through
preclinical and initial clinical trials, even if certain analyses of primary or secondary endpoints in those early trials showed trends
towards efficacy. Later-stage clinical trials with larger numbers of patients or longer durations of therapy may also reveal safety concerns
that were not identified in earlier smaller or shorter trials. Our failure to demonstrate efficacy and safety data sufficient to support
marketing approval for any of our other drug candidates would substantially harm our business, prospectus, financial condition and
results of operations.
Product testing is critical to the success of our drug candidates but subject to delay or cancellation if we have difficulty enrolling
patients.
As our portfolio of drug candidates moves from preclinical testing to clinical testing, and then through progressively larger and more
complex clinical trials, we will need to enroll an increasing number of patients with the appropriate characteristics. At times we have
experienced difficulty enrolling patients, and we may experience more difficulty as the scale of our clinical testing program increases.
The factors that affect our ability to enroll patients are largely uncontrollable and include principally the following:
● the nature of the clinical test;
● the size of the patient population;
● patients’ willingness to receive a placebo or less effective treatment on the control arm of a clinical study;
● the distance between patients and clinical test sites; and
● the eligibility criteria for the trial.
If we cannot enroll patients as needed, our costs may increase, or we may be forced to delay or terminate testing for a product.
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We may have delays in commencing, enrolling and completing our clinical trials, and we may not complete them at all.
We have not completed the clinical trials necessary to obtain FDA approval to market any of our drug candidates in development.
Clinical trials for our products in development may be delayed or terminated as a result of many factors, including the following:
● inability to reach agreements on acceptable terms with prospective contract research organizations (CROs) and trial sites, the
terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
● difficulty in enrolling patients in our clinical trials;
● inability to maintain necessary supplies of study drug and comparator to maintain predicted enrollment rates at clinical trial
sites;
● patients failing to complete clinical trials due to dissatisfaction with the treatment, side effects or other reasons;
● failure by regulators to authorize us to commence a clinical trial;
● suspension or termination by regulators of clinical research for many reasons, including concerns about patient safety, bias or
failure of our contract manufacturers to comply with cGMP requirements;
● delays or failure to obtain clinical supply for our products necessary to conduct clinical trials from contract manufacturers,
including commercial grade-clinical supply for our Phase 3 clinical trials;
● inability to identify and maintain a sufficient number of trial sites, many of which may already be engaged in other clinical trial
programs, including some that may be for the same indication as our product candidates;
● drug candidates demonstrating a lack of efficacy during clinical trials;
● inability to continue to fund clinical trials or to find a partner to fund the clinical trials;
● competition with ongoing clinical trials and scheduling conflicts with participating clinicians; and
● delays in completing data collection and analysis for clinical trials.
Any delay or failure to commence, enroll or complete clinical trials, fulfill regulatory requirements and obtain FDA approval for our
drug candidates could have a material adverse effect on our cost to develop and commercialize, and our ability to generate revenue from,
a particular drug candidate.
If serious adverse or unacceptable side effects are identified during the development of our drug candidates, such events could
prevent us from obtaining regulatory approval or achieving market acceptance of our drug candidates, and we may need to abandon
or limit our development of some of our drug candidates.
If our drug candidates are associated with serious adverse events or undesirable side effects in clinical trials or have characteristics
that are unexpected, such events could prevent us from obtaining regulatory approval or achieving market acceptance of our drug
candidates, and we may need to abandon their development or limit development to more narrow uses or subpopulations in which the
serious adverse events, undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-
benefit perspective. In pharmaceutical development, many drugs that initially show promise in early-stage testing are later found to cause
side effects that prevent further development of the drug. Currently marketed therapies for the treatment of cancer and inflammatory
diseases are generally limited to some extent by their toxicity. In addition, some of our drug candidates would be chronic therapies or be
used in pediatric populations, for which safety concerns may be particularly important. Use of our drug candidates as monotherapies may
also result in adverse events consistent in nature with those associated with other marketed therapies. In addition, when used in
combination with other marketed therapies, our drug candidates may exacerbate adverse events associated with the marketed therapy.
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Our drug candidates, including barzolvolimab, are monoclonal antibodies, which are biologics. Side effects from biologics may
include hypersensitivity; severe reactions such as anaphylaxis or cytokine release syndrome; immune-mediated adverse reactions that
may occur in any organ system or tissue, such as pneumonitis, colitis, hepatitis, endocrinopathies, nephritis, and dermatologic reactions;
as well as infusion-related reactions, cellulitis, sepsis, pneumonia, urinary tract infection, fatigue, rash, and diarrhea.
Most biologics, including our drug candidates, are injected, either subcutaneously or intravenously. There are risks inherent in
subcutaneous injections, such as injection-site reactions (including redness, itching, swelling, pain, and tenderness) and other side effects.
In addition, there are risks inherent in intravenous administration such as infusion-related reactions (including nausea, pyrexia, rash, and
dyspnea). These and other complications or side effects could harm further development and/or commercialization of our antibody-based
products and product candidates utilizing this method of administration.
In addition to the safety, efficacy, manufacturing, and regulatory hurdles faced by our product candidates, the administration of
biologics frequently causes an immune response, sometimes resulting in the creation of antibodies against the drug candidate which can
impact the safety and/or efficacy associated with the treatment.
We may expend our resources to pursue a particular drug candidate or indication and forgo the opportunity to capitalize on drug
candidates or indications that may ultimately be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we intend to focus on developing drug candidates for specific
indications that we identify as most likely to succeed, in terms of both their potential for regulatory approval and commercialization. As a
result, we may forego or delay pursuit of opportunities with other drug candidates or for other indications that may prove to have greater
commercial potential.
Our resource allocation decisions may cause us to fail to capitalize on viable commercial drugs or profitable market opportunities.
Our spending on current and future research and development programs and drug candidates for specific indications may not yield any
commercially viable drug candidates. If we do not accurately evaluate the commercial potential or target market for a particular drug
candidate, we may relinquish valuable rights to that drug 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 the drug
candidate.
We may be unable to manage multiple late-stage clinical trials for a variety of drug candidates simultaneously.
As our current clinical trials progress, we may need to manage multiple late-stage clinical trials simultaneously in order to continue
developing all of our current products. The management of late-stage clinical trials is more complex and time consuming than early-stage
trials. Typically, early-stage trials involve several hundred patients in no more than 10 to 30 clinical sites. Late-stage (Phase 3) trials may
involve up to several thousand patients in up to several hundred clinical sites and may require facilities in several countries. Therefore,
the project management required to supervise and control such an extensive program in a compliant manner is substantially larger than
early-stage programs. As the need for these resources is not known until some months before the trials begin, it is necessary to recruit
large numbers of experienced and talented individuals very quickly. If the labor market does not allow this team to be recruited quickly,
we could be faced with a decision to delay the program or to initiate it with inadequate management resources. This may result in
recruitment of inappropriate patients, inadequate monitoring of clinical investigators and inappropriate handling of data or data analysis.
Consequently, it is possible that conclusions of efficacy or safety may not be acceptable to permit filing of a BLA or NDA for any one of
the above reasons or a combination of several.
Failure to successfully validate, develop and obtain regulatory approval for companion diagnostics for our drug candidates, if
needed, could harm our drug development strategy and operational results.
As an element of our clinical development approach, we may seek to screen and identify subsets of patients that express a certain
biomarker or that have a certain genetic alteration who may derive meaningful benefit from our development drug candidates. To achieve
this, one or more of our drug development programs may be dependent on the development and commercialization of a companion
diagnostic by us or by third-party collaborators. Companion diagnostics are developed in conjunction with clinical programs for the
associated drug candidate. Companion diagnostics are subject to regulation as medical devices and must themselves be approved for
marketing by the FDA or certain other foreign regulatory agencies before the related drug candidate may be commercialized. The
approval of a companion diagnostic as part of the product label will limit the use of the drug candidate to only those patients who express
the specific biomarker it was developed to detect. We or our third-party collaborators may also experience
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delays in developing a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners
or negotiating insurance reimbursement for such companion diagnostic, all of which may prevent us from completing our clinical trials
or commercializing our drugs on a timely or profitable basis, if at all.
We and our third-party collaborators may encounter difficulties in developing and obtaining approval for these companion
diagnostics. Any delay or failure by us or third-party collaborators to develop or obtain regulatory approval of a companion diagnostic
could delay or prevent approval of our related drug candidates or, if regulatory approval is obtained, delay or limit our ability to
commercialize our related drug candidates.
Any delay in obtaining regulatory approval would have an adverse impact on our ability to earn future revenues.
It is possible that none of the drug candidates that we develop will obtain the regulatory approvals necessary for us to begin
commercializing them. The time required to obtain FDA and other approvals is unpredictable but in general takes years following the
commencement of clinical trials, depending upon the nature of the drug candidate. Any analysis we perform of data from clinical
activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval.
Any delay or failure in obtaining required approvals could have a material adverse effect on our ability to generate revenues from the
particular drug candidate including, but not limited to, loss of patent term during the approval period. Furthermore, if we, or our partners,
do not reach the market with our products before our competitors offer products for the same or similar uses, or if we, or our partners, are
not effective in marketing our products, our revenues from product sales, if any, will be reduced.
We face intense competition in our development activities. We face competition from many companies in the United States and
abroad, including a number of large pharmaceutical companies, firms specialized in the development and production of vaccines,
adjuvants and vaccine and immunotherapeutic delivery systems and major universities and research institutions. Most of our competitors
have substantially greater resources, more extensive experience in conducting preclinical studies and clinical testing and obtaining
regulatory approvals for their products, greater operating experience, greater research and development and marketing capabilities and
greater production capabilities than those of ours. These companies might succeed in obtaining regulatory approval for competitive
products more rapidly than we can for our products, especially if we experience any delay in obtaining required regulatory approvals.
We may enter into collaboration agreements for the licensing, development and ultimate commercialization of some of our drug
candidates including, where appropriate, for our lead drug candidates. In such cases, we will depend greatly on our third-party
collaborators to license, develop and commercialize such drug candidates, and they may not meet our expectations.
We may enter into co-development and commercialization partnerships for our drug candidates where appropriate. The process of
identifying collaborators and negotiating collaboration agreements for the licensing, development and ultimate commercialization of
some of our drug candidates may cause delays and increased costs. We may not be able to enter into collaboration agreements on terms
favorable to us or at all. Furthermore, some of those agreements may give substantial responsibility over our drug candidates to the
collaborator. Some collaborators may be unable or unwilling to devote sufficient resources to develop our drug candidates as their
agreements require. They often face business risks similar to ours, and this could interfere with their efforts. Also, collaborators may
choose to devote their resources to products that compete with ours. If a collaborator does not successfully develop any one of our
products, we will need to find another collaborator to do so. The success of our search for a new collaborator will depend on our legal
right to do so at the time and whether the product remains commercially viable.
If we enter into collaboration agreements for one or more of our lead drug candidates, the success of such drug candidates will
depend in great part upon our and our collaborators’ success in promoting them as superior to other treatment alternatives. We believe
that our drug candidates can be proven to offer disease treatment with notable advantages over drugs in terms of patient compliance and
effectiveness. However, there can be no assurance that we will be able to prove these advantages or that the advantages will be sufficient
to support the successful commercialization of our drug candidates.
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Risks Related to Commercialization of Our Drug Candidates
We may face delays, difficulties or unanticipated costs in establishing sales, marketing and distribution capabilities or seeking a
partnership for the commercialization of our drug candidates, even if regulatory approval is obtained.
We may retain full economic rights to our drug candidates or seek favorable economic terms through advantageous commercial
partnerships. As a result, we may have full responsibility for commercialization of one or more of our drug candidates if and when they
are approved for sale. We currently lack sufficient marketing, sales and distribution capabilities to carry out this strategy. If any of our
drug candidates are approved by the FDA, we will need a drug sales force with technical expertise prior to the commercialization of any
of our drug candidates. We may not succeed in developing such sales and distribution capabilities, the cost of establishing such sales and
distribution capabilities may exceed any product revenue, or our direct marketing and sales efforts may be unsuccessful. We may find it
necessary to enter into strategic partnerships, co-promotion or other licensing arrangements. To the extent we enter into such strategic
partnerships, co- promotion or other licensing arrangements, our product revenues are likely to be lower than if we directly marketed and
sold such drugs, and some or all of the revenues we receive will depend upon the efforts of third parties, which may not be successful
and may not be within our control. If we are unable to enter into such strategic partnerships, co-promotion or other licensing
arrangements on acceptable terms or at all, we may not be able to successfully commercialize our existing and future drug candidates. If
we are not successful in commercializing any drug candidates for which we obtain regulatory approval, either on our own or through
collaborations with one or more third parties, our future product revenue will suffer, and we may never achieve profitability or become
unable to continue the operation of our business.
If our drug candidates for which we obtain regulatory approval do not achieve broad acceptance from physicians, patients and third-
party payors, we may be unable to generate significant revenues, if any.
Even if we obtain regulatory approval for our drug candidates, our approved drugs may not gain market acceptance among
physicians and patients. We believe that effectively marketing our drug candidates, if any of them are approved, will require substantial
efforts, both prior to commercial launch and after approval. Physicians may elect not to prescribe our drugs, and patients may elect not to
request or take them, for a variety of reasons, including:
● limitations or warnings contained in a drug’s FDA-approved labeling;
● changes in the standard of care or the availability of alternative drugs for the targeted indications for any of our drug candidates;
● limitations in the approved indications for our drug candidates;
● the approval, availability, market acceptance and reimbursement for the companion diagnostic, where applicable;
● demonstrated clinical safety and efficacy compared to other drugs;
● significant adverse side effects;
● effectiveness of education, sales, marketing and distribution support;
● timing of market introduction and perceived effectiveness of competitive drugs;
● cost-effectiveness;
● adverse publicity about our drug candidates or favorable publicity about competitive drugs;
● convenience and ease of administration of our drug candidates; and
● willingness of third-party payors to reimburse for the cost of our drug candidates.
If our future drugs fail to achieve market acceptance, we will not be able to generate significant revenues and may never achieve
profitability.
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Even if any of our drug candidates receive FDA approval, the terms of the approval may limit such drug’s commercial potential.
Additionally, even after receipt of FDA approval, such drug would be subject to substantial, ongoing regulatory requirements.
The FDA has complete discretion over the approval of our drug candidates. If the FDA grants approval, the scope of the approval
may limit our ability to commercialize such drug, and in turn, limit our ability to generate substantial product revenue. For example, the
FDA may grant approval contingent on the performance of costly post-approval clinical trials or subject to warnings or contraindications
or under a Risk Evaluation and Mitigation Strategy (REMS) drug safety program. Additionally, even after granting approval, the
manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping
for such drug will be subject to extensive and ongoing regulatory requirements. In addition, manufacturers of our drug candidates are
required to comply with cGMP regulations, which include requirements related to quality control and quality assurance as well as the
corresponding maintenance of records and documentation. Further, regulatory authorities must inspect and approve these manufacturing
facilities before they can be used to manufacture our drug candidates, and these facilities are subject to continual review and periodic
inspections by the FDA and other regulatory authorities for compliance with cGMP regulations. If we or a third party discover previously
unknown problems with a drug, such as adverse events of unanticipated severity or frequency, or problems with the facility where the
drug is manufactured, a regulatory authority may impose restrictions on that product, the manufacturer or us, including requiring
withdrawal of the drug from the market or suspension of manufacturing. If we, our drug candidates or the manufacturing facilities for our
drug candidates fail to comply with regulatory requirements of the FDA and/or other non-U.S. regulatory authorities, we could be subject
to administrative or judicially imposed sanctions, including the following:
● warning letters;
● civil or criminal penalties and fines;
● injunctions;
● consent decrees;
● suspension or withdrawal of regulatory approval;
● suspension of any ongoing clinical studies;
● voluntary or mandatory product recalls and publicity requirements;
● refusal to accept or approve applications for marketing approval of new drugs;
● restrictions on operations, including costly new manufacturing requirements; or
● seizure or detention of drugs or import bans.
The regulatory requirements and policies may change, and additional government regulations may be enacted with which we may
also be required to comply. We cannot predict the likelihood, nature or extent of government regulation that may arise from future
legislation or administrative action, either in the United States or in other countries. If we are not able to maintain regulatory compliance,
we may not be permitted to market our future products and our business may suffer.
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Reimbursement decisions by third-party payors may have an adverse effect on pricing and market acceptance of any of our drug
candidates. If there is not sufficient reimbursement for our future drugs, it is less likely that such drugs will be widely used.
Market acceptance and sales of any of our drug candidates for which we obtain regulatory approval will depend on reimbursement
policies and may be affected by future health care reform measures in both the United States and foreign jurisdictions. Government
authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which drugs they will
cover and establish payment levels. In addition, government authorities and these third-party payors are increasingly attempting to
contain health care costs by demanding price discounts or rebates and limiting both the types and variety of drugs that they will cover
and the amounts that they will pay for these drugs. In addition, we might need to conduct post-marketing studies in order to demonstrate
the cost-effectiveness of any future drugs to such payors’ satisfaction. Such studies might require us to commit a significant amount of
management time and financial and other resources.
Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on
payments allowed for lower-cost products that are already reimbursed, may be incorporated into existing payments for other products or
services and may reflect budgetary constraints and/or imperfections in Medicare or Medicaid data used to calculate these rates. Net
prices for drugs may be reduced by mandatory discounts or rebates required by government health care programs. Such programs, or
regulatory changes or relaxation of laws that restrict imports of drugs from other countries, could reduce the net price we receive for any
future marketed drugs. In addition, our future drugs might not ultimately be considered cost-effective.
We cannot be certain that reimbursement will be available for any drug candidates that we develop. Also, we cannot be certain that
reimbursement policies will not reduce the demand for, or the price paid for, any future drugs. If reimbursement is not available or is
available on a limited basis, we may not be able to successfully commercialize any drug candidates that we develop.
Other factors could affect the demand for and sales and profitability of any drug candidates that we may commercialize in the future.
In general, other factors that could affect the demand for and sales and profitability of our future drugs include, but are not limited
to:
● the timing of regulatory approval, if any, of competitive drugs;
● our or any other of our partners’ pricing decisions, as applicable, including a decision to increase or decrease the price of a
drug, and the pricing decisions of our competitors;
● government and third-party payor reimbursement and coverage decisions that affect the utilization of our future drugs and
competing drugs;
● negative safety or efficacy data from new clinical studies conducted either in the U.S. or internationally by any party, which
could cause the sales of our future drugs to decrease or a future drug to be recalled;
● the degree of patent protection afforded our future drugs by patents granted to or licensed by us and by the outcome of litigation
involving our or any of our licensor’s patents;
● marketing exclusivity, if any, awarded by the FDA to our drugs;
● the outcome of litigation involving patents of other companies concerning our future drugs or processes related to production
and formulation of those drugs or uses of those drugs;
● the increasing use and development of alternate therapies;
● the rate of market penetration by competing drugs; and
● the termination of, or change in, existing arrangements with our partners.
Any of these factors could have a material adverse effect on the sales of any drug candidates that we may commercialize in the
future.
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Failure to obtain regulatory approvals in foreign jurisdictions will prevent us from marketing our products internationally.
We may seek approval for our drug candidates outside the United States and may market future products in international markets. In
order to market our future products in the European Economic Area, or EEA, and many other foreign jurisdictions, we must obtain
separate regulatory approvals. Specifically, in the EEA, medicinal products can only be commercialized after obtaining a Marketing
Authorization, or MA.
Before granting the MA, the European Medicines Agency or the competent authorities of the member states of the EEA make an
assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.
The approval procedures vary among countries and can involve additional clinical testing, and the time required to obtain approval
may differ from that required to obtain FDA approval. Clinical studies conducted in one country may not be accepted by regulatory
authorities in other countries. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval
by one or more foreign regulatory authorities does not ensure approval by regulatory authorities in other foreign countries or by the FDA.
However, a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in
others. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain
foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatory approvals, and even if we file, we may
not receive necessary approvals to commercialize our products in any market.
If we obtain approval to commercialize any approved products outside of the United States, a variety of risks associated with
international operations could materially adversely affect our business.
If our drug candidates are approved for commercialization outside of the United States, we expect that we will be subject to
additional risks related to international operations and entering into international business relationships, including:
● different regulatory requirements for drug approvals;
● reduced protection for intellectual property rights, including trade secret and patent rights;
● unexpected changes in tariffs, trade barriers and regulatory requirements;
● economic weakness, including inflation, uncertain interest rate environments or political instability in particular foreign
economies and markets;
● compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
● foreign taxes, including withholding of payroll taxes;
● foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations
incident to doing business in another country;
● workforce uncertainty in countries where employment regulations are different than, and labor unrest is more common than, in
the United States;
● production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;
● business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters, including
earthquakes, hurricanes, floods and fires; and
● difficulty in importing and exporting clinical trial materials and study samples.
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Risks Related to Reliance on Third Parties
We rely on third parties to plan, conduct and monitor our clinical tests, and their failure to perform as required would interfere with
our product development.
We rely on third parties to conduct a significant portion of our clinical development activities. These activities include clinical
patient recruitment and observation, clinical trial monitoring, clinical data management and analysis, safety monitoring and project
management. We conduct project management and medical and safety monitoring in-house for some of our programs and rely on third
parties for the remainder of our clinical development activities. If any of these third parties is unable to perform in a quality and timely
manner, and at a feasible cost, our clinical studies will face delays. Further, if any of these third parties fails to perform as we expect or if
their work fails to meet regulatory standards, our testing could be delayed, cancelled or rendered ineffective.
We rely on contract manufacturers over whom we have limited control. Should the cost, delivery and quality of clinical materials
manufactured by us in our Fall River facility or supplied by contract manufacturers vary to our disadvantage, our business
operations could suffer significant harm.
We have limited experience in commercial manufacturing. We rely on CMOs to manufacture drug substance and drug product for
any late-stage clinical studies of our drug candidates as well as for future commercial supplies. Our ability to conduct late-stage clinical
trials, manufacture and commercialize our drug candidates, if regulatory approval is obtained, depends on the ability of such CMOs to
manufacture our drug candidates on a large scale at a competitive cost and in accordance with cGMP and foreign regulatory
requirements, if applicable. We also rely on CMOs for labeling and storage for studies inside and outside the US. In order for us to
establish our own commercial manufacturing facility, we would require substantial additional funds and would need to make facility
modifications, hire and retain significant additional personnel and comply with extensive cGMP regulations applicable to such a facility.
The commercial manufacturing facility would also need to be licensed for the production of our drug candidates by the FDA and meet
other regulatory standards. We therefore work with CMOs under established manufacturing arrangements that comply with the FDA’s
requirements and other regulatory standards, although there is no assurance that the manufacturing will be successful.
We also currently manufacture barzolvolimab and CDX-585 drug substance in our Fall River facility for our current and planned
Phase 1 and Phase 2 clinical trials. All products are then filled at CMOs.
Prior to approval of any drug candidate, the FDA must review and approve validation studies for both drug substance and drug
product. The manufacturing processes for our drug candidates and immunotherapeutic delivery systems utilize known technologies. We
believe that the products we currently have under development can be scaled up to permit manufacture in commercial quantities.
However, there can be no assurance that we will not encounter difficulties in scaling up the manufacturing processes. Significant scale-up
of manufacturing may result in unanticipated technical challenges and may require additional validation studies that the FDA must
review and approve. CMOs may encounter difficulties in scaling up production, including problems involving supply chain, raw material
suppliers, production yields, technical difficulties, scaled-up product characteristics, quality control and assurance, shortage of qualified
personnel, capacity constraints, changing priorities within the CMOs, compliance with FDA and foreign regulations, environmental
compliance, production costs and development of advanced manufacturing techniques and process controls. Any of these difficulties, if
they occur and are not overcome to the satisfaction of the FDA or other regulatory agency, could lead to significant delays and possibly
the termination of the development program for such drug candidate. These risks become more acute as we scale up for commercial
quantities, where reliable sources of drug substance and drug product become critical to commercial success. The commercial viability of
any of our drug candidates, if approved, will depend on the ability of our contract manufacturers to produce drug substance and drug
product on a large scale. Failure to achieve this level of supply can jeopardize and prevent the successful commercialization of the drug.
Our leading drug candidates require specialized manufacturing capabilities and processes. We may face difficulty in securing
commitments from U.S. and foreign contract manufacturers as these manufacturers could be unwilling or unable to accommodate our
needs. Relying on foreign manufacturers involves peculiar and increased risks, including the risk relating to the difficulty foreign
manufacturers may face in complying with cGMP requirements as a result of language barriers, lack of familiarity with cGMP or the
FDA regulatory process, supply chain issues or other causes, economic or political instability in or affecting the home countries of our
foreign manufacturers, shipping delays, potential changes in foreign regulatory laws governing the sales of our product supplies,
fluctuations in foreign currency exchange rates and the imposition or application of trade restrictions.
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There can be no assurances that contract manufacturers will be able to meet our timetable and requirements. While we believe that
there is currently sufficient capacity worldwide for the production of our potential products through CMOs, establishing long-term
relationships with CMOs and securing multiple sources for the necessary quantities of clinical and commercial materials required can be
a challenge due to increasing industry demand for CMO services. Qualifying the initial source of clinical and ultimately commercial
material is a time consuming and expensive process due to the highly regulated nature of the pharmaceutical/biotech industry. The key
difficulty in qualifying more than one source for each product is the duplicated time and expense in doing so without the potential to
mitigate these costs if the secondary source is never utilized.
Further, contract manufacturers must operate in compliance with cGMP and failure to do so could result in, among other things, the
disruption of product supplies. As noted above, non-U.S. contract manufacturers may face special challenges in complying with cGMP
requirements, and although we are not currently dependent on non-U.S. collaborators or contract manufacturers, we may choose or be
required to rely on non-U.S. sources in the future as we seek to develop stable supplies of increasing quantities of materials for ongoing
clinical trials of larger scale.
Use of third-party manufacturers also limits our control over and ability to monitor the manufacturing process. As a result, we may
not be able to detect a variety of problems that may arise and may face additional costs in the process of interfacing with and monitoring
the progress of our contract manufacturers. If third-party manufacturers fail to meet our manufacturing needs in an acceptable manner or
fail to comply with regulatory requirements, we would face delays and additional costs while we develop internal manufacturing
capabilities or find alternate third-party manufacturers. It may not be possible to have multiple third-party manufacturers ready to supply
us with needed material at all or without incurring significant costs. Our dependence upon third parties for the manufacture of our
products may adversely affect our profit margins and our ability to develop, manufacture, sell and deliver products on a timely and
competitive basis. Any manufacturing failures, supply chain delays or compliance issues at our Fall River facility or at our CMOs could
cause delays in our clinical studies for our drug candidates.
We may need to rely on third-party collaborators to develop and commercialize companion diagnostic tests for our drug candidates.
We do not have experience or capabilities in developing, administering, obtaining regulatory approval for, or commercializing
companion diagnostic tests and will need to rely in large part on third-party collaborators to perform these functions. Companion
diagnostic tests are subject to regulation by the FDA and similar regulatory authorities outside of the United States as medical devices
and require separate regulatory approval prior to commercialization. We may need to rely on such third-party collaborators to obtain
regulatory approval and commercialize such companion diagnostic tests. Such third-party collaborators:
● may not perform its obligations as expected or as required under our collaboration agreement;
● may encounter production difficulties that could constrain the supply of the companion diagnostic test;
● may have difficulties gaining acceptance of the use of the companion diagnostic test in the clinical community;
● may not pursue commercialization of the companion diagnostic test even if they receive any required regulatory approvals;
● may elect not to continue the development or commercialization of the companion diagnostic test based on changes in the third
parties’ strategic focus or available funding, or external factors such as an acquisition, that divert resources or create competing
priorities;
● may be susceptible to third party cyber-attacks on our and their information security systems;
● may not commit sufficient resources to the marketing and distribution of the companion diagnostic test; and
● may terminate their relationship with us.
If such third-party collaborators fail to develop, obtain regulatory approval or commercialize the companion diagnostic test, we may
not be able to enter into arrangements with another diagnostic company to obtain supplies of an alternative diagnostic test for use
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in connection with the development and commercialization of our drug candidates or do so on commercially reasonable terms, which
could adversely affect and/or delay the development or commercialization of our drug candidates.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover
them.
Because we rely on third parties to develop our drug candidates, we must share trade secrets with them. We seek to protect our
proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative
research agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees and consultants
prior to beginning research or disclosing proprietary information. These agreements typically restrict the ability of our collaborators,
advisors, employees and consultants to publish data potentially relating to our trade secrets. Our academic collaborators typically have
rights to publish data, provided that we are notified in advance and may delay publication for a specified time in order to secure our
intellectual property rights arising from the collaboration. In other cases, publication rights are controlled exclusively by us, although in
some cases we may share these rights with other parties. We also conduct joint research and development programs which may require us
to share trade secrets under the terms of research and development partnership or similar agreements. Despite our efforts to protect our
trade secrets, our competitors may discover our trade secrets, either through breach of these agreements, independent development or
publication of information including our trade secrets in cases where we do not have proprietary or otherwise protected rights at the time
of publication. A competitor’s discovery of our trade secrets would impair our competitive position.
Risks Related to Business Operations
We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to
our management.
From time to time we may consider strategic transactions, including acquisitions of companies, asset purchases and out-licensing or
in-licensing of products, drug candidates or technologies. Additional potential transactions that we may consider include a variety of
different business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business
combinations, acquisitions of assets and investments. Any such transaction may require us to incur non-recurring or other charges, may
increase our near and long-term expenditures and may pose significant integration challenges or disrupt our management or business,
which could adversely affect our operations and financial results. For example, these transactions may entail numerous operational and
financial risks, including:
● exposure to unknown liabilities;
● disruption of our business and diversion of our management’s time and attention in order to develop acquired products, drug
candidates or technologies;
● incurrence of substantial debt or dilutive issuances of equity securities to pay for acquisitions;
● higher than expected acquisition and integration costs;
● write-downs of assets or impairment charges;
● increased amortization expenses;
● difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel;
● impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and
ownership; and
● inability to retain key employees of any acquired businesses.
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Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature
described above, any transactions that we do complete could have a material adverse effect on our business, results of operations,
financial condition and prospects.
We may expand our clinical development, regulatory and sales and marketing capabilities, and as a result, we may encounter
difficulties in managing our growth, which could disrupt our operations.
We expect that if our drug candidates continue to progress in development, we may require significant additional investment in
personnel, management systems and resources, particularly in the build out of our commercial capabilities. To date we have hired a core
commercial team to plan for potential commercial launches if any of our drug candidates are approved. Over the next several years, we
may experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug
development, regulatory affairs and sales and marketing. To manage this potential future growth, we may continue to implement and
improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified
personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such
anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified
personnel. The physical expansion of our operations may lead to significant costs and may divert our management and business
development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.
We may not be able to successfully integrate our existing technology or to modify our technologies to create new immunotherapeutic
drugs.
If we are able to integrate our acquired assets and licensed assets with our immunotherapy technologies, we believe these assets will
give our immunotherapeutic drugs a competitive advantage. However, if we are unable to successfully integrate licensed assets, or other
technologies which we have acquired or may acquire in the future, with our existing technologies and potential products currently under
development, we may be unable to realize any benefit from our acquisition of these assets, or other technologies which we have acquired
or may acquire in the future, and we may face the loss of our investment of financial resources and time in the integration process.
We believe that our immunotherapy technology portfolio may offer opportunities to develop immunotherapeutic drugs that treat a
variety of cancers and inflammatory and infectious diseases by stimulating a patient’s immune system against those diseases. If our
immunotherapy technology portfolio cannot be used to create effective immunotherapeutic drugs against a variety of diseases, we may
lose all or portions of our investment in development efforts for new drug candidates.
Our internal computer systems, or those of our CROs, CMOs, or other contractors or consultants, may fail or suffer security
breaches, which could result in a material disruption of our drug development programs.
Our computer systems and those of our CROs, CMOs, and other contractors and consultants are vulnerable to damage from
cyberattacks, malicious intrusion, computer viruses, unauthorized access, data breaches, phishing attacks, cybercriminals, natural
disasters, terrorism, war and telecommunication, electrical failures or other significant disruption even with a cybersecurity risk
mitigation program developed by our enterprise. Such information technology systems are additionally vulnerable to security breaches
from inadvertent or intentional actions by our employees, third-party vendors, contractors, consultants, business partners, and/or other
third parties. The risks of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by traditional
computer “hackers,” threat actors, personnel (such as through theft, inadvertent mistake or misuse), sophisticated nation-state and nation-
state-supported actors, sovereign governments and cyber terrorists, have generally increased over time, including for geopolitical reasons
and in conjunction with military conflicts and defense activities, along with the number, intensity and sophistication of attempted attacks
and intrusions from around the world. During times of war and other major conflicts, we and the third parties upon which we rely may be
vulnerable to a heightened risk of these attacks, including cyber-attacks that could materially disrupt our systems and operations, supply
chain and ability to produce and distribute our products and product candidates. If any such events were to occur and cause interruptions
in our operations, it could result in a material disruption of our drug development programs and commercialization efforts. For example,
the loss of clinical study data from completed or ongoing clinical studies for any of our drug candidates could result in delays in our
regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Further, the risk of cyber-attacks or other
privacy or data security incidents may be heightened due to common, external attempts to attack our information technology systems and
data using means such as phishing, other social engineering and vulnerability exploitation. To the extent that any disruption or security
breach were to result in a loss of or damage to our data or
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applications or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development
or commercialization of our drug candidates could be delayed.
While we have not experienced any material disruptions to our business, systems or operations as a result of a cybersecurity incident
to date, if such an event were to occur and cause material interruptions in our operations, it could result in a material disruption of our
independent drug development programs and our business overall. For example, the loss of clinical trial data from ongoing or future
clinical trials for any of our product candidates could result in delays in regulatory approval efforts and significantly increase costs to
recover or reproduce the data. Our information security systems are also subject to laws and regulations requiring that we take measures
to protect the privacy and security of certain information we gather and use in our business. For example, HIPAA and its implementing
regulations impose, among other requirements, certain regulatory and contractual requirements regarding the privacy and security of
personal health information. In the European Union, the General Data Protection Regulation, or GDPR, further restricts all applicable
personal data, including information masked by a coding system that is not considered deidentified data under applicable law. In addition
to HIPAA and GDPR, numerous other federal and state laws, including, without limitation, state security breach notification laws, state
health information privacy laws and federal and state consumer protection laws, govern the collection, use, disclosure, protection and
storage of personal information. To the extent that any disruption or security breach of our information technology systems were to result
in a loss of or damage to data or applications, or inappropriate disclosure of third-party notifiable confidential or proprietary information,
personal health information, personal information or personal data, we could incur substantial liability under laws that protect the privacy
of personal information, our reputation would be damaged, and the further development of our product candidates could be delayed, any
of which could adversely affect our business. The costs related to significant security breaches or disruptions could be material and
exceed the limits of the cybersecurity insurance we maintain against such risks.
We cannot anticipate all possible types of security threats and we cannot guarantee that our data protection efforts and our
investments in information technology will prevent significant breakdowns, data leakages, security breaches in our systems, or those of
our third-party vendors and other contractors and consultants, or other cyber incidents that could have a material adverse effect upon our
reputation, business, operations, or financial condition.
Our business requires us to use hazardous materials, which increases our exposure to dangerous and costly accidents.
Our research and development activities involve the use of biological materials and small amounts of hazardous chemicals. The
company has internal policies and procedures for the safe handling and disposal of these materials, in full compliance with applicable
laws and regulations, including applicable OSHA, EPA, state and local regulations, and utilizing EPA licensed disposal companies and
facilities. Although we believe we have reduced our risk and impacts from these materials through our safety procedures, we cannot
completely eliminate the risk of accidental contamination or injury from these materials. The ongoing cost of complying with
environmental laws and regulations is significant and may increase in the future. All risks of environmental damage inherent to our
operations cannot be mitigated and failure to comply with applicable government regulations could result in the imposition of fines,
restrictions, or increased operational costs, which could impact our ability to carry on with our operations.
We face the risk of product liability claims, which could exceed our insurance coverage, and product recalls, each of which could
deplete our cash resources.
As a participant in the pharmaceutical, biotechnology and immunotherapeutic drug industries, we are exposed to the risk of product
liability claims alleging that use of our drug candidates caused an injury or harm. These claims can arise at any point in the development,
testing, manufacture, marketing or sale of our drug candidates and may be made directly by patients involved in clinical trials of our
products, by consumers or health care providers or by individuals, organizations or companies selling our products. Product liability
claims can be expensive to defend, even if the drug or drug candidate did not actually cause the alleged injury or harm.
Insurance covering product liability claims becomes increasingly expensive as a drug candidate moves through the development
pipeline to commercialization. However, there can be no assurance that such insurance coverage is or will continue to be adequate or
available to us at a cost acceptable to us or at all. We may choose or find it necessary under our collaborative agreements to increase our
insurance coverage in the future. We may not be able to secure greater or broader product liability insurance coverage on acceptable
terms or at reasonable costs when needed. Any liability for damages resulting from a product liability claim could exceed the amount of
our coverage, require us to pay a substantial monetary award from our own cash resources and have a material adverse effect on our
business, financial condition and results of operations. Moreover, a product recall, if required, could generate substantial
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negative publicity about our products and business and inhibit or prevent development of our drug candidates and, if approval is
obtained, commercialization of our future drugs.
Risks Related to Intellectual Property
We license technology from other companies to develop products, and those companies could influence research and development or
restrict our use of it. In addition, if we fail to comply with our obligations in our intellectual property licenses with third parties, we
could lose license rights that are important to our business.
Companies that license technologies to us that we use in our research and development programs may require us to achieve
milestones or devote minimum amounts of resources to develop products using those technologies. They may also require us to make
significant royalty and milestone payments, including a percentage of any sublicensing income, as well as payments to reimburse them
for patent costs. The number and variety of our research and development programs require us to establish priorities and to allocate
available resources among competing programs. From time to time, we may choose to slow down or cease our efforts on particular
products. If in doing so we fail to fully perform our obligations under a license, the licensor can terminate the license or permit our
competitors to use the technology. Termination of these licenses or reduction or elimination of our licensed rights may result in our
having to negotiate new or reinstated licenses with less favorable terms. Moreover, we may lose our right to market and sell any products
based on the licensed technology. The occurrence of such events could materially harm our business.
Our ability to successfully develop and, if regulatory approval is obtained, commercialize our drug candidates may be materially
adversely affected if we are unable to obtain and maintain effective intellectual property rights for our drug candidates and
technologies.
Our success depends in part on our ability to obtain and maintain patent protection and other intellectual property protection for our
drug candidates and proprietary technology. We have sought to protect our proprietary position by filing patent applications in the United
States and abroad related to our drug candidates and technology that are important to our business. This process is expensive and time-
consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely
manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to
obtain patent protection. Our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from using
our technologies or from developing competing drugs and technologies. We may also be unable to obtain patent term adjustments or
extensions (or similar rights, such as Supplementary Protection Certificates, in foreign countries) at the relevant times, or the duration of
any such adjustments, extensions or the like may be less than requested.
Biotechnology patents involve complex legal, scientific and factual questions and are highly uncertain and may also result in
different outcomes in different territories. To date, there is no consistent policy regarding the breadth of claims allowed in biotechnology
patents, particularly in regard to patents for technologies for human uses like those we use in our business. We cannot predict whether the
patents we or our licensors seek will issue. If such patents are issued, a competitor may challenge them and may potentially have them
revoked or limit their scope, for example based on existing or newly identified prior art or other issues of validity. Moreover, our patents
may not afford effective protection against competitors with similar technology. A successful challenge to any one of our patents could
result in a third party’s ability to use the technology covered by the patent. We also face the risk that others will infringe, avoid or
circumvent our patents. Technology that we license from others is subject to similar risks and this could harm our ability to use that
technology. If we, or a company that licenses technology to us, were not the first creator of an invention that we use, and/or if
inventorship were to be decided against us (or our licensor) in any relevant litigation, our use of the underlying product or technology
will face restrictions, including elimination, and our ability to defend and/or enforce any affected patent rights could also be materially
harmed.
If we must defend against suits brought against us or prosecute suits against others involving intellectual property rights, we will
incur substantial costs. In addition to any potential liability for significant monetary damages, a decision against us may require us to
obtain licenses to patents or other intellectual property rights of others on potentially unfavorable terms. If those licenses from third
parties are necessary but we cannot acquire them, we would attempt to design around the relevant technology, which would cause higher
development costs and delays and may ultimately prove impracticable.
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We may need to license intellectual property from third parties, and such licenses may not be available or may not be available on
commercially reasonable terms.
A third party may hold intellectual property, including patent rights, that are important or necessary to the development of our drug
candidates. It may be necessary for us to use the patented or proprietary technology of a third party to commercialize our own technology
or drug candidates, in which case we would be required to obtain a license from such third party. A license to such intellectual property
may not be available or may not be available on commercially reasonable terms, which could have a material adverse effect on our
business and financial condition.
We may be unable to protect the confidentiality of our trade secrets, thus harming our business and competitive position.
We rely upon trade secrets, including unpatented know-how, technology and other proprietary information to develop and maintain
our competitive position, which we seek to protect, in part, by confidentiality agreements with our employees and our collaborators and
consultants. We also have agreements with our employees that obligate them to assign their inventions to us. However, it is possible that
technology relevant to our business will be independently developed by a person that is not a party to such an agreement. Furthermore, if
the employees, consultants or collaborators that are parties to these agreements breach or violate the terms of these agreements, we may
not have adequate remedies for any such breach or violation, and we could lose our trade secrets through such breaches or violations.
Further, our trade secrets could be disclosed, misappropriated or otherwise become known or be independently discovered by our
competitors. In addition, intellectual property laws in foreign countries may not protect our intellectual property to the same extent as the
laws of the United States. If our trade secrets are disclosed or misappropriated, it would harm our ability to protect our rights and have a
material adverse effect on our business.
We may become involved in lawsuits to protect or enforce our patents, which could be expensive, time- consuming and unsuccessful.
Competitors may infringe our patents. To counter infringement or unauthorized use, we may be required to file infringement claims,
which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is
invalid or unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not
cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being
invalidated or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual
property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of
litigation.
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which
would be uncertain and could have a material adverse effect on the success of our business.
Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell our
drug candidates and use our proprietary technologies without infringing, misappropriating or otherwise violating the proprietary rights or
intellectual property of third parties. We may become party to, or be threatened with, future adversarial proceedings or litigation
regarding intellectual property rights with respect to our drug candidates and technology. Third parties may assert infringement claims
against us based on existing patents or patents that may be granted in the future. If we are found to infringe a third-party’s intellectual
property rights, we could be required to obtain a license from such third-party to continue developing our drug candidates and
technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were
able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We
could be forced, including by court order, to cease developing the infringing technology or product. In addition, we could be found liable
for monetary damages. Claims that we have misappropriated the confidential information or trade secrets of third parties can have a
similar negative impact on our business.
Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or
misappropriated trade secrets.
We employ individuals who were previously employed at universities or other diagnostic or biopharmaceutical companies, including
our competitors or potential competitors. Although we try to ensure that our employees and consultants do not use the proprietary
information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or
independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other
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proprietary information, of a former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail
in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel.
Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management
and other employees.
Regulatory Risks
We may not be able to obtain or maintain orphan drug designation or exclusivity for our product candidates.
We may seek orphan drug designation for some of our product candidates in the United States. Regulatory authorities in some
jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs.
Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or
condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States.
Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for
which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or the EMA from
approving another marketing application for the same indication for that drug during that time period. The applicable period is seven
years in the United States and ten years in Europe. The European exclusivity period can be reduced to six years if a drug no longer meets
the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan
drug exclusivity may be lost if the FDA or the EMA determines that the request for designation was materially defective or if the
manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.
We cannot assure you that any future application for orphan drug designation with respect to any product candidate will be granted.
If we are unable to obtain orphan drug designation in the United States, we will not be eligible to obtain the period of market exclusivity
that could result from orphan drug designation or be afforded the financial incentives associated with orphan drug designation. Even if
we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because
different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the
same drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more
effective or makes a major contribution to patient care.
Any fast track designation or grant of priority review status by the FDA may not actually lead to a faster development or regulatory
review or approval process, nor will it assure FDA approval of our product candidates. Additionally, our product candidates may treat
indications that do not qualify for priority review vouchers.
We may seek fast track designation for some of our product candidates or priority review of applications for approval of our product
candidates. If a drug is intended for the treatment of a serious or life- threatening condition and the drug demonstrates the potential to
address unmet medical needs for this condition, the drug sponsor may apply for FDA fast track designation. If a product candidate offers
major advances in treatment, the FDA may designate it eligible for priority review. The FDA has broad discretion whether or not to grant
these designations, so even if we believe a particular product candidate is eligible for these designations, we cannot assure you that the
FDA would decide to grant them. Even if we do receive fast track designation or priority review, we may not experience a faster
development process, review or approval compared to conventional FDA procedures. The FDA may withdraw fast track designation if it
believes that the designation is no longer supported by data from our clinical development program.
Any breakthrough therapy designation granted by the FDA for our product candidates may not lead to a faster development or
regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing
approval.
We may seek a breakthrough therapy designation for some of our product candidates. A breakthrough therapy is defined as a drug
that 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 that 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. For drugs and biologics that
have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to
identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens.
Drugs designated as breakthrough therapies by the FDA may also be eligible for accelerated approval if the relevant criteria are met.
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Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product
candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such
designation. In any event, the receipt of a breakthrough therapy designation for a product candidate may not result in a faster
development process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not
assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the
FDA may later decide that the products no longer meet the conditions for qualification or decide that the time period for FDA review or
approval will not be shortened.
If our processes and systems are not compliant with regulatory requirements, we could be subject to delays in submitting BLAs,
NDAs or restrictions on marketing of drugs after they have been approved.
We currently are developing drug candidates for regulatory approval and are in the process of implementing regulated processes and
systems required to obtain and maintain regulatory approval for our drug candidates. Certain of these processes and systems for
conducting clinical trials and manufacturing material must be compliant with regulatory requirements before we can apply for regulatory
approval for our drug candidates. These processes and systems will be subject to continual review and periodic inspection by the FDA
and other regulatory bodies. If we are unable to achieve compliance in a timely fashion or if compliance issues are identified at any point
in the development and approval process, we may experience delays in filing for regulatory approval for our drug candidates or delays in
obtaining regulatory approval after filing. In addition, any later discovery of previously unknown problems or safety issues with
approved drugs or manufacturing processes, or failure to comply with regulatory requirements may result in restrictions on such drugs or
manufacturing processes, withdrawal of drugs from the market, the imposition of civil or criminal penalties or a refusal by the FDA
and/or other regulatory bodies to approve pending applications for marketing approval of new drugs or supplements to approved
applications, any of which could have a material adverse effect on our business. In addition, we are a party to agreements that transfer
responsibility for complying with specified regulatory requirements, such as filing and maintenance of marketing authorizations and
safety reporting or compliance with manufacturing requirements, to our collaborators and third-party manufacturers. If our collaborators
or third-party manufacturers do not fulfill these regulatory obligations, any drugs for which we or they obtain approval may be subject to
later restrictions on manufacturing or sale or may even risk withdrawal, which could have a material adverse effect on our business.
We have conducted and are conducting clinical trials outside the United States and anticipate conducting additional clinical trials
outside the United States, and the FDA may not accept data from such trials.
We are currently conducting clinical trials for our product candidates in countries outside of the United States and we anticipate that
we will conduct additional clinical trials in countries outside the United States. Although the FDA may accept data from clinical trials
conducted outside the United States, acceptance of such study data by the FDA is subject to certain conditions. For example, the clinical
trial must be conducted in accordance with GCP requirements and the FDA must be able to validate the data from the clinical trial
through an onsite inspection if it deems such inspection necessary. Where data from foreign clinical trials are intended to serve as the
sole basis for marketing approval in the United States, the FDA will not approve the application on the basis of foreign data alone unless
those data are considered applicable to the U.S. patient population and U.S. medical practice, the clinical trials were performed by
clinical investigators of recognized competence, and the data is considered valid without the need for an on-site inspection by the FDA
or, if the FDA considers such an inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other
appropriate means. In addition, such clinical trials would be subject to the applicable local laws of the foreign jurisdictions where the
clinical trials are conducted. A description of any studies related to overdosage is also required, including information on dialysis,
antidotes, or other treatments, if known. There can be no assurance the FDA will accept data from clinical trials conducted outside of the
United States. If the FDA does not accept any such data, it would likely result in the need for additional clinical trials, which would be
costly and time-consuming and delay aspects of our development plan.
Risks inherent in conducting international clinical trials include, but are not limited to:
● foreign regulatory requirements that could burden or limit our ability to conduct our clinical trials;
● administrative burdens of conducting clinical trials under multiple foreign regulatory schema;
● foreign currency fluctuations which could negatively impact our financial condition since certain payments are paid in local
currencies;
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● manufacturing, customs, shipment and storage requirements;
● cultural differences in medical practice and clinical research; and
● diminished protection of intellectual property in some countries.
Changes in product candidate manufacturing or formulation may result in additional costs or delay.
As product candidates are developed through preclinical studies to late-stage clinical trials towards approval and commercialization,
it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered along the
way in an effort to optimize processes and results. During the course of a development program, sponsors may also change the contract
manufacturers used to produce the product candidates. 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 affect the results of clinical trials. Such changes may
also require additional testing, notification or approval by the FDA, EMA or other regulatory authorities. This could delay completion of
clinical trials; require the conduct of bridging clinical trials or studies, or the repetition of one or more clinical trials; increase clinical trial
costs; delay or prevent approval of our product candidates and jeopardize our ability to commence product sales and generate revenue.
Even if we receive regulatory approval for a drug candidate, we will be subject to ongoing regulatory obligations and continued
regulatory review, which may result in significant additional expense and subject us to penalties if we fail to comply with applicable
regulatory requirements.
Once regulatory approval has been granted, the approved product and its manufacturer are subject to continual review by the FDA
and/or non-U.S. regulatory authorities. Any regulatory approval that we or our collaboration partners receive for our drug candidates may
be subject to limitations on the indicated uses for which the product may be marketed or contain requirements for potentially costly post-
marketing follow-up studies to monitor the safety and efficacy of the product. In addition, if the FDA and/or non-U.S. regulatory
authorities approve any of our drug candidates, we will be subject to extensive and ongoing regulatory requirements by the FDA and
other regulatory authorities with regard to the labeling, packaging, adverse event reporting, storage, advertising, promotion and
recordkeeping for our products. In addition, manufacturers of our drug products are required to comply with cGMP regulations, which
include requirements related to quality control and quality assurance as well as the corresponding maintenance of records and
documentation. Further, regulatory authorities must inspect and approve these manufacturing facilities before they can be used to
manufacture our drug products, and these facilities are subject to continual review and periodic inspections by the FDA and other
regulatory authorities for compliance with cGMP regulations. If we or a third party discover previously unknown problems with a
product, such as adverse events of unanticipated severity or frequency or problems with the facility where the product is manufactured, a
regulatory authority may impose restrictions on that product, the manufacturer or us, including requiring withdrawal of the product from
the market or suspension of manufacturing. If we, our drug candidates or the manufacturing facilities for our drug candidates fail to
comply with regulatory requirements of the FDA and/or other non-U.S. regulatory authorities, we could be subject to administrative or
judicially imposed sanctions, including the following:
● warning letters;
● civil or criminal penalties and fines;
● injunctions;
● consent decrees;
● suspension or withdrawal of regulatory approval;
● suspension of any ongoing clinical studies;
● voluntary or mandatory product recalls and publicity requirements;
● refusal to accept or approve applications for marketing approval of new drugs;
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● restrictions on operations, including costly new manufacturing requirements; or
● seizure or detention of drugs or import bans.
The regulatory requirements and policies may change and additional government regulations may be enacted with which we may
also be required to comply. We cannot predict the likelihood, nature or extent of government regulation that may arise from future
legislation or administrative action, either in the United States or in other countries. If we are not able to maintain regulatory compliance,
we may not be permitted to market our future products, and our business may suffer.
We may be subject, directly or indirectly, to federal and state health care fraud and abuse laws, false claims laws, transparency and
pricing laws and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws,
we could face substantial penalties.
If we obtain FDA approval for any of our drug candidates and begin commercializing those products in the United States, our
operations will be directly, or indirectly through our customers, subject to various federal and state fraud and abuse laws, including,
without limitation, the federal Anti-Kickback Statute and the federal False Claims Act. These laws may affect, among other things, our
proposed sales, marketing and education programs. 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 that may affect our ability to operate include:
● the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting,
receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, the purchase 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 from Medicare, Medicaid or other third-
party payors that are false or fraudulent;
● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information
Technology for Economic and Clinical Health Act of 2009, or HITECH, and its implementing regulations, which impose
certain requirements relating to the privacy, security and transmission of individually identifiable health information;
● the federal transparency requirements under the Patient Protection and Affordable Care Act of 2010 (“ACA”) requires
manufacturers of drugs, devices, biologics and medical supplies to report to the Department of Health and Human Services
information related to physician payments and other transfers of value and physician ownership and investment interests;
● state law and foreign 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, and state 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; and
● state and federal laws, such as the Physician Sunshine Act, directed at generating transparency on financial issues, including
drug prices and payments made by drug companies to various entities and individuals involved in healthcare.
Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be
entirely eliminated. If our operations are found to be in violation of any of the laws described above or any other governmental
regulations that apply to us, we may be subject to penalties, including exclusion from payment by federal health care programs, civil and
criminal penalties, damages, fines 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. Moreover, achieving and sustaining compliance with applicable federal and state
privacy, security and fraud laws may prove costly.
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Compliance with laws and regulations pertaining to the privacy and security of health information may be time consuming, difficult
and costly, particularly in light of increased focus on privacy issues in countries around the world, including the U.S. and the EU.
We are subject to various domestic and international privacy and security regulations related to personal information, including
health information, that are appliable to our business and associated data processing activities. The confidentiality, collection, use and
disclosure of personal data, including clinical trial patient-specific information, are subject to governmental regulation generally in the
country that the personal data were collected or used. In the United States, we are subject to various state and federal privacy and data
security regulations, including but not limited to HIPAA and as amended by the HITECH Act. HIPAA imposes specified requirements
relating to the privacy, security and transmission of individually identifiable health information, and mandates, among other things, the
adoption of uniform standards for the electronic exchange of information in common health care transactions, as well as standards
relating to the privacy and security of individually identifiable health information, which require the adoption of administrative, physical
and technical safeguards to protect such information. We may also be subject to state security breach notification laws, state laws
protecting the privacy and security of health and personal information, and federal and state consumer protections laws which regulate
the collection, use, disclosure and transmission of personal information. These laws may overlap and conflict with each other, and each
of these laws is subject to varying interpretations by courts and government agencies, creating complex compliance issues for us. In the
EU, personal data includes any information that relates to an identified or identifiable natural person with health information carrying
additional obligations, including obtaining the explicit consent from the individual for collection, use or disclosure of the information.
We are also subject to the EU General Data Protection Regulation 2016/679 (“GDPR”). Violations of the GDPR can carry hefty fines. In
addition, we may be subject to additional national laws and regulations that govern the privacy and security of health information in
certain circumstances, many of which differ from each other in significant ways, thus complicating compliance efforts. If we fail to
comply with applicable data protection laws and regulations, we could be subject to penalties or sanctions, including criminal penalties.
Furthermore, the legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an
increasing amount of focus on privacy and data protection issues.
Compliance with these laws may be time-consuming, difficult and costly. If we fail to comply with applicable laws, regulations or
duties relating to the use, privacy or security of personal data we could be subject to the imposition of significant civil and criminal
penalties, be forced to alter our business practices and suffer reputational harm.
Changes in health care law and implementing regulations, including government restrictions on pricing and reimbursement, as well
as health care policy and other health care payor cost-containment initiatives, may have a material adverse effect on us.
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed
changes regarding the regulatory system, health care system and efforts to control health care costs, including drug prices, that could
have a significant negative impact on our business, including preventing, limiting or delay regulatory approval of our drug candidates
and reducing the sales and profits derived from our products once they are approved. For example, in the United States, the ACA
substantially changed the way health care is financed by both governmental and private insurers and significantly affects the
pharmaceutical industry. Many provisions of ACA impact the biopharmaceutical industry, including that in order for a biopharmaceutical
product to receive federal reimbursement under the Medicare Part B 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 drug pricing program under the Public Health
Services Act, or PHS. Since its enactment, there have been judicial and Congressional challenges and amendments to certain aspects of
ACA. There is continued uncertainty about the implementation of ACA, including the potential for further amendments to the ACA and
legal challenges to or efforts to repeal the ACA.
In addition, the Inflation Reduction Act of 2022, enacted in August 2022, empowers the Centers for Medicare and Medicaid
Services to negotiate directly with pharmaceutical companies to set the prices for a limited set of high-cost drugs covered by Medicare,
and puts penalties in place for drug manufacturers who increase their Medicare prices by more than the rate of inflation.
Other examples of proposed changes include, but are not limited to, expanding post-approval requirements, changing the Orphan
Drug Act, and restricting sales and promotional activities for pharmaceutical products.
We cannot be sure whether additional legislative changes will be enacted, or whether government regulations, guidance or
interpretations will be changed, or what the impact of such changes would be on the marketing approvals, sales, pricing, or
reimbursement of our drug candidates or products, if any, may be.
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Risks Related to Our Capital Stock
Our history of losses and uncertainty of future profitability make our common stock a highly speculative investment.
We have had no commercial revenue to date from sales of our drug candidates. We had an accumulated deficit of $1.4 billion as of
December 31, 2023. We expect to spend substantial funds to continue the research and development testing of our drug candidates.
In anticipation of FDA approval of these products, we will need to make substantial investments to establish sales, marketing,
quality control, regulatory compliance capabilities and commercial manufacturing alliances. These investments will increase if and when
any of these drug candidates receive FDA approval. We cannot predict how quickly our lead drug candidates will progress through the
regulatory approval process. As a result, we may continue to lose money for several years.
We cannot be certain that we will achieve or sustain profitability in the future. Failure to achieve profitability could diminish our
ability to sustain operations, pay dividends on our common stock, obtain additional required funds and make required payments on our
present or future indebtedness.
Our share price has been and could remain volatile.
The market price of our common stock has historically experienced and may continue to experience significant volatility. From
January 2022 through December 2023, the market price of our common stock has fluctuated from a high of $48.40 per share in the first
quarter of 2023, to a low of $19.85 per share in the second quarter of 2022. Our progress in developing and commercializing our
products, the impact of government regulations on our products and industry, the potential sale of a large volume of our common stock
by stockholders, our quarterly operating results, changes in general conditions in the economy or the financial markets and other
developments affecting us or our competitors could cause the market price of our common stock to fluctuate substantially with
significant market losses. If our stockholders sell a substantial number of shares of common stock, especially if those sales are made
during a short period of time, those sales could adversely affect the market price of our common stock and could impair our ability to
raise capital. In addition, in recent years, the stock market has experienced significant price and volume fluctuations. This volatility has
affected the market prices of securities issued by many companies for reasons unrelated to their operating performance and may
adversely affect the price of our common stock. In addition, we could be subject to a securities class action litigation as a result of
volatility in the price of our stock, which could result in substantial costs and diversion of management’s attention and resources and
could harm our stock price, business, prospects, results of operations and financial condition.
Our ability to use our net operating loss carryforwards will be subject to limitation and, under certain circumstances, may be
eliminated.
As of December 31, 2023, we had net operating loss carryforwards, or NOLs, of approximately $618.4 million for federal income
tax purposes, and $1.0 billion for state income tax purposes. Utilization of these NOLs depends on many factors, including our future
income, which cannot be assured. In addition, utilization of our net operating loss and research and development credit carryforwards
may be subject to substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in
the future provided by Section 382 of the Internal Revenue Code of 1986, or Section 382, as well as similar state provisions. In general,
an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public
groups in the stock of a corporation by more than 50 percentage points over a three-year period.
In October 2007, June 2009, December 2009 and December 2013, we experienced a change in ownership as defined by Section 382.
Historically, we have raised capital through the issuance of capital stock on several occasions which, combined with shareholders’
subsequent disposition of those shares, has resulted in three changes of control, as defined by Section 382. As a result of these ownership
changes, utilization of at least some of our federal NOL carryforwards is subject to an annual limitation. We have not undertaken a study
to assess whether an ownership change or multiple ownership changes have occurred for (i) acquired businesses with NOLs prior to
being acquired by the Company, (ii) the Company on the state level, (iii) the Company since March 2015 or (iv) research and
development credits. If, based on such a study, we were to determine that there has been an ownership change at any time, utilization of
net operating loss or tax credit carryforwards would be subject to an annual limitation under Section 382 (or similar state provisions).
Any unused annual limitation may be carried over to later years, and the amount of the limitation may, under certain circumstances,
be subject to adjustment if the fair value of our net assets is determined to be below or in excess of the tax basis of such
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assets at the time of the ownership change, and such unrealized loss or gain is recognized during the five-year period after the ownership
change. Subsequent ownership changes, as defined in Section 382, could further limit the amount of net operating loss carryforwards and
research and development credits that can be utilized annually to offset future taxable income. Additionally, the Tax Cuts and Jobs Act
limited the deduction for net operating losses to 80% of taxable income while providing that net operating loss carryovers for years after
2017 will not expire. The CARES Act provides relief to corporate taxpayers by permitting a five year carryback of 2018 – 2020 NOLs,
removing the 80% limitation on the carryback of those NOLs, and accelerates refunds for minimum tax credit carryforwards, along with
a few other provisions. During the twelve months ended December 31, 2023, no material adjustments were made to provision amounts
recorded as a result of the enactment of the CARES Act.
Refer to Note 15, “Income Taxes,” in the accompanying notes to the financial statements for additional discussion on income taxes.
General Risk Factors
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our
financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which
would harm our business and the trading price of our common stock.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with
adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required or improved controls, or
difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. We have designed, implemented
and tested the internal control over financial reporting required to comply with this obligation, which was and is time consuming, costly,
and complicated. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that
the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be
detected. Any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act of 2002, or any subsequent testing by
our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are
deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other
areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported
financial information, which could have a negative effect on the trading price of our common stock.
We have many competitors in our field, and they may develop technologies that make ours obsolete.
Biotechnology, pharmaceuticals and therapeutics are rapidly evolving fields in which scientific and technological developments are
expected to continue at a rapid pace. We have many competitors in the U.S. and abroad. The competitors of which we are aware that
have initiated a Phase 3 study or have obtained marketing approval for a potentially competitive drug to barzolvolimab for treatment of
CSU, CIndU, PN and EoE include: Allakos (lirentelimab for EoE), Celltrion (CT-P39; omalizumab biosimilar for CSU),
Galderma/Chugai (nemolizumab for PN), Novartis (remibrutinib for CSU), and Regeneron/Sanofi (Dupixent for CSU, CIndU, PN and
EoE). Our success depends upon our ability to develop and maintain a competitive position in the product categories and technologies on
which we focus. Many of our competitors have greater capabilities, experience and financial resources than we do. Competition is
intense and is expected to increase as new products enter the market and new technologies become available. Our competitors may:
● develop technologies and products that are more effective than ours, making ours obsolete or otherwise noncompetitive;
● obtain regulatory approval for products more rapidly or effectively than us; and
● obtain patent protection or other intellectual property rights that would block our ability to develop competitive products.
We or the third parties upon whom we depend may be adversely affected by natural disasters or other unforeseen events and our
business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Any unplanned event, such as flood, fire, explosion, earthquake, extreme weather condition, power shortage, telecommunication
failure or other natural or manmade accidents or incidents that result in us being unable to fully utilize our facilities, or the manufacturing
facilities of our third-party CMOs, could severely disrupt our operations and have a material adverse effect on our business, results of
operations, financial condition and prospects. For example, our operations are located primarily on the east coast
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of the United States, and any adverse weather event or natural disaster, such as a hurricane or heavy snowstorm, could have a material
adverse effect on a substantial portion of our operations. If any event occurred that prevented us from using all or a significant portion of
our manufacturing and lab facilities, damaged critical infrastructure, such as third-party manufacturing facilities, or otherwise disrupted
operations and travel, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time.
The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar
event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which
could have a material adverse effect on our business.
We face risks related to health epidemics and outbreaks, including COVID-19, which could significantly disrupt our preclinical
studies and clinical trials.
Disease outbreaks, epidemics and pandemics, including COVID-19, in regions where we have concentrations of clinical trial sites
and other business operations, could adversely affect our business, including by causing significant disruptions in our operations and/or
in the operations of manufacturers and CROs upon whom we rely. Disease outbreaks, epidemics and pandemics may have negative
impacts on our ability to initiate new clinical trial sites, enroll new patients and maintain existing patients who are participating in
clinical trials, which may result in increased clinical trial costs, longer timelines and delay in our ability to obtain regulatory approvals of
our product candidates, if at all. For example, patient enrollment and recruitment could be delayed due to local clinical trial site protocols
designed to protect staff and patients from certain outbreaks, which could delay the expected timelines for data readouts of our
preclinical studies and clinical trials. Additionally, general supply chain issues may be exacerbated during disease outbreaks, epidemics
or pandemics and may also impact the ability of our clinical trial sites to obtain basic medical supplies used in our trials in a timely
fashion, if at all. Moreover, the extent to which disease outbreaks, epidemics and pandemics may impact our business, results of
operations and financial position will depend on future developments, which are highly uncertain and cannot be predicted with
confidence. New health epidemics or pandemics may emerge that result in similar or more severe disruptions to our business. A future
disease outbreak, epidemic or pandemic adversely affects our business, financial condition, results of operations and growth prospects.
The future progression of the COVID-19 epidemic and its effects on our business and operations are uncertain. The impacts of a
potential resurgence of COVID-19 could pose the risk that we or our employees, suppliers, customers and others may be restricted or
prevented from conducting business activities for indefinite or intermittent periods of time, including as a result of employee health and
safety concerns, shutdowns, shelter in place orders, travel restrictions and other actions and restrictions that may be prudent or required
by governmental authorities. This could disrupt our ability to operate our business, including producing drug product and administering
our preclinical and clinical studies. In addition, fluctuations in demand and other implications associated with the COVID-19 pandemic
have resulted in, and could continue resulting in, certain supply chain constraints and challenges.
Disruptions in the global economy and supply chains may have a material adverse effect on our business, financial condition and
results of operations.
The disruptions to the global economy due to geopolitical events have impeded, and may continue to impede in the future, global
supply chains, resulting in longer lead times and also increased critical component costs and freight expenses. We have taken steps to
minimize the impact of these increased costs by working closely with our suppliers. Despite the actions we have undertaken to minimize
the impacts from disruptions to the global economy, there can be no assurances that unforeseen future events in the global supply chain,
and inflationary pressures, will not have a material adverse effect on our business, financial condition and results of operations.
We depend greatly on the intellectual capabilities and experience of our key executives and scientists, and the loss of any of them
could affect our ability to develop our products.
The loss of any of our executive officers could harm us. We entered into employment agreements with each of our executive
officers, although an employment agreement as a practical matter does not guarantee retention of an employee. We also depend on our
scientific and clinical collaborators and advisors, all of whom have outside commitments that may limit their availability to us. In
addition, we believe that our future success will depend in large part upon our ability to attract and retain highly skilled scientific,
managerial and marketing personnel, particularly as we expand our activities in clinical trials, the regulatory approval process and sales
and manufacturing. We routinely enter into consulting agreements with our scientific and clinical collaborators and advisors, key opinion
leaders and heads of academic departments in the ordinary course of our business. We also enter into contractual agreements with
physicians and institutions who recruit patients into our clinical trials on our behalf in the ordinary course of our business.
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Notwithstanding these arrangements, we face significant competition for this type of personnel from other companies, research and
academic institutions, government entities and other organizations. We cannot predict our success in hiring or retaining the personnel we
require for continued growth.
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 intentional failures to
comply with FDA regulations, provide accurate information to the FDA, comply with applicable privacy laws, comply with
manufacturing standards we have established, comply with federal and state health care fraud and abuse laws and regulations, report
financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business
arrangements in the health care industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing
and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and
promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve
the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to
our reputation. We have adopted a Code of Business Conduct and Ethics and launched a Health Care Compliance program, but it is not
always possible to identify and deter employee misconduct. The precautions we take and the investments we make 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 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
effect on our business and results of operations, including the imposition of significant fines or other sanctions.
We may not be able to maintain compliance with the Listing Rules of the NASDAQ Stock Exchange.
There can be no assurance that in the future we will be able to maintain compliance with the Nasdaq Listing Rules, including the
minimum bid price requirement and other applicable corporate governance requirements. If we fail to maintain compliance with the
minimum bid requirement or to meet the other applicable continued listing requirements for the NASDAQ Capital Market in the future
and NASDAQ determines to delist our common stock, the delisting could adversely affect the market price and liquidity of our common
stock and reduce our ability to raise additional capital. In addition, if our common stock is delisted from NASDAQ and the trading price
remains below $5.00 per share, trading in our common stock might also become subject to the requirements of certain rules promulgated
under the Exchange Act, which require additional disclosure by broker-dealers in connection with any trade involving a stock defined as
a “penny stock” (generally, any equity security not listed on a national securities exchange or quoted on NASDAQ that has a market
price of less than $5.00 per share, subject to certain exceptions).
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 1C. CYBERSECURITY
Cybersecurity Risk Management and Strategy
To effectively prevent, detect and respond to cybersecurity threats, we maintain a cyber risk management program under the
responsibility of the head of the Information Technology (“IT”) function. Management and administration of cybersecurity systems and
activities are primarily outsourced to consultants who have cross-functional expertise in cyber security and who perform the work under
the supervision of the IT head. Our IT head, in turn reports to the Senior Vice-President and General Counsel who is responsible for and
knowledgeable of legal and contractual cybersecurity risk for the organization. The program is comprised of policies, standards,
architecture, and processes, which are reviewed and updated on a periodic basis. The program leverages a multilayered approach of
utilizing different practices, technologies, vendors or techniques without an overreliance on a single vendor. We engage with consultants
to help develop and evidence the policies, standards, and processes in a manner consistent with applicable legal requirements, and also
evaluate and adopt cybersecurity software from reputable vendors in cybersecurity, some that provide software as a service solutions
backed by a Security Operations Center. We also engage separate third parties to provide penetration testing, risk consulting,
cybersecurity incident assessment and forensics, as necessary and in addition to IT’s internal risk assessment processes. We work with
many companies that provide hosted software or support for software systems. It is important for these
50
Table of Contents
companies to also have effective cybersecurity measures to protect data and systems. We have a self-attestation form to assess
cybersecurity readiness that is sent to select vendors based on a risk assessment. For certain vendors, we request System and
Organization Controls (SOC) reports or similar documents to provide assurance that the vendors have audited practices or practices in
keeping with our legal requirements even if SOC audit documentation does not exist. We have also engaged legal counsel to advise on
cybersecurity matters and we have developed an escalation protocol to report cybersecurity incidents as legally required. No material
cybersecurity incidents have occurred to date.
The program also includes training that reinforces our policies, standards, and practices, as well as the expectation that employees
comply with these policies. The training engages personnel on how to identify potential cybersecurity risks and protect our resources and
information. This training is mandatory for all employees on a periodic basis, and it is supplemented by testing initiatives, including
periodic phishing tests. We maintain a cybersecurity risk insurance policy.
Governance; Board Oversight
Our Audit Committee is responsible for reviewing our information security programs, including cybersecurity. IT provides regular
updates to the Audit Committee on our IT security strategy, secure score assessments, penetration testing results, and status of risk
mitigation activities, where applicable. IT also notifies the Audit Committee and Executive Committee of any cybersecurity incidents
(suspected or actual) and provides updates on the incidents as well as cybersecurity risk mitigation activities, as appropriate.
Item 2. PROPERTIES
As of December 31, 2023, our significant leased properties are described below.
Property Location
Hampton, New Jersey
Fall River, Massachusetts
New Haven, Connecticut
Approximate
Square Feet
Lease Expiration Date
July 2025(1)
33,400 Headquarters, Office and Laboratory
33,900 Manufacturing, Office and Laboratory July 2025(2)
April 2025
17,700 Office and Laboratory
Use
(1) Lease includes one renewal option of two years followed by one renewal option of three years.
(2) Lease includes one renewal option of two years followed by one renewal option of three years.
Item 3. LEGAL PROCEEDINGS
We are not currently a party to any material legal proceedings.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
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Table of Contents
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Our common stock currently trades on the Nasdaq Capital Market (NASDAQ) under the symbol “CLDX.” As of February 14, 2024,
there were approximately 133 shareholders of record of our common stock. On February 14, 2024 the closing price of our common
stock, as reported by NASDAQ, was $36.26 per share. We have not paid any dividends on our common stock since our inception and do
not intend to pay any dividends in the foreseeable future.
CELLDEX THERAPEUTICS, INC., NASDAQ MARKET INDEX — U.S. AND PEER GROUP INDICES
The graph below compares the cumulative total stockholder return on the common stock for the period from December 31, 2018
through December 31, 2023, with the cumulative return on (i) NASDAQ U.S. Benchmark TR Index and (ii) NASDAQ Pharmaceutical
(Subsector) Index. The comparison assumes investment of $100 on December 31, 2018 in our common stock and in each of the indices
and, in each case, assumes reinvestment of all dividends. The points on the graph are as of December 31 of the year indicated.
Celldex Therapeutics, Inc.
NASDAQ U.S. Benchmark TR Index
NASDAQ Pharmaceutical (Subsector) Index
Item 6. [Reserved]
2018
$ 100
$ 100
$ 100
2019
$
75
$ 131
115
$
2020
$ 590
$ 159
$ 127
2021
$ 1,302
200
$
157
$
2022
$ 1,501
161
$
175
$
2023
$ 1,336
203
$
182
$
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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are a biopharmaceutical company dedicated to exploring the science of mast cell biology and developing therapeutic antibodies
which have the ability to engage the human immune system and/or directly affect critical pathways to improve the lives of patients with
severe inflammatory, allergic, autoimmune and other devastating diseases. Our drug candidates include monoclonal and bispecific
antibodies designed to address mast cell mediated diseases for which available treatments are inadequate.
We are focusing our efforts and resources on the continued research and development of
● Barzolvolimab (also referred to as CDX-0159), a monoclonal antibody that specifically binds the KIT receptor and potently
inhibits its activity, which is currently being studied across multiple mast cell driven diseases including
-
-
-
Chronic Urticarias: In November 2023, we announced that our Phase 2 study in chronic spontaneous urticaria (CSU)
achieved the primary efficacy endpoint (statistically significant mean change from baseline to week 12 of urticaria
activity score compared to placebo) and was well tolerated. The study is ongoing and patients will continue to receive
barzolvolimab for 52 weeks of treatment; we plan to report topline 52 week data in the second half of 2024. We are
currently planning for the initiation of Phase 3 studies in CSU in summer 2024. A Phase 2 study in chronic inducible
urticaria (CIndU) is currently enrolling patients and we expect to report data from this study in the second half of
2024;
Prurigo Nodularis (PN): In November 2023, we reported positive data from a Phase 1b study in PN that supports
further development of barzolvolimab in this indication and we are currently planning for the initiation of a Phase 2
study in PN in early 2024;
Eosinophilic Esophagitis (EoE): A Phase 2 study in EoE was initiated in June 2023 and enrollment is ongoing.
● Our next generation bispecific antibody platform to support pipeline expansion with additional candidates for inflammatory
diseases and oncology. Targets are being selected based on new science as well as their compatibility to be used in bispecific
antibody formats with our existing antibody programs. Development is focused on emerging, important pathways controlling
inflammatory diseases or immunity to tumors.
Our goal is to build a fully integrated, commercial-stage biopharmaceutical company that develops important therapies for patients
with unmet medical needs. We believe our program assets provide us with the strategic options to either retain full economic rights to our
innovative therapies or seek favorable economic terms through advantageous commercial partnerships. This approach allows us to
maximize the overall value of our technology and product portfolio while best ensuring the expeditious development of each individual
product.
The expenditures that will be necessary to execute our business plan are subject to numerous uncertainties. Completion of clinical
trials may take several years or more, and the length of time generally varies substantially according to the type, complexity, novelty and
intended use of a drug candidate. It is not unusual for the clinical development of these types of drug candidates to each take five years or
more, and total development costs could exceed hundreds of millions of dollars for each drug candidate. We estimate that clinical trials
of the type we generally conduct are typically completed over the following timelines:
Clinical Phase
Phase 1
Phase 2
Phase 3
53
Estimated
Completion
Period
1 – 2 Years
1 – 5 Years
1 – 5 Years
Table of Contents
The duration and the cost of clinical trials may vary significantly over the life of a project as a result of differences arising during the
clinical trial protocol, including, among others, the following:
● the number of patients that ultimately participate in the trial;
● the duration of patient follow-up that seems appropriate in view of results;
● the number of clinical sites included in the trials;
● the length of time required to enroll suitable patient subjects; and
● the efficacy and safety profile of the drug candidate.
We test potential drug candidates in numerous preclinical studies for safety, toxicology and immunogenicity. We may then conduct
multiple clinical trials for each drug candidate. As we obtain results from trials, we may elect to discontinue or delay clinical trials for
certain drug candidates in order to focus our resources on more promising drug candidates.
An element of our business strategy is to pursue the discovery, research and development of a broad portfolio of drug candidates.
This is intended to allow us to diversify the risks associated with our research and development expenditures. To the extent we are unable
to maintain a broad range of drug candidates, our dependence on the success of one or a few drug candidates increases.
Regulatory approval is required before we can market our drug candidates as therapeutic products. In order to proceed to subsequent
clinical trial stages and to ultimately achieve regulatory approval, the regulatory agencies must conclude that our clinical data
demonstrate that our product candidates are safe and effective. Historically, the results from preclinical testing and early clinical trials
(through Phase 2) have often not been predictive of results obtained in later clinical trials. A number of new drugs and biologics have
shown promising results in early clinical trials but subsequently failed to establish sufficient safety and efficacy data to obtain necessary
regulatory approvals.
Furthermore, our business strategy includes the option of entering into collaborative arrangements with third parties to complete the
development and commercialization of our drug candidates. In the event that third parties take over the clinical trial process for one of
our drug candidates, the estimated completion date would largely be under control of that third party rather than us. We cannot forecast
with any degree of certainty which proprietary products, if any, will be subject to future collaborative arrangements, in whole or in part,
and how such arrangements would affect our development plan or capital requirements. Our programs may also benefit from subsidies,
grants, contracts or government or agency-sponsored studies that could reduce our development costs.
As a result of the uncertainties discussed above, among others, it is difficult to accurately estimate the duration and completion costs
of our research and development projects or when, if ever, and to what extent we will receive cash inflows from the commercialization
and sale of a product. Our inability to complete our research and development projects in a timely manner or our failure to enter into
collaborative agreements, when appropriate, could significantly increase our capital requirements and could adversely impact our
liquidity. These uncertainties could force us to seek additional, external sources of financing from time to time in order to continue with
our business strategy. Our inability to raise additional capital, or to do so on terms reasonably acceptable to us, would jeopardize the
future success of our business.
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Table of Contents
During the past five years through December 31, 2023, we incurred an aggregate of $338.8 million in research and development
expenses. The following table indicates the amount incurred for each of our significant research programs and for other identified
research and development activities during the years ended December 31, 2023, 2022 and 2021. The amounts disclosed in the following
table reflect direct research and development costs, license fees associated with the underlying technology and an allocation of indirect
research and development costs to each program.
Barzolvolimab/Anti-KIT Program
CDX-585
Other Programs
Total R&D Expense
Clinical Development Programs
Barzolvolimab (also referred to as CDX-0159)
Year Ended
Year Ended
Year Ended
December 31, 2023 December 31, 2022 December 31, 2021
$
$
(In thousands)
79,913
6,357
31,741
118,011
$
$
51,220
9,793
21,245
82,258
$
$
24,395
7,133
21,783
53,311
Barzolvolimab is a humanized monoclonal antibody that specifically binds the receptor tyrosine kinase KIT and potently inhibits its
activity. KIT is expressed in a variety of cells, including mast cells, and its activation by its ligand SCF regulates mast cell growth,
differentiation, survival, chemotaxis and degranulation. Barzolvolimab is designed to block KIT activation by disrupting both SCF
binding and KIT dimerization. By targeting KIT, barzolvolimab has been shown to inhibit mast cell activity and decrease mast cell
numbers, which we believe could provide potential clinical benefit in mast cell related diseases.
Barzolvolimab was initially studied in chronic spontaneous urticaria (CSU) and chronic inducible urticaria (CIndU), diseases where
mast cell degranulation plays a central role in the onset and progression of the disease. Phase 1 studies in CSU and CIndU were
successfully completed and Phase 2 studies are ongoing. In November 2023, we reported that barzolvolimab achieved the primary
efficacy endpoint in the ongoing Phase 2 CSU study, with a statistically significant mean change from baseline to week 12 of UAS7
(weekly urticaria activity score) compared to placebo and was well tolerated. We are currently planning Phase 3 studies in CSU which
are expected to initiate in summer 2024.
Based on the positive results reported in urticaria, we expanded development of barzolvolimab into additional indications where
mast cells are believed to play an important role. We are conducting an ongoing Phase 2 study in eosinophilic esophagitis (EoE) and are
preparing to initiate a Phase 2 study in prurigo nodularis (PN) in early 2024 after reporting positive data from a Phase 1b study in PN in
late 2023. We continue to assess potential opportunities for barzolvolimab in other diseases where mast cells play an important role, such
as dermatologic, respiratory, allergic, gastrointestinal and ophthalmic conditions.
Chronic Spontaneous Urticaria (CSU)
CSU presents as itchy hives, angioedema or both for at least six weeks without a specific trigger; multiple episodes can play out over
years or even decades. It is one of the most frequent dermatologic diseases with a prevalence of 0.5-1.0% of the total population or up to
approximately 1 to 3 million patients in the United States (Weller et al. 2010. Hautarzt. 61(8), Bartlett et al. 2018. DermNet.Org).
Approximately 50% of patients with CSU achieve symptomatic control with antihistamines. Omalizumab, an IgE inhibitor, provides
relief for roughly half of the remaining antihistamine refractory patients. Consequently, there is a need for additional therapies.
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Table of Contents
We have completed a Phase 1b randomized, double-blind, placebo-controlled multi-center study of barzolvolimab in CSU. The
study was designed to assess the safety of multiple ascending doses of barzolvolimab in patients with CSU who remain symptomatic
despite treatment with antihistamines. Secondary and exploratory objectives included pharmacokinetic and pharmacodynamic
assessments, clinical activity outcomes and quality of life assessments. Barzolvolimab was administered intravenously as add on
treatment to H1-antihistamines, either alone or in combination with H2-antihistamines and/or leukotriene receptor agonists. 45 patients
with moderate to severe CSU refractory to antihistamines were enrolled and treated [35 barzolvolimab (n=9 in 0.5 mg/kg; n=8 in 1.5
mg/kg; n=9 in 3.0 mg/kg; n=9 in 4.5 mg/kg) and 10 placebo].
At saturating doses (1.5 mg/kg and higher), barzolvolimab resulted in rapid, marked and durable responses in patients with moderate
to severe CSU refractory to antihistamines. The 1.5 mg/kg, 3.0 mg/kg and 4.5 mg/kg dose groups showed similar markedly improved
urticaria symptoms, including rapid onset of responses (as early as 1 week after the first dose) and prolonged disease control with
sustained durability up to 24 weeks. Patients with prior omalizumab therapy also had similar symptom improvement as all patients.
● Mean reduction from baseline in weekly urticaria activity score (UAS7) at week 12 was 67% in the 1.5 mg/kg dose group
(n=8), 67% in the 3.0 mg/kg dose group (n=9) and 82% in the 4.5 mg/kg dose group (n=9). Mean reduction from baseline in
UAS7 at week 24 was 80% in the 1.5 mg/kg dose group (n=7), 70% in the 3.0 mg/kg dose group (n=6) and 77% in the 4.5
mg/kg dose group (n=7).
● Complete response (UAS7=0) at week 12 was 57% in the 1.5 mg/kg dose group, 44% in the 3.0 mg/kg dose group and 67% in
the 4.5 mg/kg dose group. Complete response (UAS7=0) at week 24 was 57% in the 1.5 mg/kg dose group, 67% in the 3.0
mg/kg dose group and 43% in the 4.5 mg/kg dose group.
● Well-controlled disease (UCT≥ 12) at week 12 was 75% in the 1.5 mg/kg dose group, 63% in the 3.0 mg/kg dose group and
89% in the 4.5 mg/kg dose group. Well-controlled disease (UCT≥ 12) at week 24 was 75% in the 1.5 mg/kg dose group, 67% in
the 3.0 mg/kg dose group and 67% in the 4.5 mg/kg dose group.
● During post-treatment follow up, 71% (10 of 14) of patients who had been treated with doses greater than or equal to 1.5 mg/kg
and had a complete response (UAS7=0) at week 12, remained urticaria free at week 24 (patients received last dose of
barzolvolimab at week 8).
● Profound and durable improvement in angioedema symptoms as measured through the weekly angioedema activity score
(AAS7) was achieved across all dose levels evaluated with sustained activity observed with the 1.5 mg/kg and greater dose
levels.
● Patients also reported improvements in quality of life outcomes as assessed by the Dermatology Life Quality Index (DLQI)
which surveys patients’ perceptions of symptoms and feelings, daily activities, leisure, work and school performance, personal
relationships and treatment.
● Tryptase suppression, indicative of mast cell depletion, paralleled symptom improvement, demonstrating the impact of mast
cell depletion on CSU disease activity.
● Barzolvolimab was well tolerated. Most AEs were mild or moderate in severity and resolved while on study. The most common
treatment emergent adverse events were hair color changes, COVID-19, headache, neutropenia and urinary tract infections
(UTIs). UTIs and COVID-19 were reported as unrelated to treatment. Generally transient, asymptomatic and mild changes in
hematologic parameters were observed, consistent with observations from prior studies. No pattern of further decrease was
observed with multiple dose administration.
Data from this study were reported across multiple medical meetings, including the American Academy of Allergy, Asthma &
Immunology (AAAAI) Annual Meeting in February 2023, the European Academy of Allergy and Clinical Immunology (EAACI)
Annual Congress in June 2023 and the European Academy of Dermatology & Venereology (EADV) Congress in October 2023.
In June 2022, we initiated dosing in a Phase 2 study in patients with CSU who remained symptomatic despite antihistamine therapy;
in July 2023, we announced that enrollment was complete. The study is being conducted at approximately 75 sites across 9
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Table of Contents
countries. The study is a randomized, double-blind, placebo-controlled, parallel group Phase 2 study evaluating the efficacy and safety
profile of multiple dose regimens of barzolvolimab to determine the optimal dosing strategy. 208 patients have been randomly assigned
on a 1:1:1:1 ratio to receive subcutaneous injections of barzolvolimab at 75 mg every 4 weeks, 150 mg every 4 weeks, 300 mg every 8
weeks or placebo during a 16-week placebo-controlled treatment phase. After 16 weeks, patients then enter a 36-week active treatment
period, in which patients receiving placebo or the 75 mg dose are randomized to receive barzolvolimab 150 mg every 4 weeks or 300 mg
every 8 weeks; patients already randomized to the 150 mg and 300 mg treatment arms remain on the same regimen as during the
placebo-controlled treatment period. After 52 weeks, patients then enter a follow-up period for an additional 24 weeks. The primary
endpoint of the study is mean change in baseline to week 12 in UAS7 (weekly urticaria activity score). Secondary endpoints include
safety and other assessments of clinical activity including ISS7 (weekly itch severity score), HSS7 (weekly hive severity score) and
AAS7 (weekly angioedema activity score).
Topline data from this study were presented in November of 2023 and 12 week treatment results were presented at the American
Academy of Allergy, Asthma & Immunology (AAAAI) Annual Meeting in February 2024. Data from the 208 patients randomized in the
study showed that barzolvolimab achieved the primary efficacy endpoint, with a statistically significant mean change from baseline to
week 12 in UAS7 compared to placebo at all dose levels. Secondary and exploratory endpoints in the study were also achieved at week
12 and strongly support the primary endpoint results, including changes in ISS7 and HSS7 and responder analyses. Importantly,
barzolvolimab demonstrated rapid, durable and clinically meaningful responses in patients with moderate to severe CSU refractory to
antihistamines, including patients with prior omalizumab treatment. Demographics and baseline disease characteristics were well
balanced across treatment groups. The majority of patients on study had severe disease (UAS7≥28).
UAS7 Changes
Baseline UAS7 (mean)
LS Mean change at Week 12
LS Mean difference from
placebo (Confidence Interval,
p value)
HSS7 Changes
Baseline HSS7 (mean)
LS Mean change at Week 12
LS Mean difference from
placebo (Confidence Interval,
p value)
ISS7 Changes
Baseline ISS7 (mean)
LS Mean change at Week 12
LS Mean difference from
placebo (Confidence Interval,
p value)
Summary of Clinical Activity Assessments at Week 12
300 mg Q8W
(n=51)
150 mg Q4W
(n=52)
75 mg Q4W
(n=53)
31.33
-23.87
-13.41
30.75
-23.02
-12.55
30.30
-17.06
-6.60
(CI: -17.47, -9.34)
p<0.0001
(CI:-16.56, -8.55)
p<0.0001
(CI:-10.71, -2.49)
p=0.0017
14.92
-12.19
-7.24
15.05
-11.19
-6.24
14.86
-8.25
-3.31
(CI:-9.36, -5.12)
p<0.0001
(CI:-8.33, -4.16),
p<0.0001
(CI:-5.40, -1.22),
p=0.0020
16.42
-11.79
-6.32
15.70
-11.68
-6.21
15.44
-8.62
-3.16
(CI: -8.50, -4.13),
p<0.0001
(CI: -8.38, -4.04),
p<0.0001
(CI: -5.41, -0.91),
p=0.0061
Placebo
(n=51)
30.09
-10.47
14.47
-4.95
15.61
-5.47
Responder Analyses/Clinical Responses
UAS7=0 (Complete Control)
UAS7≤6 (Well-controlled)
37.5%
62.5%
51.1%
59.6%
22.9%
41.7%
6.4%
12.8%
UAS7, HSS7 and ISS7 data were analyzed using ANCOVA model and multiple imputation.
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Barzolvolimab demonstrated strong improvement in UAS7 independent of omalizumab status at Week 12. Approximately 20%
(n=41) of enrolled patients received prior treatment with omalizumab and more than half of these patients had omalizumab-refractory
disease. These patients experienced a similar clinical benefit as the overall treated population within their individual dosing groups
consistent with the barzolvolimab mechanism of action.
Barzolvolimab was well tolerated with a favorable safety profile. Most adverse events were mild to moderate in severity; through 12
weeks, the most common treatment emergent adverse events in barzolvolimab treated patients were urticaria/CSU (10%), hair color
changes (9%), and neutropenia/ANC decrease (8%). The rate of infections was similar between barzolvolimab treated patients and
placebo with no association between neutropenia and infections.
Patients on study will continue to receive barzolvolimab for 52 weeks and we plan to report 52 week data in late 2024. We believe
these results strongly support the further development of barzolvolimab in CSU and are currently planning two Phase 3 studies of
barzolvolimab which we plan to initiate in summer 2024.
Chronic Inducible Urticaria (CIndU)
CIndUs are forms of urticaria that have an attributable cause or trigger associated with them, typically resulting in hives or wheals.
The prevalence of CIndU is estimated at 0.5% of the total population and is reported to overlap in up to 36% of CSU patients (Weller et
al. 2010. Hautarzt. 61(8), Bartlett et al. 2018. DermNet.Org). There are currently no approved therapies for chronic inducible urticarias
other than antihistamines and patients attempt to manage symptoms associated with their disease through avoidance of triggers. We are
currently exploring cold-induced and dermographism (scratch-induced) urticarias in an ongoing Phase 2 study.
We completed a Phase 1b open label clinical trial in CIndU in patients refractory to antihistamines, conducted in Germany. This
study was designed to evaluate the safety of a single intravenous dose (3 mg/kg) of barzolvolimab in patients with cold urticaria (ColdU)
or symptomatic dermographism (SD). The study was expanded to include a cohort (single dose, 3 mg/kg) in patients with cholinergic
urticaria (“CholU”) and a cohort at a lower dose (single dose, 1.5 mg/kg) in ColdU. Patient’s symptoms were induced via provocation
testing that resembles real life triggering situations. Secondary and exploratory objectives included pharmacokinetic and
pharmacodynamic assessments, including changes from baseline provocation thresholds, measurement of tryptase and stem cell factor
levels, clinical activity outcomes, quality of life assessments and measurement of tissue mast cells through skin biopsies.
Generally patients on study had high disease activity at baseline that was poorly controlled and marked impairment in quality of life.
At 3 mg/kg in the ColdU and SD cohorts, safety results were reported for 21 patients and activity results were reported for the 20 patients
who received a full dose of barzolvolimab. At 1.5 mg/kg in the ColdU cohort, safety results were reported for 10 patients and activity
results were reported for the 9 patients who received a full dose of barzolvolimab. At 3 mg/kg in the cholinergic cohort, safety results
were reported for 21 patients and activity results were reported for the 20 patients who received a full dose of barzolvolimab.
Rapid (as early as 1 week) and durable responses were observed in patients as assessed by provocation testing.
● A complete response was achieved in 95% (n=19/20) of patients with ColdU and SD treated with a single dose at 3 mg/kg
(n=10/10 ColdU; n=9/10 SD), including 3 patients who experienced insufficient response to prior omalizumab treatment. The
median duration (range) of complete response through the 12-week observation period was 77+ days (29–86; n=10) for patients
with ColdU and 57+ days (16–70; n=9) for patients with SD. A UCT score of ≥12 (well controlled) was achieved by 80%
(n=16/20) of the patients within week 4 post-treatment. By week 8, all patients (100%; n=20/20) achieved well-controlled
urticaria, which was sustained to week 12 post-dose by 80% (n=16/20) of patients. Complete urticaria control (UCT=16) was
achieved by 35% (n=7/20), 65% (n=13/20), and 40% (n=8/20) at weeks 4, 8, and 12, respectively.
● A complete response was achieved in 100% (n=9 of 9) patients with ColdU treated with a single dose at 1.5 mg/kg, including 4
patients with disease refractory to omalizumab. The median duration of complete response through the 12-week observation
period was 51+ days (7+ weeks). Following barzolvolimab administration, all patients achieved well controlled disease
(UCT>12) with 7 of 9 achieving complete control (UCT=16).
● A complete response was achieved in 56% (n=5 of 9) patients with cholinergic urticaria treated with a single dose at 3 mg/kg.
Most responses remained durable through to week 12. 63% (5/8) patients reported well controlled disease (UCT ≥12) at week 8
and 50% (4/8) at week 12, respectively.
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● Patients also reported improvements in quality of life outcomes as assessed by the Dermatology Life Quality Index (DLQI)
which surveys patients’ perceptions of symptoms and feelings, daily activities, leisure, work and school performance, personal
relationships and treatment.
● A single dose of barzolvolimab led to marked decreases in tryptase and in skin mast cells. The kinetics correlated with
improvements in provocation testing and clinical activity, consistent with a central role for mast cells in the pathogenesis of
ColdU and SD. This confirmed that serum tryptase level is a robust pharmacodynamic biomarker for assessing mast cell burden
and clinical activity in inducible urticaria and potentially in other diseases with mast cell driven involvement.
● Barzolvolimab was well tolerated across all cohorts. In the 3 mg/kg ColdU and SD cohorts, most adverse events were mild, and
the most common (≥3 patients) were hair color changes (76%; n=16/21), infusion reactions (43%; n=9/21), taste changes (38%;
n=8/21), nasopharyngitis (24%; n=5/21), malaise (24%; n=5/21), and headache (19%; n=4/21). Hair color changes (generally
small areas of hair color lightening) and taste disorders (generally partial changes of ability to taste salt or umami) are
consistent with inhibiting KIT signaling in other cell types and completely resolved over time during follow-up. One patient
with a history of fainting experienced loss of consciousness during infusion. The patient rapidly recovered. Importantly, no
evidence of mast cell activation as measured by serum tryptase monitoring was observed in this patient. Barzolvolimab was
also generally well tolerated by patients in the 1.5 mg/kg ColdU cohort and the 3.0 mg/kg cholinergic cohort with a similar
safety profile to that reported previously. Across the Phase 1b inducible urticaria study, mean hematology parameters generally
remained within the normal ranges—an important finding for a KIT inhibitor. Mild, transient, and asymptomatic decreases in
hemoglobin and white blood cell parameters occurred for some patients.
● Long term follow up data was collected from the 3.0 mg/kg cohorts in cold urticaria and symptomatic dermographism. 14
patients consented to the optional evaluation (6 cold, 8 symptomatic dermographism); 10 of the 14 still had complete control of
their disease as assessed by provocation testing at week 12. Data were collected at one or more timepoints beyond week 12
through week 36. Most patients had return of symptoms and/or loss of urticaria control between 12 and 36 weeks. Remarkably,
two patients remained provocation negative at 36 weeks, and four had well controlled disease (UCT ≥12) 36 weeks post dosing.
Serum tryptase exhibits a similar rate of recovery as clinical symptoms, while skin mast cells return at a slower rate. Tissue KIT
signaling, as approximated by SCF levels, was rapidly inhibited after dose administration and fully reactivated approximately
18 weeks after dosing. Tryptase levels return to pretreatment levels during follow up, while mast cells continue to recover. Drug
related adverse events noted during the study all resolved.
Data from this study were reported in Allergy (Nov 2022) and across multiple medical meetings, including the GA²LEN Global
Urticaria Forum (GUF) in December and the European Academy of Allergy and Clinical Immunology (EAACI) Annual Congress in
June 2022.
In July 2022, we announced that the first patient had been dosed in a Phase 2 study in patients with CIndU who remain symptomatic
despite antihistamine therapy. The study is being conducted at approximately 85 sites across approximately 12 countries. The
randomized, double-blind, placebo-controlled, parallel group Phase 2 study is evaluating the efficacy and safety profile of multiple dose
regimens of barzolvolimab in patients with CIndU to determine the optimal dosing strategy. Approximately 180 patients in 2 cohorts
(differentiated by CIndU subtype) including 90 patients with cold urticaria and 90 patients with symptomatic dermographism will be
randomly assigned on a 1:1:1 ratio to receive subcutaneous injections of barzolvolimab at 150 mg every 4 weeks, 300 mg every 8 weeks
or placebo during a 20-week treatment phase. Patients will then enter a follow-up phase for an additional 24 weeks. In addition, the study
includes the option for patients who have symptoms following the treatment phase, including patients who were on placebo, to enroll in
an open label extension where all patients receive 300 mg of barzolvolimab every 8 weeks. The primary endpoint of the study is the
percentage of patients with a negative provocation test at week 12 (using TempTest(R) and FricTest(R)). Secondary endpoints include
safety and other assessments of clinical activity including CTT (Critical Temperature Threshold), CFT (Critical Friction Threshold) and
WI-NRS (Worst itch numeric rating scale). Data from this study are expected in the second half of 2024.
Prurigo Nodularis (PN)
We have expanded clinical development of barzolvolimab into prurigo nodularis (PN). PN is a chronic skin disease characterized by
the development of hard, intensely itchy (pruritic) nodules on the skin. Mast cells through their interactions with sensory neurons and
other immune cells are believed to play an important role in amplifying chronic itch and neuroinflammation, both of which are a
hallmark of PN. There is currently only one FDA approved therapy for PN, representing an area of significant unmet need. Industry
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sources estimate there are approximately 154,000 patients in the United States with PN who have undergone treatment within the last 12
months and, of these, approximately 75,000 would be biologic-eligible.
We have completed a Phase 1b multi-center, randomized, double-blind, placebo-controlled intravenous study in PN. Data from the
study, including 24 weeks of follow-up, were presented at the 12th World Congress on Itch (WCI) held in November 2023. 24 adults
(evaluable: n=23 safety; n=22 efficacy) with moderate to severe PN were randomized across three arms: (1) barzolvolimab 3.0 mg/kg
(n=9), barzolvolimab 1.5 mg/kg (n=7) and placebo (n=8). The primary endpoint of the study was safety; key secondary endpoints include
changes from baseline in Worst Itch-Numerical Rating Scale (WI-NRS) & Investigator Global Assessment (IGA). The primary timepoint
for evaluation of clinical activity was 8 weeks; patients were followed for safety and efficacy endpoints to 24 weeks. Patients on study
generally had moderate to severe disease with mean baselines scores across all arms of 8.6 for WI-NRS and 3.3 for IGA.
A single IV dose of 3.0 mg/kg barzolvolimab resulted in rapid and durable reductions in itch and healing of skin lesions in patients
with moderate to severe PN and that barzolvolimab was generally well tolerated.
● At week 8, the percentage of patients with ≥4-point decrease in WI-NRS was 57% and 43% for the single dose 3.0 or 1.5 mg/kg
barzolvolimab arms, respectively, and 25% for the placebo arm; this level of response generally persisted out to week 16. In the
3.0 mg/kg arm, a ≥4-point decrease in WI-NRS reduction was seen as early as the first week and reached a high of 71% of
patients at week six which was distinct from both the 1.5 mg/kg barzolvolimab and placebo arms.
% of Subjects with ≥4-point decrease in WI-NRS
Dose
Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8
1.5 mg/kg
3.0 mg/kg
placebo
0
14
0
14
29
0
29
29
13
14
29
13
29
57
25
29
71
38
29
57
38
43
57
25
● At week 8, 29% of patients achieved clear or almost clear skin according to IGA following a single dose of barzolvolimab 3.0
mg/kg. This effect was noted as early as week 2 (the first clinic visit) and was maintained out to week 12/16. No patients treated
at 1.5 mg/kg barzolvolimab or placebo achieved clear or almost clear skin according to IGA through week 8. 2 additional
patients in the 1.5 mg/kg arm, 2 additional patients in the 3.0 mg/kg arm and 1 patient on placebo had IGA 0/1 at timepoints
between weeks 8 and 24.
Dose
1.5 mg/kg
3.0 mg/kg
placebo
% of Subjects with IGA 0/1
Baseline
Week 2
Week 4
Week 8
0
0
0
0
14
0
0
14
0
0
29
0
● Clinical activity was associated with profound serum tryptase reduction. At the 3.0 mg/kg dose, tryptase was profoundly
reduced to, or below, the level of quantification and this level of reduction was maintained at least through 8 weeks. Tryptase
reduction was observed in the 1.5 mg/kg arm but to a lesser extent.
● Adverse Events were generally mild to moderate in intensity and considered unrelated to treatment. During the initial 8 week
observation period in the 3.0 mg/kg dosing arm, an anaphylactic reaction occurred in a complicated patient with multiple
comorbidities; the event fully resolved without sequelae. Generally, AEs seen during the 24-week follow-up period were
consistent with comorbidities commonly observed in the PN population.
We are currently planning for the initiation of a Phase 2 subcutaneous study in PN in early 2024. This randomized, double-blind,
placebo-controlled, parallel group study will evaluate the efficacy and safety profile of 2 dose levels of barzolvolimab compared to
placebo in approximately 120 patients with moderate to severe PN who had inadequate response to prescription topical medications, or
for whom topical medications are medically inadvisable (such as concerns for safety). Patients will be randomly assigned on a 1:1:1
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ratio to receive barzolvolimab injections of 150 mg Q4W after an initial loading dose of 450 mg, 300 mg Q4W after an initial loading
dose of 450 mg, or placebo during a 24‑week Treatment Phase. Participants will then enter a follow-up phase with no study treatment for
an additional 16 weeks through week 40. The primary objective of this study is to evaluate the clinical effect of barzolvolimab, compared
to placebo, on itch response as measured by the proportion of participants with ≥ 4-point improvement in the worst intensity itch per a
numeric rating scale (WI-NRS). Secondary objectives include but are not limited to additional measures of itch response from baseline
compared to different timepoints, the assessment of skin lesions as measured by the Investigator Global Assessment (IGA), QoL
outcomes and safety. The study will include approximately 50 clinical trial centers worldwide, including the United States.
Eosinophilic Esophagitis (EoE)
In July of 2023, we announced that the first patient had been dosed in a Phase 2 study of eosinophilic esophagitis (EoE). EoE, the
most common type of eosinophilic gastrointestinal disease, is a chronic inflammatory disease of the esophagus characterized by the
infiltration of eosinophils. This chronic inflammation can result in trouble swallowing, chest pain, vomiting and impaction of food in the
esophagus, a medical emergency. Several studies have suggested that mast cells may be an important driver in the disease, demonstrating
that the number and activation state of mast cells are greatly increased in EoE biopsies and that mast cell signatures correlate with
markers of inflammation, fibrosis, pain and disease severity. Currently, there is only one FDA approved therapy for EoE, representing an
area of significant unmet need. Industry sources estimate there are approximately 160,000 patients in the United States with EoE who
have undergone treatment within the last 12 months and, of these, approximately 48,000 would be biologic-eligible. Given the lack of
effective therapies for EoE and barzolvolimab’s potential as a mast cell depleting agent, we believe EoE is an important indication for
future study.
The randomized, double-blind, placebo-controlled, parallel group Phase 2 study is evaluating the efficacy and safety profile of
subcutaneous barzolvolimab in patients with active EoE. To optimize potential efficacy signal in this difficult to treat indication, we have
recently amended the protocol to dose 300 mg every 4 weeks rather than 8 weeks. Approximately 75 patients will be enrolled in total. In
the revised protocol, patients will be randomly assigned on a 1:1 ratio to receive subcutaneous injections of barzolvolimab at 300 mg
every 4 weeks or placebo during a 16-week placebo-controlled treatment phase. Patients then enter a 12-week active treatment phase, in
which all patients will receive barzolvolimab 300 mg every 4 weeks. Patients then enter a follow-up phase for an additional 16 weeks.
The primary endpoint of the study is reducing esophageal intraepithelial infiltration of mast cells as assessed by peak esophageal
intraepithelial mast cell count. Secondary endpoints include the reduction of symptoms of dysphagia and esophageal intraepithelial
infiltration of eosinophils and safety. The study includes approximately 60 clinical trial centers across 8 countries, including the United
States. Enrollment is ongoing.
Additional Barzolvolimab Development Activities
In 2023, we completed the transfer of our current barzolvolimab manufacturing process to a CMO and successfully scaled up the
drug substance manufacturing process to produce larger cGMP batches in support of late-stage trials and to prepare for potential
commercialization. Drug product manufacturing into 1 mL pre-filled syringes has been completed in support of Phase 3 trials. We are in
the process of scaling up our drug product manufacturing. We believe that barzolvolimab can be scaled up to permit drug product
manufacturing in commercial quantities.
In February 2022, we reported interim data after completing the in-life dosing portion of our six-month chronic toxicology study in
non-human primates. The only clinically adverse finding at the completion of dosing was a profound impact on spermatogenesis, an
expected and well understood effect of KIT inhibition. As a standard part of toxicology studies, some animals from each group continued
to be observed through a recovery period to understand the reversibility of any adverse findings. Due to the very high concentrations of
barzolvolimab at the end of dosing, the recovery period was approximately one year. As we expected, and consistent with previous
findings with KIT blocking antibodies, we were pleased to report in December 2022, that during this recovery period spermatogenesis
fully recovered in all male animals as measured by both sperm count and motility. The final histologic analysis and study report were
completed in early 2023 and were consistent with previously reported results. We are encouraged with these findings and believe these
data strongly support continued development of barzolvolimab.
Bispecific Platform
Our next generation bispecific antibody platform is supporting the expansion of our pipeline with additional candidates for
inflammatory diseases and oncology. Targets are being selected based on new science as well as their compatibility to be used in
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bispecific antibody formats with our existing antibody programs. Development is focused on emerging, important pathways controlling
inflammatory diseases or immunity to tumors.
CDX-585
CDX-585 combines our proprietary highly active PD-1 blockade and anti-ILT4 blockade to overcome immunosuppressive signals in
T cells and myeloid cells, respectively. ILT4 is emerging as an important immune checkpoint on myeloid cells and is thought to
contribute to resistance to PD-1 blockade. Interactions of PD-1 and ILT4 with their ligands are known to deliver immune suppressive
signals that can attenuate anti-tumor immune responses. The concept behind CDX-585 is to simultaneously inhibit both T cell and
myeloid suppressive signals to potentiate the anti-tumor activity of both cell types, and potentially overcome PD-1 resistance. In
preclinical studies, CDX-585 was demonstrated to be a potent inhibitor of PD-1 signaling in comparison to the approved PD-1 antibody,
nivolumab. In addition, CDX-585 activated and promoted a strong inflammatory phenotype in human macrophage and dendritic cell
cultures. Together these activities of CDX-585 enhanced the response in a mixed lymphocyte reaction assay above that observed for
either parental mAb or the combination of the PD-1 and ILT4 mAbs. The in vivo efficacy of CDX-585 was also demonstrated in a
melanoma humanized mouse model. CDX-585 has successfully completed GMP manufacturing and IND-enabling studies to support
clinical development. CDX-585 will initially be developed for the treatment of solid tumors either as monotherapy or in combination
with other oncologic treatments.
In late May 2023, we announced that the first patient had been dosed in the Phase 1 study of CDX-585. This open-label, multi-
center, intravenous study of CDX-585 is being evaluated in patients with advanced or metastatic solid tumors that have progressed
during or after standard of care therapy. The dose-escalation phase of the study (n=~30 patients) is designed to determine a maximum
tolerated dose (MTD) and to select CDX-585 dose(s) for future evaluation in tumor specific expansion cohorts. In the first phase,
increasing doses of CDX-585 will be administered intravenously (0.03 mg/kg up to 10.0 mg/kg) every 2 weeks until confirmed disease
progression, intolerance, or for a maximum of 2 years. In the second phase, potential expansion cohorts will evaluate the safety,
tolerability and biologic effects, including anti-tumor activity, of selected dose level(s) of CDX-585 in specific tumor types. Enrollment
is ongoing.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our significant accounting policies are described in Note 2 to the financial statements included in Item 8 of this Form 10-K. We
believe our most critical accounting policies include accounting for contingent consideration, revenue recognition, intangible and long-
lived assets, research and development expenses and stock-based compensation expense.
The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the
results we report in our financial statements. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on
historical experience and on assumptions that we believe to be reasonable under the circumstances. Our experience and assumptions
form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual
results may vary from what we anticipate and different assumptions or estimates about the future could materially change our reported
results. We believe the following accounting policies are the most critical to us in that they are important to the portrayal of our financial
statements and they require our most difficult, subjective or complex judgments in the preparation of our financial statements:
Contingent Consideration
We record contingent consideration resulting from a business combination at its fair value on the acquisition date. We determine the
fair value of the contingent consideration based primarily on the following factors:
● timing and probability of success of clinical events or regulatory approvals;
● timing and probability of success of meeting clinical and commercial milestones; and
● discount rates.
Our contingent consideration arose in connection with our acquisition of Kolltan. On a quarterly basis, we revalue these obligations
and record increases or decreases in their fair value as an adjustment to operating earnings. As of December 31, 2023, the
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fair value of our contingent consideration was $0.0 million. Changes to contingent consideration obligations can result from adjustments
to discount rates, accretion of the discount rates due to the passage of time, changes in our estimates of the likelihood or timing of
achieving development or commercial milestones, changes in the probability of certain clinical events or changes in the assumed
probability associated with regulatory approval.
The assumptions related to determining the value of contingent consideration include a significant amount of judgment, and any
changes in the underlying estimates could have a material impact on the amount of contingent consideration adjustment recorded in any
given period.
Revenue Recognition
Revenues are recognized when performance obligations under agreements or contracts are satisfied, in an amount that reflects the
consideration the Company expects to be entitled to in exchange for those services.
The Company determines revenue recognition through the following steps:
● Identification of the contract, or contracts, with a customer;
● Identification of the performance obligations in the contract;
● Determination of the transaction price;
● Allocation of the transaction price to the performance obligations in the contract; and
● Recognition of revenue when, or as, the Company satisfies a performance obligation.
Revenue for the Company is derived from product development agreements with collaborative partners for the research and
development of therapeutic drug candidates. The terms of the agreements may include nonrefundable signing and licensing fees, funding
for research, development and manufacturing, milestone payments and royalties on any product sales derived from collaborations. The
Company assesses the multiple obligations typically within product development contracts to determine the distinct performance
obligations and how to allocate the arrangement consideration to each distinct performance obligation. Under product development
agreements, revenue is generally recognized using a cost-to-cost measure of progress. Revenue is recognized based on the costs incurred
to date as a percentage of the total estimated costs to fulfill the contract. Incurred cost represents work performed, which corresponds
with, and thereby best depicts, the transfer of control to the customer. Due to the nature of the work performed in these arrangements, the
estimation of cost at completion is complex, subject to many variables, such as expected clinical trial costs, and requires significant
judgements. Circumstances can arise that change original estimates of costs or progress toward completion. Any revisions to estimates
are reflected in revenue on a cumulative catch-up basis in the period in which the change in circumstances became known.
Revenue for the Company is also derived from manufacturing and research and development arrangements. The Company owns and
operates a cGMP manufacturing facility in Fall River, Massachusetts, to produce drug substance for its current and planned early-stage
clinical trials. In order to utilize excess capacity, the Company has, from time to time, entered into contract manufacturing and research
and development arrangements in which services are provided on a time-and-material basis or at a negotiated fixed- price. Revenue from
time-and-material contracts is generally recognized on an output basis as labor hours and/or direct expenses are incurred. Under fixed-
price contracts, revenue is generally recognized on an output basis as progress is made toward completion of the performance obligations
using surveys of performance completed to date.
Intangible and Long-Lived Assets
We evaluate the recoverability of our long-lived assets, including property and equipment when circumstances indicate that an event
of impairment may have occurred. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting
from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the
carrying amount of the assets, the assets are written down to their estimated fair values.
IPR&D assets acquired in a business combination initially are recorded at fair value and accounted for as indefinite-lived intangible
assets. These assets are capitalized on our balance sheets until either the project underlying them is completed or the assets
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become impaired. If a project is completed, the carrying value of the related intangible asset is amortized over the remaining estimated
life of the asset beginning in the period in which the project is completed. If a project becomes impaired or is abandoned, the carrying
value of the related intangible asset is written down to its fair value and an impairment charge is taken in the period in which the
impairment occurs. Discounted cash flow models are typically used in these tests, and the models require the use of significant estimates
and assumptions including but not limited to:
● timing and costs to complete the in-process projects;
● timing and probability of success of clinical events or regulatory approvals;
● estimated future cash flows from product sales resulting from completed products and in-process projects; and
● discount rates
Each IPR&D asset is assessed for impairment at least annually or when impairment indicators are present. The Company has the
option to assess qualitative factors to determine if it is more likely than not that the IPR&D asset is impaired and whether it is necessary
to perform a quantitative impairment test.
Research and Development Expenses
Research and development costs, including internal and contract research costs, are expensed as incurred. Research and development
expenses consist mainly of clinical trial costs, manufacturing of clinical material, toxicology and other preclinical studies, personnel
costs, depreciation, license fees and funding of outside contracted research.
Clinical trial expenses include expenses associated with clinical research organization, or CRO, services. Contract manufacturing
expenses include expenses associated with contract manufacturing organization, or CMO, services. The invoicing from CROs and CMOs
for services rendered can lag several months. We accrue the cost of services rendered in connection with CRO and CMO activities based
on our estimate of costs incurred. We maintain regular communication with our CROs and CMOs to assess the reasonableness of our
estimates. Differences between actual expenses and estimated expenses recorded have not been material and are adjusted for in the
period in which they become known.
Stock-Based Compensation Expense
We record stock-based compensation expense for all stock-based awards made to employees, consultants and non-employee
directors based on the estimated fair values of the stock-based awards expected to vest at the grant date and adjust, if necessary, to reflect
actual forfeitures. Our estimates of employee, consultant and non-employ director stock option values rely on estimates of future
uncertain events. Significant assumptions include the use of historical volatility to estimate the expected stock price volatility. We also
estimate expected term based on historical exercise patterns. For consultant and non-employee director grants, we may elect to use the
contractual term as the expected term in the option-pricing model. Actual volatility and lives of options may be significantly different
from our estimates. Compensation expense for all stock-based awards is recognized using the straight-line method over the term of
vesting or performance.
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RESULTS OF OPERATIONS
Year Ended December 31, 2023 compared with Year Ended December 31, 2022
Revenues:
Product development and licensing agreements
Contracts and grants
Total revenues
Operating expenses:
Research and development
General and administrative
Gain on fair value remeasurement of contingent consideration
Litigation settlement related loss
Total operating expenses
Operating loss
Investment and other income, net
Net loss
Net Loss
Year Ended
December 31,
2023
2022
Increase/
(Decrease)
$
Increase/
(Decrease)
%
(In thousands)
$
$
278
6,605
6,883
$
$
56
2,301
2,357
$
$
222
4,304
4,526
118,011
30,914
—
12,500
161,425
(154,542)
13,113
35,753
3,719
(6,862)
(2,500)
43,834
39,308
10,204
$ (141,429) $ (112,325) $ 29,104
82,258
27,195
(6,862)
15,000
117,591
(115,234)
2,909
396 %
187 %
192 %
43 %
14 %
(100)%
(17)%
37 %
34 %
351 %
26 %
The $29.1 million increase in net loss for the year ended December 31, 2023, as compared to the year ended December 31, 2022,
was primarily due to an increase in research and development expenses and a decrease in the gain on fair value remeasurement of
contingent consideration, partially offset by increases in contracts and grants revenue and investment and other income, net.
Revenue
The $4.3 million increase in contracts and grants revenue for the year ended December 31, 2023, as compared to the year ended
December 31, 2022, was primarily related to an increase in services performed under our manufacturing and research and development
agreements with Rockefeller University. We expect revenue to remain relatively consistent over the next twelve months, although there
may be fluctuations on a quarterly basis.
Research and Development Expense
Research and development expenses consist primarily of (i) personnel expenses, (ii) laboratory supply expenses relating to the
development of our technology, (iii) facility expenses and (iv) product development expenses associated with our drug candidates as
follows:
Personnel
Laboratory supplies
Facility
Product development
Year Ended
December 31,
2023
2022
(In thousands)
Increase/
(Decrease)
$
%
$ 40,121
5,358
4,970
59,319
$ 32,674
6,310
4,764
32,156
$ 7,447
(952)
206
27,163
23 %
(15)%
4 %
84 %
Personnel expenses primarily include salary, benefits, stock-based compensation and payroll taxes. The $7.4 million increase in
personnel expenses for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to
higher stock-based compensation expense and an increase in employee headcount. We expect personnel expenses to increase over the
next twelve months as a result of additional headcount to support the expanded development of barzolvolimab.
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Laboratory supplies expenses include laboratory materials and supplies, services and other related expenses incurred in the
development of our technology. The $1.0 million decrease in laboratory supply expenses for the year ended December 31, 2023, as
compared to the year ended December 31, 2022, was primarily due to lower laboratory services, materials and supplies purchases. We
expect laboratory supplies expenses to remain relatively consistent over the next twelve months, although there may be fluctuations on a
quarterly basis.
Facility expenses include depreciation, amortization, utilities, rent, maintenance and other related expenses incurred at our facilities.
The $0.2 million increase in facility expenses for the year ended December 31, 2023, as compared to the year ended December 31, 2022,
was primarily due to higher repairs and depreciation expense. We expect facility expenses to remain relatively consistent over the next
twelve months, although there may be fluctuations on a quarterly basis.
Product development expenses include clinical investigator site fees, external trial monitoring costs, data accumulation costs,
contracted research and outside clinical drug product manufacturing. The $27.2 million increase in product development expenses for the
year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to an increase in barzolvolimab
clinical trial and contract manufacturing expenses. We expect product development expenses to increase over the next twelve months as a
result of the expanded development of barzolvolimab, although there may be fluctuations on a quarterly basis.
General and Administrative Expense
The $3.7 million increase in general and administrative expenses for the year ended December 31, 2023, as compared to the year
ended December 31, 2022, was primarily due to higher stock-based compensation, recruiting and barzolvolimab commercial planning
expenses, partially offset by a decrease in legal expenses. We expect general and administrative expenses to increase over the next twelve
months as a result of the expanded development of barzolvolimab and an increase in commercial planning efforts, although there may be
fluctuations on a quarterly basis.
Gain on Fair Value Remeasurement of Contingent Consideration
The $6.9 million gain on fair value remeasurement of contingent consideration for the year ended December 31, 2022 was primarily
due to our decision to deprioritize the CDX-1140 program.
Litigation Settlement Related Loss
We recorded a loss of $15.0 million in the second quarter of 2022 related to the Initial Payment due under the binding settlement
term sheet entered with SRS, which was subsequently memorialized in a Settlement Agreement with SRS. During the fourth quarter of
2023, we announced positive topline results from our Phase 2 clinical trial of barzolvolimab in patients with moderate to severe CSU,
which satisfied the requirement of “successful completion” of a Phase 2 Clinical Trial of barzolvolimab such that we were obligated to
make the applicable milestone payment under the Settlement Agreement in the amount of $12.5 million. During the fourth quarter of
2023, we paid the $12.5 million milestone in cash and recorded a litigation settlement related loss of $12.5 million.
Investment and Other Income, Net
The $10.2 million increase in investment and other income, net for the year ended December 31, 2023, as compared to the year
ended December 31, 2022, was primarily due to higher interest rates on fixed income investments and higher other income related to our
sale of New Jersey tax benefits. We expect investment and other income to increase over the next twelve months due to higher interest
rates and higher levels of cash as a result of our November 2023 underwritten public offering, although there may be fluctuations on a
quarterly basis.
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Year Ended December 31, 2022 compared with Year Ended December 31, 2021
Revenues:
Product development and licensing agreements
Contracts and grants
Total revenues
Operating expenses:
Research and development
General and administrative
Intangible asset impairment
Gain on fair value remeasurement of contingent consideration
Litigation settlement related loss
Total operating expenses
Operating loss
Investment and other income, net
Net loss before income tax benefit
Income tax benefit
Net loss
Net Loss
Year Ended
December 31,
Increase/
(Decrease)
Increase/
(Decrease)
2022
2021
$
%
(In thousands)
$
$
56
2,301
2,357
$
$
31
4,620
4,651
$
$
25
(2,319)
(2,294)
82,258
27,195
—
(6,862)
15,000
117,591
(115,234)
2,909
(112,325)
—
$ (112,325)
53,311
20,488
3,500
(1,405)
—
75,894
(71,243)
505
(70,738)
227
$ (70,511)
$
28,947
6,707
(3,500)
5,457
15,000
41,697
43,991
2,404
41,587
(227)
41,814
81 %
(50)%
(49)%
54 %
33 %
(100)%
388 %
n/a
55 %
62 %
476 %
59 %
(100)%
59 %
The $41.8 million increase in net loss for the year ended December 31, 2022, as compared to the year ended December 31, 2021,
was primarily due to the $15.0 million litigation settlement related loss recorded in the second quarter of 2022 and increases in research
and development and general and administrative expenses, partially offset by an increase in the gain on fair value remeasurement of
contingent consideration.
Revenue
Product development and licensing agreements revenue for the year ended December 31, 2022 was relatively consistent with the
year ended December 31, 2021. The $2.3 million decrease in contracts and grants revenue for the year ended December 31, 2022, as
compared to the year ended December 31, 2021, was primarily related to a decrease in services performed under our manufacturing and
research and development agreements with Rockefeller University and Gilead Sciences.
Research and Development Expense
Research and development expenses consist primarily of (i) personnel expenses, (ii) laboratory supply expenses relating to the
development of our technology, (iii) facility expenses and (iv) product development expenses associated with our drug candidates as
follows:
Personnel
Laboratory supplies
Facility
Product development
Year Ended
December 31,
2022
2021
(In thousands)
Increase/
(Decrease)
$
%
$ 32,674
6,310
4,764
32,156
$ 26,424
5,981
4,771
12,230
$ 6,250
329
(7)
19,926
24 %
6 %
0 %
163 %
Personnel expenses primarily include salary, benefits, stock-based compensation and payroll taxes. The $6.3 million increase in
personnel expenses for the year ended December 31, 2022, as compared to the year ended December 31, 2021, was primarily due to
higher stock-based compensation expense and an increase in employee headcount.
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Laboratory supplies expenses include laboratory materials and supplies, services and other related expenses incurred in the
development of our technology. The $0.3 million increase in laboratory supply expenses for the year ended December 31, 2022, as
compared to the year ended December 31, 2021, was primarily due to higher laboratory services, materials and supplies purchases.
Facility expenses include depreciation, amortization, utilities, rent, maintenance and other related expenses incurred at our facilities.
Facility expenses for the year ended December 31, 2022 were relatively consistent with the year ended December 31, 2021.
Product development expenses include clinical investigator site fees, external trial monitoring costs, data accumulation costs,
contracted research and outside clinical drug product manufacturing. The $19.9 million increase in product development expenses for the
year ended December 31, 2022, as compared to the year ended December 31, 2021, was primarily due to an increase in barzolvolimab
clinical trial and contract manufacturing expenses.
General and Administrative Expense
The $6.7 million increase in general and administrative expenses for the year ended December 31, 2022, as compared to the year
ended December 31, 2021, was primarily due to higher stock-based compensation, legal and barzolvolimab commercial planning
expenses.
Intangible Asset Impairment
During the third quarter of 2021, we evaluated the TAM program IPR&D asset for potential impairment as a result of a lack of
interest in the program from third parties. We concluded that the TAM program IPR&D asset was fully impaired, and a non-cash
impairment charge of $3.5 million was recorded in the third quarter of 2021.
Gain on Fair Value Remeasurement of Contingent Consideration
The $6.9 million gain on fair value remeasurement of contingent consideration for the year ended December 31, 2022 was primarily
due to our decision to deprioritize the CDX-1140 program.
Litigation Settlement Related Loss
We recorded a loss of $15.0 million in the second quarter of 2022 related to the Initial Payment due under the binding settlement
term sheet entered with SRS, which was subsequently memorialized in the Settlement Agreement with SRS.
Investment and Other Income, Net
The $2.4 million increase in investment and other income, net for the year ended December 31, 2022, as compared to the year ended
December 31, 2021, was primarily due to higher interest rates on fixed income investments.
Income Tax Benefit
A $0.2 million non-cash income tax benefit was recorded for the year ended December 31, 2021 related to the impairment of the
TAM program IPR&D asset in the third quarter of 2021.
LIQUIDITY AND CAPITAL RESOURCES
Our cash equivalents are highly liquid investments with a maturity of three months or less at the date of purchase and consist
primarily of investments in money market mutual funds with commercial banks and financial institutions. We maintain cash balances
with financial institutions in excess of insured limits. We do not anticipate any losses with respect to such cash balances. We invest our
excess cash balances in marketable securities, including municipal bond securities, U.S. government agency securities and high- grade
corporate bonds that meet high credit quality standards, as specified in our investment policy. Our investment policy seeks to manage
these assets to achieve our goals of preserving principal and maintaining adequate liquidity.
The use of our cash flows for operations has primarily consisted of salaries and wages for our employees; facility and facility-related
costs for our offices, laboratories and manufacturing facility; fees paid in connection with preclinical studies, clinical studies,
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contract manufacturing, laboratory supplies and services; and consulting, legal and other professional fees. We anticipate that our cash
flows from operations will continue to be focused in these areas as we progress our current drug candidates through the clinical trial
process and develop additional drug candidates. To date, the primary sources of cash flows from operations have been payments received
from our collaborative partners and from government entities and payments received for contract manufacturing and research and
development services provided by us. The timing of any new contract manufacturing and research and development agreements,
collaboration agreements, government contracts or grants and any payments under these agreements, contracts or grants cannot be easily
predicted and may vary significantly from quarter to quarter.
At December 31, 2023, our principal sources of liquidity consisted of cash, cash equivalents and marketable securities of $423.6
million. We have had recurring losses and incurred a loss of $141.4 million for the year ended December 31, 2023. Net cash used in
operations for the year ended December 31, 2023 was $107.3 million. We believe that the cash, cash equivalents and marketable
securities at December 31, 2023 are sufficient to meet estimated working capital requirements and fund current planned operations into
2026. This could be impacted if we elect to pay the future milestone under the Settlement Agreement with SRS, if any, in cash.
During the next twelve months, we may take further steps to raise additional capital to meet our long-term liquidity needs including,
but not limited to, one or more of the following: the licensing of drug candidates with existing or new collaborative partners, possible
business combinations, issuance of debt, or the issuance of common stock or other securities via private placements or public offerings.
Although we have been successful in raising capital in the past, there can be no assurance that additional financing will be available on
acceptable terms, if at all, and our negotiating position in capital raising efforts may worsen as existing resources are used. There is also
no assurance that we will be able to enter into further collaborative relationships. Additional equity financings may be dilutive to our
stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that restrict our ability to
operate as a business; and licensing or strategic collaborations may result in royalties or other terms which reduce our economic potential
from products under development. Our ability to continue funding our planned operations into and beyond twelve months from the
issuance date is also dependent on the timing and manner of payment of the future milestone under the Settlement Agreement with SRS,
in the event that we achieve the milestone related to that payment. We may decide to pay that milestone payment in cash, shares of our
common stock or a combination thereof. If we are unable to raise the funds necessary to meet our long-term liquidity needs, we may
have to delay or discontinue the development of one or more programs, discontinue or delay ongoing or anticipated clinical trials,
discontinue or delay our commercial manufacturing efforts, discontinue or delay our efforts to expand into additional indications for our
drug product candidates, license out programs earlier than expected, raise funds at a significant discount or on other unfavorable terms, if
at all, or sell all or a part of our business.
Operating Activities
Net cash used in operating activities was $107.3 million for the year ended December 31, 2023 compared to $103.7 million for the
year ended December 31, 2022. The increase in net cash used in operating activities was primarily due to increases in research and
development and general and administrative expenses, partially offset by an increase in revenue and a decrease in payments made under
the Settlement Agreement with SRS. We expect that cash used in operating activities will increase over the next twelve months as a
result of the expanded development of barzolvolimab.
Net cash used in operating activities was $103.7 million for the year ended December 31, 2022 compared to $60.9 million for the
year ended December 31, 2021. The increase in net cash used in operating activities was primarily due to increases in research and
development and general and administrative expenses and the $15.0 million Initial Payment made to SRS under the Settlement
Agreement.
We have incurred and will continue to incur significant costs in the area of research and development, including preclinical and
clinical trials and clinical drug product manufacturing as our drug candidates are developed. We plan to spend significant amounts to
progress our current drug candidates through the clinical trial processes as well as to develop additional drug candidates. As our drug
candidates progress through the clinical trial process, we may be obligated to make significant milestone payments, pursuant to our
existing arrangements and arrangements we may enter in the future.
Investing Activities
Net cash used in investing activities was $105.8 million for the year ended December 31, 2023 compared to net cash provided by
investing activities of $89.9 million for the year ended December 31, 2022. The increase in net cash used in investing activities was
primarily due to net purchases of marketable securities of $104.0 million for the year ended December 31, 2023 as compared to net
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sales and maturities of marketable securities of $91.7 million for the year ended December 31, 2022. We expect that cash provided by
investing activities will increase over the next twelve months as we fund our operations through the combination of net proceeds from
the sales and maturities of marketable securities, cash provided by financing activities and/or new partnerships, although there may be
significant fluctuations on a quarterly basis based on the amount of cash provided by financing activities and/or new partnerships.
Net cash provided by investing activities was $89.9 million for the year ended December 31, 2022 compared to net cash used in
investing activities of $216.2 million for the year ended December 31, 2021. The increase in net cash provided by investing activities
was primarily due to net sales and maturities of marketable securities of $91.7 million for the year ended December 31, 2022 as
compared to net purchases of $214.9 million for the year ended December 31, 2021.
Financing Activities
Net cash provided by financing activities was $218.5 million for the year ended December 31, 2023 compared to $4.1 million for the
year ended December 31, 2022. The increase in net cash provided by financing activities was primarily due to an increase in net proceeds
from stock issuances.
Net cash provided by financing activities was $4.1 million for the year ended December 31, 2022 compared to $272.4 million for the
year ended December 31, 2021. The decrease in net cash provided by financing activities was primarily due to a decrease in net proceeds
from stock issuances.
Equity Offerings
In November 2023, we filed an automatic shelf registration statement with the SEC to register for sale any combination of the types
of securities described in the shelf registration statement.
On February 26, 2024, we entered into a controlled equity offering sales agreement with Cantor Fitzgerald & Co. (“Cantor”) to
allow us to issue and sell shares of our common stock having an aggregate offering price of up to $300.0 million from time to time
through Cantor, acting as agent. On February 26, 2024, we terminated our prior Controlled Equity Offering sales agreement, dated May
19, 2016, with Cantor.
During the third quarter of 2021, we issued 6,845,238 shares of common stock in an underwritten public offering resulting in net
proceeds of $269.9 million, after deducting underwriting fees and offering expenses.
During the fourth quarter of 2023, we issued 8,538,750 shares of common stock in an underwritten public offering resulting in net
proceeds of $216.2 million, after deducting underwriting fees and offering expenses.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We own financial instruments that are sensitive to market risk as part of our investment portfolio. Our investment portfolio is used to
preserve our capital until it is used to fund operations, including our research and development activities. None of these market-risk
sensitive instruments are held for trading purposes. We invest our cash primarily in money market mutual funds. These investments are
evaluated quarterly to determine the fair value of the portfolio. From time to time, we invest our excess cash balances in marketable
securities, including municipal bond securities, U.S. government agency securities, and high-grade corporate bonds that meet high credit
quality standards, as specified in our investment policy. Our investment policy seeks to manage these assets to achieve our goals of
preserving principal and maintaining adequate liquidity. Because of the short-term nature of these investments, we do not believe we
have material exposure due to market risk. The impact to our financial position and results of operations from changes in interest rates is
not material.
We do not utilize derivative financial instruments. The carrying amounts reflected in the balance sheet of cash and cash equivalents,
accounts receivables and accounts payable approximates fair value at December 31, 2023 due to the short-term maturities of these
instruments.
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Celldex Therapeutics, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Celldex Therapeutics, Inc. and its subsidiary (the “Company”) as
of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, of stockholders’ equity
and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to
as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December
31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s
Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the
Company’s consolidated financial statements and on the Company’s internal control over financial reporting 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
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due
to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of
the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
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Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s 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 the assets of the
company; (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 receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures
that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.
The communication of critical audit matters 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 accounts or disclosures to which it relates.
Research and Development Expenses and Accruals Related to Clinical Research Organization and Contract Manufacturing
Organization Activities
As described in Notes 2 and 9 to the consolidated financial statements, research and development costs, including internal and
contract research costs, are expensed as incurred. Research and development expenses consist mainly of clinical trial costs and
manufacturing of clinical material, toxicology and other preclinical studies, personnel costs, depreciation, license fees and funding of
outside contracted research. Clinical trial expenses include expenses associated with clinical research organization, or CRO, services.
Contract manufacturing expenses include expenses associated with contract manufacturing organization, or CMO, services. The
invoicing from CROs and CMOs for services rendered can lag several months. Management accrues the cost of services rendered in
connection with CRO and CMO activities based on their estimate of costs incurred. Management maintains regular communication with
their CROs and CMOs to assess the reasonableness of its estimates. Research and development expenses for the year ended December
31, 2023 were $118 million, a portion of which related to CRO and CMO activities. Within accrued expenses, total accrued research and
development contract costs as of December 31, 2023 amounted to $10.9 million, a majority of which related to CRO and CMO activities.
The principal consideration for our determination that performing procedures relating to research and development expenses and
accruals related to CRO and CMO activities is a critical audit matter is a high degree of auditor effort in performing procedures related to
the Company’s research and development expenses and accruals.
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Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion
on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s
estimated research and development accruals, including those related to CRO and CMO activities. These procedures also included,
among others (i) testing management’s process for developing the estimate of research and development accruals related to CROs and
CMOs, (ii) evaluating the appropriateness of the methods used by management to develop the estimate, (iii) testing, on a sample basis,
the completeness and accuracy of costs incurred for services that have been performed and for which the Company has been invoiced by
comparing amounts to CRO and CMO contracts and invoices, and evaluating the reasonableness of the cost incurred for the services for
which the Company has not yet been invoiced by comparing estimated amounts to information received from the CROs and CMOs, and
(iv) testing, on a sample basis, classification of research and development expenses.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 26, 2024
We have served as the Company’s auditor since 2008.
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CELLDEX THERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Accounts and other receivables
Prepaid and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets, net
Intangible assets
Other assets
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
Accrued expenses
Current portion of operating lease liabilities
Current portion of long-term liabilities
Total current liabilities
Long-term portion of operating lease liabilities
Other long-term liabilities
Total liabilities
Commitments and contingent liabilities (Note 14)
Stockholders’ equity:
Convertible preferred stock, $.01 par value; 3,000,000 shares authorized; no shares issued and
outstanding at December 31, 2023 and 2022
Common stock, $.001 par value; 297,000,000 shares authorized; 55,883,377 and 47,200,695
shares issued and outstanding at December 31, 2023 and 2022, respectively
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
December 31, 2023 December 31, 2022
$
$
$
$
$
$
$
34,814
388,784
2,628
5,467
431,693
4,060
2,577
27,190
107
465,627
3,494
22,029
1,614
3,988
31,125
928
4,403
36,456
29,429
275,523
347
12,394
317,693
3,747
4,001
27,190
104
352,735
3,340
12,835
1,445
990
18,610
2,588
5,333
26,531
—
—
56
1,823,168
3,308
(1,397,361)
429,171
465,627
$
47
1,580,829
1,260
(1,255,932)
326,204
352,735
The accompanying notes are an integral part of the consolidated financial statements.
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CELLDEX THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except per share amounts)
Year Ended
Year Ended
December 31, 2023 December 31, 2022 December 31, 2021
Year Ended
Revenues:
Product development and licensing agreements
Contracts and grants
Total revenues
Operating expenses:
Research and development
General and administrative
Intangible asset impairment
Gain on fair value remeasurement of contingent consideration
Litigation settlement related loss
Total operating expenses
Operating loss
Investment and other income, net
Net loss before income tax benefit
Income tax benefit
Net loss
Basic and diluted net loss per common share
Shares used in calculating basic and diluted net loss per share
Comprehensive loss:
Net loss
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities
Comprehensive loss
$
$
$
$
$
$
$
278
6,605
6,883
$
56
2,301
2,357
118,011
30,914
—
—
12,500
161,425
(154,542)
13,113
(141,429) $
—
(141,429) $
(2.92) $
82,258
27,195
—
(6,862)
15,000
117,591
(115,234)
2,909
(112,325) $
—
(112,325) $
(2.40) $
48,449
46,888
31
4,620
4,651
53,311
20,488
3,500
(1,405)
—
75,894
(71,243)
505
(70,738)
227
(70,511)
(1.64)
42,870
(141,429) $
(112,325) $
(70,511)
2,048
(139,381) $
(634)
(112,959) $
(695)
(71,206)
The accompanying notes are an integral part of the consolidated financial statements.
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CELLDEX THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
Balance at December 31, 2020
Shares issued under stock option and employee stock purchase plans
Shares issued in underwritten offering, net
Stock-based compensation
Unrealized loss on marketable securities
Net loss
Balance at December 31, 2021
Shares issued under stock option and employee stock purchase plans
Stock-based compensation
Unrealized loss on marketable securities
Net loss
Balance at December 31, 2022
Shares issued under stock option and employee stock purchase plans
Shares issued in underwritten offering, net
Stock-based compensation
Unrealized gain on marketable securities
Net loss
Balance at December 31, 2023
Common
Stock
Shares
39,603,771
281,189
6,845,238
—
—
—
46,730,198
470,497
—
—
—
47,200,695
143,932
8,538,750
—
—
—
55,883,377
$
$
$
$
Common
Stock Par
Value
40
—
7
—
—
—
47
—
—
—
—
47
—
9
—
—
—
56
Additional
Paid-In
Capital
1,279,824
2,479
269,886
8,953
—
—
1,561,142
4,076
15,611
—
—
1,580,829
2,236
216,213
23,890
—
—
1,823,168
$
$
$
$
Accumulated
Other
Comprehensive Accumulated
Income
2,589
—
—
—
(695)
—
1,894
—
—
(634)
—
1,260
—
—
—
2,048
—
3,308
Deficit
$ (1,073,096)
—
—
—
—
(70,511)
$ (1,143,607)
—
—
—
(112,325)
$ (1,255,932)
—
—
—
—
(141,429)
$ (1,397,361)
$
$
$
$
Total
Stockholders’
Equity
$
$
$
$
209,357
2,479
269,893
8,953
(695)
(70,511)
419,476
4,076
15,611
(634)
(112,325)
326,204
2,236
216,222
23,890
2,048
(141,429)
429,171
The accompanying notes are an integral part of the consolidated financial statements.
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CELLDEX THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Amortization and premium of marketable securities, net
Loss (gain) on sale or disposal of assets
Intangible asset impairment
Gain on fair value remeasurement of contingent consideration
Non-cash income tax benefit
Stock-based compensation expense
Changes in operating assets and liabilities:
Accounts and other receivables
Prepaid and other current assets
Other assets
Accounts payable and accrued expenses
Other liabilities
Net cash used in operating activities
Cash flows from investing activities:
Sales and maturities of marketable securities
Purchases of marketable securities
Acquisition of property and equipment
Proceeds from sale or disposal of assets
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Net proceeds from stock issuances
Proceeds from issuance of stock from employee benefit plans
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Non-cash investing activities
Accrued construction in progress
$
$
Year Ended
December 31, 2023
Year Ended
December 31, 2022
Year Ended
December 31, 2021
$
(141,429)
$
(112,325)
$
(70,511)
3,008
(6,222)
—
—
—
—
23,890
(2,281)
5,900
(3)
9,384
462
(107,291)
320,597
(424,561)
(1,818)
—
(105,782)
216,222
2,236
218,458
5,385
29,429
34,814
77
$
$
2,896
844
2
—
(6,862)
—
15,611
(175)
(9,572)
—
3,123
2,726
(103,732)
280,666
(188,965)
(1,828)
69
89,942
—
4,076
4,076
(9,714)
39,143
29,429
113
$
$
3,068
(3,209)
(24)
3,500
(1,405)
(227)
8,953
1,574
(1,871)
(5)
3,653
(4,405)
(60,909)
174,947
(389,881)
(1,249)
27
(216,156)
269,893
2,479
272,372
(4,693)
43,836
39,143
289
The accompanying notes are an integral part of the consolidated financial statements.
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CELLDEX THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS
(1) Nature of Business and Overview
Celldex Therapeutics, Inc. (the “Company” or “Celldex”) is a biopharmaceutical company dedicated to developing therapeutic
monoclonal and bispecific antibodies that address diseases for which available treatments are inadequate. The Company is primarily
focusing its efforts and resources on the continued research and development of barzolvolimab (also referred to as CDX-0159) and CDX-
585.
At December 31, 2023, the Company had cash, cash equivalents and marketable securities of $423.6 million. The Company has had
recurring losses and incurred a loss of $141.4 million for the year ended December 31, 2023. Net cash used in operations for the year
ended December 31, 2023 was $107.3 million. The Company believes that the cash, cash equivalents and marketable securities at the
filing date of this Form 10-K will be sufficient to meet estimated working capital requirements and fund planned operations for at least
the next twelve months from the date of issuance of these financial statements.
During the next twelve months and beyond, the Company may take further steps to raise additional capital to meet its long-term
liquidity needs including, but not limited to, one or more of the following: the licensing of drug candidates with existing or new
collaborative partners, possible business combinations, issuance of debt, or the issuance of common stock or other securities via private
placements or public offerings. Although the Company has been successful in raising capital in the past, there can be no assurance that
additional financing will be available on acceptable terms, if at all, and the Company’s negotiating position in capital-raising efforts may
worsen as existing resources are used. There is also no assurance that the Company will be able to enter into further collaborative
relationships. Additional equity financings may be dilutive to the Company’s stockholders; debt financing, if available, may involve
significant cash payment obligations and covenants that restrict the Company’s ability to operate as a business; and licensing or strategic
collaborations may result in royalties or other terms which reduce the Company’s economic potential from products under development.
The Company’s ability to continue funding its planned operations beyond twelve months from the issuance date is also dependent on the
timing and manner of payment of amounts due under the Settlement Agreement with Shareholder Representative Services LLC (“SRS”)
(refer to Note 17), in the event that the Company achieves the milestone related to that payment. The Company, at its option, may decide
to pay that milestone payment in cash, shares of its common stock or a combination thereof. If the Company is unable to raise the funds
necessary to meet its long-term liquidity needs, it may have to delay or discontinue the development of one or more programs,
discontinue or delay ongoing or anticipated clinical trials, discontinue or delay our commercial manufacturing efforts, discontinue or
delay our efforts to expand into additional indications for our drug product candidates, license out programs earlier than expected, raise
funds at a significant discount or on other unfavorable terms, if at all, or sell all or a part of the Company.
(2) Summary of Significant Accounting Policies
Basis of Presentation
The balance sheets and statements of operations and comprehensive loss, stockholders’ equity, and cash flows, are consolidated for
the years ended December 31, 2023, 2022 and 2021. These consolidated financial statements reflect the operations of the Company and
its wholly-owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation. The Company operates
in one segment, which is the business of development, manufacturing and commercialization of novel therapeutics for human health
care.
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of
America (U.S. GAAP) requires management to make estimates and use assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates.
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Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity date of 90 days or less at the date of purchase to be
cash equivalents. Cash equivalents consist principally of money market funds and debt securities.
Marketable Securities
The Company invests its excess cash balances in marketable securities, including municipal bond securities, U.S. government
agency securities, and highly rated corporate bonds. The Company classifies all of its marketable securities as current assets on the
balance sheets because they are available-for-sale and available to fund current operations. Marketable securities are stated at fair value
with unrealized gains and losses included as a component of accumulated other comprehensive income (loss), which is a separate
component of stockholders’ equity. Each reporting period, the Company evaluates its investment portfolio to determine if any security is
impaired and if an allowance for credit losses should be recorded. As part of this evaluation, the Company considers whether it has the
ability and intent to hold the investment until recovery of its amortized cost basis and whether the decline in fair value is due to any
credit related factors. If an impairment is the result of a credit loss, the Company recognizes an allowance for credit losses. Realized
gains and losses are determined on the specific identification method and are included in investment and other income, net.
Concentration of Credit Risk and of Significant Customers and Suppliers
Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash, cash
equivalents, marketable securities and accounts receivable. The Company invests its cash, cash equivalents and marketable securities in
debt instruments and interest-bearing accounts at major financial institutions in excess of insured limits. The Company mitigates credit
risk by limiting the investment type and maturity to securities that preserve capital, maintain liquidity and have a high credit quality. The
Company has not historically experienced credit losses from its accounts receivable and therefore has not established an allowance for
doubtful accounts.
Revenue from Rockefeller University represented 95% and 75% of total Company revenue for the years ended December 31, 2023
and 2022, respectively. Revenue from Rockefeller University and Gilead Sciences represented 88% of total Company revenue for the
year ended December 31, 2021.
The Company relies on contract manufacturing organizations (CMO) to manufacture drug substance and drug product as well as for
future commercial supplies. The Company also relies on CMOs for supply of raw materials as well as filling, packaging, storing and
shipping our drug products.
Fair Value Measurements
The Company has certain assets and liabilities that are measured at fair value in the financial statements. The Company seeks to
maximize the use of observable inputs (market data obtained from sources independent from the Company) and to minimize the use of
unobservable inputs (the Company’s assumptions about how market participants would price assets and liabilities) when measuring the
fair value of its assets and liabilities. These assets and liabilities are classified into one of three levels of the following fair value
hierarchy as defined by U.S. GAAP:
Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. An active market for an asset or
liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing
information on an ongoing basis.
Level 2: Observable inputs other than Level 1 prices, such as quoted prices in active markets for similar assets or liabilities and
quoted prices for identical assets or liabilities in markets that are not active.
Level 3: Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing
the asset or liability.
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Property and Equipment
Property and equipment are stated at cost and depreciated over the estimated useful lives of the related assets using the straight-line
method. Laboratory equipment and office furniture and equipment are depreciated over five years, and computer equipment is
depreciated over three years. Manufacturing equipment is depreciated over seven to ten years. Leasehold improvements are amortized
over the shorter of the estimated useful life or the non-cancelable term of the related lease, including any renewals that are reasonably
assured of occurring. Property and equipment under construction is classified as construction in progress and is depreciated or amortized
only after the asset is placed in service. Expenditures for maintenance and repairs are charged to expense whereas the costs of significant
improvements which extend the life of the underlying asset are capitalized. Upon retirement or sale, the cost of assets disposed of and the
related accumulated depreciation are eliminated and any resulting gain or loss is reflected in the Company’s statements of operations and
comprehensive loss.
The treatment of costs to construct property and equipment depends on the nature of the costs and the stage of construction. Costs
incurred in the project planning, design, construction and installation phases are capitalized as part of the cost of the asset. The Company
stops capitalizing these costs when the asset is substantially complete and ready for its intended use. For manufacturing property and
equipment, the Company also capitalizes the cost of validating these assets for the underlying manufacturing process. The Company
completes the capitalization of validation costs when the asset is substantially complete and ready for its intended use. Costs capitalized
include incremental labor and fringe benefits, and direct consultancy services.
Leases
The Company has operating leases of office, manufacturing and laboratory space, which have remaining lease terms of one to two
years and may include one or more options to renew or terminate early.
The Company determines if an arrangement contains a lease at inception. Operating lease right-of-use assets and lease liabilities are
recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Certain
adjustments to the right-of-use asset may be required for items such as prepaid or accrued lease payments, initial direct costs paid or
incentives received. The Company’s leases do not contain an implicit rate, and therefore the Company uses an estimated incremental
borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.
Options to extend or terminate the lease are reflected in the calculation when it is reasonably certain that the option will be exercised.
The Company has elected to account for lease and non-lease components as a single lease component, however non-lease components
that are variable, such as common area maintenance and utilities, are generally paid separately from rent based on actual costs incurred
and therefore are not included in the right-of-use asset and operating lease liability and are reflected as an expense in the period incurred.
Leases with an initial term of 12 months or less are not recorded on the balance sheet.
Contingent Consideration
The Company records contingent consideration resulting from a business combination at its fair value on the acquisition date. The
Company determines the fair value of the contingent consideration based primarily on the (i) timing and probability of success of clinical
events or regulatory approvals; (ii) timing and probability of success of meeting clinical and commercial milestones; and (iii) discount
rates. The Company’s contingent consideration liabilities arose in connection with its acquisition of Kolltan. On a quarterly basis, the
Company revalues these obligations and records increases or decreases in their fair value as an adjustment to operating earnings.
Changes to contingent consideration obligations can result from adjustments to discount rates, accretion of the discount rates due to the
passage of time, changes in the Company’s estimates of the likelihood or timing of achieving development or commercial milestones,
changes in the probability of certain clinical events or changes in the assumed probability associated with regulatory approval. The
assumptions related to determining the value of contingent consideration include a significant amount of judgment, and any changes in
the underlying estimates could have a material impact on the amount of contingent consideration adjustment recorded in any given
period.
Intangible Assets
IPR&D assets acquired in a business combination initially are recorded at fair value and accounted for as indefinite-lived intangible
assets. The valuation model used to measure the fair value of the Company’s IPR&D assets was primarily a discounted cash flow
approach. The assumptions used in determining the fair value of the Company’s IPR&D assets include (i) probability of success; (ii)
probability of partnership; (iii) partnership milestones; and (iv) discount rate. These assets are capitalized on the Company’s
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balance sheets until either the project underlying them is completed or the assets become impaired. If a project is completed, the carrying
value of the related intangible asset is amortized over the remaining estimated life of the asset beginning in the period in which the
project is completed. If a project becomes impaired or is abandoned, the carrying value of the related intangible asset is written down to
its fair value and an impairment charge is taken in the period in which the impairment occurs.
Each IPR&D asset is assessed for impairment at least annually or when impairment indicators are present. The Company has the
option to assess qualitative factors to determine if it is more likely than not that the IPR&D asset is impaired and whether it is necessary
to perform a quantitative impairment test.
Impairment of Intangible and Long-Lived Assets
The Company evaluates the recoverability of its long-lived assets, including property and equipment, right-of-use assets, and
intangible assets when circumstances indicate that an event of impairment may have occurred. Determination of recoverability is based
on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such
cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written-down to their estimated
fair values.
Revenue Recognition
Revenues are recognized when performance obligations under agreements or contracts are satisfied, in an amount that reflects the
consideration the Company expects to be entitled to in exchange for those services.
The Company determines revenue recognition through the following steps:
● Identification of the contract, or contracts, with a customer;
● Identification of the performance obligations in the contract;
● Determination of the transaction price;
● Allocation of the transaction price to the performance obligations in the contract; and
● Recognition of revenue when, or as, the Company satisfies a performance obligation.
Revenue for the Company is derived from product development agreements with collaborative partners for the research and
development of therapeutic drug candidates. The terms of the agreements may include nonrefundable signing and licensing fees, funding
for research, development and manufacturing, milestone payments and royalties on any product sales derived from collaborations. The
Company assesses the multiple obligations typically within product development contracts to determine the distinct performance
obligations and how to allocate the arrangement consideration to each distinct performance obligation. Under product development
agreements, revenue is generally recognized using a cost-to-cost measure of progress. Revenue is recognized based on the costs incurred
to date as a percentage of the total estimated costs to fulfill the contract. Incurred cost represents work performed, which corresponds
with, and thereby best depicts, the transfer of control to the customer. Due to the nature of the work performed in these arrangements, the
estimation of cost at completion is complex, subject to many variables, such as expected clinical trial costs, and requires significant
judgements. Circumstances can arise that change original estimates of costs or progress toward completion. Any revisions to estimates
are reflected in revenue on a cumulative catch-up basis in the period in which the change in circumstances became known.
Revenue for the Company is also derived from manufacturing and research and development arrangements. The Company owns and
operates a cGMP manufacturing facility in Fall River, Massachusetts, to produce drug substance for its current and planned early-stage
clinical trials. In order to utilize excess capacity, the Company has, from time to time, entered into contract manufacturing and research
and development arrangements in which services are provided on a time-and-material basis or at a negotiated fixed price. Revenue from
time-and-material contracts is generally recognized on an output basis as labor hours and/or direct expenses are incurred. Under fixed-
price contracts, revenue is generally recognized on an output basis as progress is made toward completion of the performance obligations
using surveys of performance completed to date.
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Contract Assets and Liabilities
The Company classifies the right to consideration in exchange for products or services transferred to a client as either a receivable or
a contract asset. A receivable is a right to consideration that is unconditional as compared to a contract asset which is a right to
consideration that is conditional upon factors other than the passage of time.
The Company’s contract liabilities result from arrangements where the Company has received payment in advance of performance
under the contract. These amounts are included as deferred revenue within current portion of long-term liabilities on the consolidated
balance sheets.
Research and Development Expenses
Research and development costs, including internal and contract research costs, are expensed as incurred. Research and development
expenses consist mainly of clinical trial costs, manufacturing of clinical material, toxicology and other preclinical studies, personnel
costs, depreciation, license fees and funding of outside contracted research.
Clinical trial expenses include expenses associated with clinical research organization, or CRO, services. Contract manufacturing
expenses include expenses associated with contract manufacturing organization, or CMO, services. The invoicing from CROs and CMOs
for services rendered can lag several months. The Company accrues the cost of services rendered in connection with CRO and CMO
activities based on our estimate of costs incurred. The Company maintains regular communication with our CROs and CMOs to assess
the reasonableness of its estimates. Differences between actual expenses and estimated expenses recorded have not been material and are
adjusted for in the period in which they become known.
Patent Costs
Patent costs are expensed to general and administrative expense as incurred. Certain patent costs are reimbursed by the Company’s
product development and licensing partners. Any reimbursed patent costs are recorded as product development and licensing agreement
revenues in the Company’s consolidated financial statements.
Stock-Based Compensation
The Company records stock-based compensation expense for all stock-based awards made to employees, consultants and non-
employee directors based on the estimated fair values of the stock-based awards expected to vest at the grant date and adjusts, if
necessary, to reflect actual forfeitures. Compensation expense for all stock-based awards is recognized using the straight-line method
over the term of vesting or performance.
Foreign Currency Translation
Net unrealized gains and losses resulting from foreign currency translation are included in accumulated other comprehensive
income. At December 31, 2023 and 2022, accumulated other comprehensive income includes a net unrealized gain related to foreign
currency translation of $2.6 million.
Income Taxes
The Company uses the asset and liability method to account for income taxes, including the recognition of deferred tax assets and
deferred tax liabilities for the anticipated future tax consequences attributable to differences between financial statement amounts and
their respective tax basis. Quarterly, the Company reviews its deferred tax assets for recovery. A valuation allowance is established when
the Company believes that it is more likely than not that its deferred tax assets will not be realized. Changes in valuation allowances from
period to period are included in the Company’s tax provision in the period of change.
The Company records uncertain tax positions in the financial statements only if it is more likely than not that the uncertain tax
position will be sustained upon examination by the taxing authorities. The Company records interest and penalties related to uncertain
tax positions in income tax expense.
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Comprehensive Loss
Comprehensive loss is comprised of net loss and certain changes in stockholders’ equity that are excluded from net loss. The
Company includes foreign currency translation adjustments and unrealized gains and losses on marketable securities in other
comprehensive loss. The statements of operations and comprehensive loss reflect total comprehensive loss for the years ended December
31, 2023, 2022 and 2021.
Net Loss Per Share
Basic net loss per common share is based upon the weighted-average number of common shares outstanding during the period,
excluding restricted stock that has been issued but is not yet vested. Diluted net loss per common share is based upon the weighted-
average number of common shares outstanding during the period plus additional weighted-average potentially dilutive common shares
outstanding during the period when the effect is dilutive. In periods in which the Company reports a net loss, there is no difference
between basic and diluted net loss per share because dilutive shares of common stock are not assumed to have been issued as their effect
is anti-dilutive. The potentially dilutive common shares that have not been included in the net loss per common share calculations
because the effect would have been anti-dilutive are as follows:
Stock options
Newly-Adopted Accounting Pronouncements
2023
6,378,924
Year Ended December 31,
2022
5,085,662
2021
4,077,667
On January 1, 2023, the Company adopted ASU 2016-13: Financial Instruments - Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments. The guidance requires that credit losses be reported using an expected losses model rather than the
incurred losses model and establishes additional disclosure requirements related to credit risks. For available-for-sale debt securities with
unrealized losses, the standard requires allowances to be recorded instead of reducing the amortized cost of the investment. The adoption
of this guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other
standard setting bodies that are adopted by the Company as of the specified effective date. The Company has reviewed recently issued
accounting pronouncements and concluded they are either not applicable to the business or not expected to have a material impact on the
Company’s consolidated financial statements as a result of future adoption.
(3) Accumulated Other Comprehensive Income
The changes in accumulated other comprehensive income, which is reported as a component of stockholders’ equity, for the year
ended December 31, 2023 are summarized below:
Balance at December 31, 2022
Other comprehensive gain
Balance at December 31, 2023
Unrealized
Gain (Loss) on
Marketable
Securities
$
$
(1,336)
2,048
712
Foreign
Currency Items
(In thousands)
2,596
$
—
2,596
$
$
$
Total
1,260
2,048
3,308
No amounts were reclassified out of accumulated other comprehensive income during the years ended December 31, 2023, 2022 and
2021.
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Table of Contents
(4) Fair Value Measurements
The following tables set forth the Company’s financial assets and liabilities subject to fair value measurements:
Assets:
Money market funds and cash equivalents
Marketable securities
Assets:
Money market funds and cash equivalents
Marketable securities
As of
December 31, 2023
$
$
19,803
388,784
408,587
As of
December 31, 2022
$
$
16,813
275,523
292,336
Level 1
Level 2
(In thousands)
Level 3
— $
—
— $
19,803
388,784
408,587
Level 1
Level 2
(In thousands)
Level 3
— $
—
— $
16,813
275,523
292,336
—
—
—
—
—
—
The Company’s financial assets consist mainly of cash equivalents and marketable securities and are classified as Level 2 within the
valuation hierarchy. The Company values its marketable securities utilizing independent pricing services which normally derive security
prices from recently reported trades for identical or similar securities, making adjustments based on significant observable transactions.
At each balance sheet date, observable market inputs may include trade information, broker or dealer quotes, bids, offers or a
combination of these data sources.
Contingent consideration liabilities measured at fair value using Level 3 inputs were $0.0 million as of December 31, 2023 and
December 31, 2022. The valuation technique used to measure fair value of the Company’s Level 3 liabilities, which consist of contingent
consideration related to the acquisition of Kolltan Pharmaceuticals, Inc. (“Kolltan”) in 2016, is primarily an income approach. The
significant unobservable inputs used in the fair value measurement of the contingent consideration are estimates including probability of
success, discount rates and amount of time until the conditions of the milestone payment are met.
During the year ended December 31, 2022, the Company recorded a $6.9 million gain on fair value remeasurement of contingent
consideration primarily due to the Company’s decision to deprioritize the CDX-1140 program. The assumptions related to determining
the value of contingent consideration include a significant amount of judgment, and any changes in the underlying estimates could have a
material impact on the amount of contingent consideration adjustment recorded in any given period.
The Company did not have any transfers of assets or liabilities between the fair value measurement classifications during the years
ended December 31, 2023 and 2022.
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(5) Marketable Securities
The following is a summary of marketable debt securities, classified as available-for-sale:
December 31, 2023
Marketable securities
U.S. government and municipal obligations
Maturing in one year or less
Maturing after one year through three years
Total U.S. government and municipal obligations
Corporate debt securities
Maturing in one year or less
Maturing after one year through three years
Total corporate debt securities
Total marketable securities
December 31, 2022
Marketable securities
U.S. government and municipal obligations
Maturing in one year or less
Maturing after one year through three years
Total U.S. government and municipal obligations
Corporate debt securities
Maturing in one year or less
Maturing after one year through three years
Total corporate debt securities
Total marketable securities
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
(In thousands)
Fair
Value
$ 132,459
26,009
$ 158,468
$ 183,625
45,977
$ 229,602
$ 388,070
$
$
97,246
—
97,246
$ 179,613
—
$ 179,613
$ 276,859
$
$
$
$
$
$
$
$
$
$
143
77
220
300
257
557
777
5
—
5
$
$
$
$
$
$
$
(53) $ 132,549
—
26,086
(53) $ 158,635
(10) $ 183,915
—
46,234
(10) $ 230,149
(63) $ 388,784
(369) $
—
(369) $
96,882
—
96,882
— $
—
— $
$
5
—
(972) $ 178,641
—
(972) $ 178,641
(1,341) $ 275,523
The Company holds investment grade marketable securities. Unrealized losses are generally attributable to changes in interest rates.
The aggregate fair value of marketable securities held by the Company in an unrealized loss position as of December 31, 2023 and
December 31, 2022 was $80.4 million and $133.9 million, respectively. The Company has the intent and ability to hold its marketable
securities until recovery and has determined that there has been no material change to the Company’s credit risk. As a result, the
Company determined it did not hold any investments with a credit loss at December 31, 2023.
Marketable securities include $1.9 million and $0.8 million in accrued interest at December 31, 2023 and December 31, 2022,
respectively.
(6) Property and Equipment, Net
Property and Equipment, net includes the following:
Laboratory equipment
Manufacturing equipment
Office furniture and equipment
Leasehold improvements
Construction in progress
Total property and equipment
Less: accumulated depreciation and amortization
Property and equipment, net
85
December 31, December 31,
2023
2022
(In thousands)
$
$
9,848
2,419
3,738
9,653
787
26,445
(22,385)
4,060
$
$
9,250
2,558
3,454
9,613
498
25,373
(21,626)
3,747
Table of Contents
Depreciation and amortization expense related to property and equipment was $1.5 million, $1.4 million and $1.6 million for the
years ended December 31, 2023, 2022 and 2021, respectively.
(7) Leases
The Company has operating leases of office, manufacturing and laboratory space, which have remaining lease terms of one to two
years and may include one or more options to renew.
During the years ended December 31, 2023, 2022 and 2021, the Company recorded right of use assets and lease liabilities of $0.1
million, $2.5 million and $1.0 million related to new leases and lease extensions, respectively.
Operating lease expense was $1.9 million, $1.9 million and $1.9 million for years ended December 31, 2023, 2022 and 2021,
respectively. Variable lease expense was $0.8 million, $0.8 million and $0.7 million for years ended December 31, 2023, 2022 and 2021,
respectively. Cash paid for amounts included in the measurement of operating lease liabilities was $2.0 million, $1.9 million and $1.8
million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, the weighted-average remaining
lease term was 2 years and the weighted-average discount rate was 10.0%, compared to a weighted-average remaining lease term of 2
years and weighted average discount rate of 10.0% as of December 31, 2022.
Future minimum lease payments under non-cancellable leases as of December 31, 2023 were as follows:
2024
2025
Total lease payments
Less imputed interest
Present value of operating lease liabilities
(8) Intangible Assets
$
$
1,788
949
2,737
(195)
2,542
At December 31, 2023 and 2022, the carrying value of the Company’s indefinite-lived intangible assets was $27.2 million.
Indefinite-lived intangible assets consist of acquired in-process research and development (“IPR&D”) related to the development of the
anti-KIT program (including barzolvolimab). Barzolvolimab is in Phase 2 development. As of December 31, 2023, the IPR&D asset
related to the anti-KIT program had not reached technological feasibility nor did the asset have alternative future uses.
The Company performs an impairment test on IPR&D assets at least annually, or more frequently if events or changes in
circumstances indicate that IPR&D assets may be impaired. During the third quarter of 2021, the Company evaluated its TAM program
IPR&D asset for potential impairment as a result of a lack of interest in the program from third parties. The Company concluded that the
TAM program IPR&D asset was fully impaired, and a non-cash impairment charge of $3.5 million was recorded in the third quarter of
2021.
The Company performed its annual impairment test of the IPR&D asset related to the development of the anti-KIT program
(including barzolvolimab) during the fourth quarter of 2023 and concluded that the IPR&D asset was not impaired. Due to the nature of
IPR&D projects, the Company may experience future delays or failures to obtain regulatory approvals to conduct clinical trials, failures
of such clinical trials or other failures to achieve a commercially viable product, and as a result, may recognize further impairment losses
in the future.
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(9) Accrued Expenses
Accrued expenses include the following:
Accrued payroll and employee benefits
Accrued research and development contract costs
Accrued professional fees
Other accrued expenses
(10) Other Long-Term Liabilities
Other long-term liabilities include the following:
Net deferred tax liabilities related to IPR&D (Note 15)
Deferred income from sale of tax benefits
Deferred revenue (Note 13)
Total
Less current portion
Long-term portion
December 31,
December 31,
2023
2022
(In thousands)
$
$
9,348
10,864
1,439
378
22,029
$
$
7,526
4,223
766
320
12,835
December 31,
December 31,
2023
2022
(In thousands)
$
$
1,613
3,720
3,058
8,391
(3,988)
4,403
$
$
1,613
4,650
60
6,323
(990)
5,333
In March 2022, the Company received approval from the New Jersey Economic Development Authority and agreed to sell New
Jersey tax benefits of $5.0 million to an independent third party for $4.7 million. Under the agreement, the Company must maintain a
base of operations in New Jersey for five years or the tax benefits must be paid back on a pro-rata basis based on the number of years
completed. The Company recognized $0.9 million in other income related to the sale of these tax benefits during the year ended
December 31, 2023.
(11) Stockholders’ Equity
Common Stock
In November 2023, the Company filed an automatic shelf registration statement with the SEC to register for sale any combination of
the types of securities described in the shelf registration statement.
On February 26, 2024, the Company entered into a controlled equity offering sales agreement with Cantor Fitzgerald & Co.
(“Cantor”) to allow the Company to issue and sell shares of its common stock having an aggregate offering price of up to $300.0 million
from time to time through Cantor, acting as agent. On February 26, 2024, the Company terminated its sales agreement dated May 19,
2016 with Cantor.
In November 2023, the Company issued 8,538,750 shares of its common stock in an underwritten public offering resulting in net
proceeds to the Company of $216.2 million, after deducting underwriting fees and offering expenses.
In July 2021, the Company issued 6,845,238 shares of its common stock in an underwritten public offering resulting in net proceeds
to the Company of $269.9 million, after deducting underwriting fees and offering expenses.
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Convertible Preferred Stock
At December 31, 2023, the Company had authorized 3,000,000 shares of preferred stock all of which have been designated Class C
Preferred Stock including 350,000 shares which have been designated Series C-1 Junior Participating Cumulative Preferred Stock (the
“Series C-1 Preferred Stock”). No shares of Series C-1 Preferred Stock were outstanding at December 31, 2023 or 2022.
(12) Stock-Based Compensation
The Company has the following stock-based compensation plans: the 2004 Employee Stock Purchase Plan (the “2004 ESPP Plan”),
the 2008 Stock Option and Incentive Plan (the “2008 Plan”) and the 2021 Omnibus Equity Incentive Plan (the “2021 Plan”). There are
no shares available for future grant under the 2008 Plan. Outstanding options under the 2008 Plan will be rolled into the 2021 Plan if
canceled.
Employee Stock Purchase Plan
At December 31, 2023, a total of 276,666 shares of common stock are reserved for issuance under the 2004 ESPP Plan. Under the
2004 ESPP Plan, each participating employee may purchase shares of common stock through payroll deductions at a purchase price
equal to 85% of the lower of the fair market value of the common stock at either the beginning of the offering period or the applicable
exercise date. During the years ended December 31, 2023, 2022 and 2021, the Company issued 12,729, 12,243 and 21,867 shares under
the 2004 ESPP Plan, respectively. At December 31, 2023, 163,503 shares were available for issuance under the 2004 ESPP Plan.
Employee Stock Option Plan
The 2021 Plan permits the granting of incentive stock options (intended to qualify as such under Section 422A of the Internal
Revenue Code of 1986, as amended), non-qualified stock options, stock appreciation rights, performance share units, restricted stock and
other awards of restricted stock in lieu of cash bonuses to employees, consultants and non-employee directors.
The 2021 Plan allows for grants of new awards until April 19, 2031. As of December 31, 2023, there were 2,055,002 shares
outstanding under the 2008 Plan that will be rolled into the 2021 Plan if canceled. The Company’s Board of Directors determines the
term of each option, option price, and number of shares for which each option is granted and the rate at which each option vests. Options
generally vest over a period not to exceed four years. The term of each option cannot exceed ten years (five years for options granted to
holders of more than 10% of the voting stock of the Company), and the exercise price of stock options cannot be less than the fair market
value of the common stock at the date of grant (110% of fair market value for incentive stock options granted to holders of more than
10% of the voting stock of the Company). Vesting of all employee and non-employee director stock option awards may accelerate upon a
change in control as defined in the 2021 Plan.
A summary of stock option activity for the year ended December 31, 2023 is as follows:
Options outstanding at December 31, 2022
Granted
Exercised
Canceled
Options outstanding at December 31, 2023
Options vested and expected to vest at December 31, 2023
Options exercisable at December 31, 2023
Shares available for grant under the 2021 Plan
Weighted
Average
Exercise
Price
Per Share
Weighted
Average
Remaining
Contractual
Term (In Years)
7.9
—
—
—
7.5
7.5
6.4
—
29.26
36.58
14.92
87.30
29.69
29.67
29.21
—
Shares
5,085,662
$
$
1,612,175
(131,203) $
(187,710) $
6,378,924
$
$
6,264,180
3,261,890
$
1,013,503
The total intrinsic value of stock options exercised during the years ended December 31, 2023, 2022 and 2021 was $2.7 million,
$12.8 million and $9.4 million, respectively. The weighted average grant-date fair value of stock options granted during the years
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ended December 31, 2023, 2022 and 2021 was $28.15, $17.60 and $22.16, respectively. The total fair value of stock options vested
during the years ended December 31, 2023, 2022 and 2021 was $20.4 million, $15.6 million and $5.9 million, respectively.
The aggregate intrinsic value of stock options outstanding at December 31, 2023 was $98.6 million. The aggregate intrinsic value of
stock options vested and expected to vest at December 31, 2023 was $97.6 million. The aggregate intrinsic value of stock options
exercisable at December 31, 2023 was $68.9 million. As of December 31, 2023, total compensation cost related to non-vested employee
and non-employee director stock options not yet recognized was approximately $61.9 million, net of estimated forfeitures, which is
expected to be recognized as expense over a weighted average period of 2.6 years.
Valuation and Expenses Information
Stock-based compensation expense for the years ended December 31, 2023, 2022 and 2021 was recorded as follows:
Research and development
General and administrative
Total stock-based compensation expense
2023
11,948
11,942
23,890
2022
(In thousands)
8,082
$
7,529
15,611
$
$
$
2021
4,525
4,428
8,953
$
$
The fair values of employee and director stock options granted during the years ended December 31, 2023, 2022 and 2021 were
valued using the Black-Scholes option pricing model with the following assumptions:
Expected stock price volatility
Expected option term
Risk-free interest rate
Expected dividend yield
2023
92%
6.0 Years
3.5 - 4.7%
None
2022
90 - 97%
6.0 Years
1.7 - 4.2%
None
2021
97 - 98%
6.0 Years
0.8 - 1.4%
None
The Company estimates expected term based on historical exercise patterns. The Company uses its historical stock price volatility
consistent with the expected term of grant as the basis for its expected volatility assumption. The risk-free interest rate is based upon the
yield of U.S. Treasury securities consistent with the expected term of the option. The dividend yield assumption is based on the
Company’s history of zero dividend payouts and expectation that no dividends will be paid in the foreseeable future.
(13) Revenue
Contract and Grants Revenue
The Company has entered into the Rockefeller Agreement and an agreement with Gilead Sciences pursuant to which the Company
performs manufacturing and research and development services on a time-and-materials basis or at a negotiated fixed price. The
Company recognized $6.6 million, $1.8 million and $4.1 million in revenue under these agreements during the years ended December
31, 2023, 2022 and 2021, respectively.
During the third quarter of 2020, the Company was awarded a Small Business Innovation Research (“SBIR”) grant from the
National Institutes of Health (NIH) to support the Company’s CDX-1140 and CDX-301 programs. The Company recognized $0.0
million, $0.5 million and $0.4 million in grant revenue under the award during the years ended December 31, 2023, 2022 and 2021,
respectively.
Contract Assets and Liabilities
At December 31, 2023 and 2022, the Company’s right to consideration under all contracts was considered unconditional, and as
such, there were no recorded contract assets. At December 31, 2023, the Company had $3.1 million in contract liabilities recorded, which
is expected to be recognized during the next 12 months as manufacturing and research and development services are performed. At
December 31, 2022, the Company had $0.1 million in contract liabilities recorded. Revenue recognized from contract liabilities as of
December 31, 2022 during the year ended December 31, 2023 was $0.1 million.
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(14) Collaboration Agreements
The Company has entered into license agreements whereby the Company has received licenses or options to license technology,
specified patents and/or patent applications. These license and collaboration agreements generally provide for royalty payments equal to
specified percentages of product sales, annual license maintenance fees, continuing patent prosecution costs and potential future
milestone payments to third parties upon the achievement of certain development, regulatory and/or commercial milestones.
Nonrefundable license fee expense of $0.3 million, $0.1 million and $0.1 million was recorded to research and development expense for
the years ended December 31, 2023, 2022 and 2021, respectively.
Yale University (Yale)
Under a license agreement with Yale, the Company may be required to make a one-time payment to Yale of $3.0 million with
respect to barzolvolimab upon achievement of a specified commercial milestone. In addition, the Company may be required to pay a low
single-digit royalty on annual worldwide net sales of barzolvolimab. Unless earlier terminated by us or Yale, the Yale license agreement
is due to expire no later than May 2038 but may expire earlier on a country-by-country basis under specified circumstances.
(15) Income Taxes
The components of income tax benefit (provision) are as follows:
2023
Year Ended December 31,
2022
(In thousands)
2021
Income tax benefit (provision):
Federal
State
Expiration of NOLs and R&D credit
Deferred tax valuation allowance
$ 36,067
13,691
(15,141)
34,617
(34,617)
$ 17,484
9,606
(16,862)
10,228
(10,228)
$
— $
— $
$ 18,513
7,082
(14,210)
11,385
(11,158)
227
A reconciliation between the amount of reported income tax and the amount computed using the U.S. statutory rate is as follows:
Pre-tax loss
Loss at statutory rates
Research and development credits
State taxes
Other
Change in fair value remeasurement of contingent consideration
Expiration of NOLs and R&D credit
Change in valuation allowance
Income tax (benefit) provision
90
2021
2023
2022
(In thousands)
$ (141,429) $ (112,325) $ (70,738)
(14,855)
(2,422)
(7,082)
(941)
(295)
14,210
11,158
(227)
(23,588)
(3,876)
(9,606)
11,421
(1,441)
16,862
10,228
(29,700)
(5,237)
(13,691)
(1,130)
—
15,141
34,617
— $
— $
$
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Deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and tax basis of
assets and liabilities using future expected enacted rates. The principal components of the deferred tax assets and liabilities at December
31, 2023 and 2022 are as follows:
Gross deferred tax assets
Net operating loss carryforwards
Tax credit carryforwards
Deferred research and development expenses
Stock-based compensation
Fixed assets
Accrued expenses and other
Gross deferred tax liabilities
IPR&D intangibles
Total deferred tax assets and liabilities
Valuation allowance
Net deferred tax liability
December 31, December 31,
2023
2022
(In thousands)
$
$
197,618
56,830
82,077
14,671
1,019
398
352,613
(6,840)
345,773
(347,386)
$
(1,613) $
188,255
50,688
67,494
9,993
1,193
373
317,996
(6,840)
311,156
(312,769)
(1,613)
The Company has evaluated the positive and negative evidence bearing upon the realizability of its net deferred tax assets and
considered its history of losses, ultimately concluding that it is “more likely than not” that the Company will not recognize the benefits of
federal, state and foreign deferred tax assets and, as such, has maintained a full valuation allowance on its deferred tax assets.
In response to COVID-19, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27,
2020. Among other provisions, the CARES Act included (i) the ability to use net operating losses to offset income without the 80%
taxable income limitation enacted as part of the Tax Cuts and Jobs Act (“TCJA”) for net operating losses incurred in the 2018, 2019 or
2020 tax years; and (ii) the ability to claim a current deduction for interest expense up to 50% of adjusted taxable income for the 2019
and 2020 tax years (rather than 30% of adjusted taxable income pursuant to the TCJA). We do not expect that any of the provisions of the
CARES Act will result in a material impact to the financial statements.
The net deferred tax liability of $1.6 million at December 31, 2023 and 2022, relates to the temporary differences associated with the
IPR&D intangible assets acquired in previous business combinations and are not deductible for tax purposes. The Company recorded an
income tax benefit of $0.2 million during the year ended December 31, 2021 due to a decrease in deferred tax liabilities resulting from
the impairment of the TAM program IPR&D asset in the third quarter of 2021.
As of December 31, 2023, the Company had federal and state net operating loss carryforwards of $618.4 million and $1.0 billion,
respectively, which may be available to offset certain future income tax liabilities and begin to expire in 2024 and 2029, respectively. Of
the federal net operating loss carryforwards of $618.4 million, approximately $442.2 million are from 2018 through 2023 and have no
expiration date. As of December 31, 2023, the Company also had federal and state research and development tax credit carryforwards of
$46.7 million and $12.9 million, respectively, which may be available to offset future income tax liabilities and begin to expire in 2023
and 2022, respectively.
Utilization of the net operating loss carryforwards and research and credit carryforwards may be subject to a substantial annual
limitation under Section 382 of the Internal Revenue Code of 1986, or Section 382, due to ownership changes that occurred previously or
that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset
future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of
certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has
estimated the amounts of net operating loss and research and development tax credit carryforwards which will expire unutilized as a
result of its estimated annual limitations under Section 382 and has excluded those amounts from the carryforward amounts disclosed
above and in the deferred tax assets and liabilities table included in this footnote. The Company has concluded Section 382 studies
through 2015 for Celldex generated NOLs.
As of December 31, 2023 and 2022, the Company did not have any unrecognized tax benefits.
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Massachusetts, New Jersey, New York and Connecticut are the jurisdictions in which the Company primarily operates or has
operated and has income tax nexus. The Company is not currently under examination by these or any other jurisdictions for any tax year.
Generally, in U.S. federal and state taxing jurisdictions, all years which generated net operating losses and/or tax credit carryforwards
remain subject to examination to the extent those carryforwards are utilized in a subsequent period.
(16) Retirement Savings Plan
The Company maintains a 401(k) Plan which is available to substantially all employees. Under the terms of the 401(k) Plan,
participants may elect to contribute up to 60% of their compensation or the statutory prescribed limits. The Company may make 50%
matching contributions on up to 4% of a participant’s annual salary. Benefit expense for the 401(k) Plan was $0.5 million, $0.4 million
and $0.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.
(17) Kolltan Acquisition
On November 29, 2016, the Company acquired all of the share and debt interests of Kolltan, a clinical-stage biopharmaceutical
company, in exchange for 1,217,200 shares of the Company’s common stock plus contingent consideration in the form of development,
regulatory approval and sales-based milestones (“Kolltan Milestones”) of up to $172.5 million payable in cash, in shares of Celldex’s
common stock or a combination of both, in the sole discretion of Celldex and subject to provisions of the Agreement and Plan of Merger,
dated November 1, 2016 (the “Merger Agreement”).
In October 2019, the Company received a letter from SRS, the hired representative of the former stockholders of Kolltan, notifying
the Company that it objected to the Company’s characterization of the development, regulatory approval and sales-based Kolltan
Milestones relating to CDX-0158 as having been abandoned and contending instead that the related milestone payments are due from
Celldex to the Kolltan stockholder.
On August 18, 2020, Celldex filed a Verified Complaint in the Court of Chancery of the State of Delaware against SRS (acting in its
capacity as the representative of the former stockholders of Kolltan pursuant to the Merger Agreement) seeking declaratory relief with
respect to the rights and obligations of the parties relating to certain contingent milestone payments under the Merger Agreement relating
to the discontinued CDX-0158 program (the “Litigation”).
On July 15, 2022, the Company entered into a definitive settlement agreement between the Company and SRS (the “Settlement
Agreement”) and the Company and SRS jointly filed a Stipulation of Dismissal with prejudice relating to the Litigation on July 19, 2022.
Pursuant to the terms of the Settlement Agreement, all milestone payments provided for by the Merger Agreement were replaced in
their entirety with the following payments, each of which is payable only once:
(i) The Company paid $15.0 million upon execution of the Settlement Agreement (the “Initial Payment”).
(ii) The Company paid $12.5 million upon the Successful Completion (as defined in the Settlement Agreement) of a Phase 2
Clinical Trial (as defined in the Merger Agreement) of barzolvolimab.
(iii) The Company shall pay $52.5 million upon the first United States Food and Drug Administration or European Medicines
Agency, or, in each case, any successor organization, regulatory approval of a Surviving Company Product (as defined the
Settlement Agreement).
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The above payment obligations replace, in their entirety, the contingent consideration in the form of development, regulatory
approval and sales-based milestones of up to $172.5 million contained in the Merger Agreement.
Under the Settlement Agreement, each of the Company and SRS provided broad mutual releases of all claims relating to or arising
out of the Merger Agreement, including without limitation, all claims brought in the Litigation or that could have been brought in the
Litigation.
The Company paid the Initial Payment in cash in July 2022. During the fourth quarter of 2023, the Company announced positive
topline results from our Phase 2 clinical trial of barzolvolimab in patients with moderate to severe CSU, which satisfied the requirement
of “successful completion” of a Phase 2 Clinical Trial of barzolvolimab such that the Company was obligated to make the applicable
milestone payment under the Settlement Agreement with SRS in the amount of $12.5 million. During the fourth quarter of 2023, the
Company paid the $12.5 million milestone in cash and recorded a litigation settlement related loss of $12.5 million.
A future milestone payment related to the barzolvolimab program, which was subject to the Litigation, will be recorded when and if
payment becomes probable and reasonably estimable in accordance with the loss contingency model under ASC 450. A future milestone
payment related to the remaining Surviving Company Products are measured at fair value (refer to Note 4). When and if the remaining
payment described above becomes due, it shall be payable, at the Company’s sole election, in either cash or stock (as set forth in the
Merger Agreement) or a combination thereof.
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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of December 31, 2023, our management evaluated, with the participation of our Chief Executive Officer and Chief Financial
Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2023.
Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the
reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within time periods specified by
the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal
control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under
the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and
other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial
statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures
that:
● pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
assets;
● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in
accordance with the authorizations of management and directors; and
● provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of
assets that could have a material effect on our financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial
Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework provided
in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of
December 31, 2023.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Item 8 above.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended December 31, 2023 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. OTHER INFORMATION
On February 26, 2024, we entered into a controlled equity offering sales agreement (the “Sales Agreement”) with Cantor Fitzgerald
& Co. (“Cantor”), as sales agent, pursuant to which we may offer and sell, from time to time, through Cantor shares of our common
stock, par value $0.001 per share.
We are not obligated to sell any shares under the Sales Agreement. Subject to the terms and conditions of the Sales Agreement,
Cantor will use commercially reasonable efforts consistent with its normal trading and sales practices, applicable state and federal law,
rules and regulations and the rules of The Nasdaq Capital Market to sell shares from time to time based upon our instructions, including
any price, time or size limits specified by us. Under the Sales Agreement, Cantor may sell shares by any method deemed to be an “at the
market offering” as defined in Rule 415 under the U.S. Securities Act of 1933, as amended, or any other method permitted by law.
Cantor’s obligations to sell shares under the Sales Agreement are subject to satisfaction of certain conditions, including customary
closing conditions. We will pay Cantor a commission of up to 3.0% of the aggregate gross proceeds from each sale of shares and have
agreed to provide Cantor with customary indemnification and contribution rights. We have also agreed to reimburse Cantor for certain
specified expenses.
Sales of shares of common stock under the Sales Agreement will be made pursuant to the registration statement on Form S-3ASR
(File No. 333-275300), which became effective upon filing with the U.S. Securities and Exchange Commission (the “SEC”) on
November 3, 2023, and a related prospectus supplement to be filed with the SEC on February 26, 2024, for an aggregate offering price of
up to $300.0 million.
The foregoing summary of the Sales Agreement does not purport to be complete and is qualified in its entirety by reference to the
full text of the Sales Agreement, which is filed herewith as Exhibit 1.1. A copy of the opinion of Lowenstein Sandler LLP relating to the
validity of the securities issued in the offering is filed herewith as Exhibit 5.1.
This Annual Report on Form 10-K shall not constitute an offer to sell or the solicitation of an offer to buy any shares under the Sales
Agreement, nor shall there be any sale of such shares in any state in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state.
Also on February 23, 2024, we provided notice of, and Cantor agreed to, termination of the controlled equity offering sales
agreement, dated as of May 19, 2016, by and between us and Cantor, as agent, effective immediately.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
The information required by this Item 10 will be included in the definitive Proxy Statement for our 2024 Annual Meeting of
Stockholders, or the 2024 Proxy Statement, under “Information Regarding Our Current Directors and Executive Officers,” “Delinquent
Section 16(a) Reports,” “Code of Business Conduct and Ethics” and “The Board of Directors and Its Committees” and is incorporated
herein by reference. If the 2024 Proxy Statement is not filed with the SEC within 120 days after the end of our most recent fiscal year, we
will provide such information by means of an amendment to this Annual Report on Form 10-K.
Item 11. EXECUTIVE COMPENSATION
The information required by this Item 11 will be included in the 2024 Proxy Statement under “Executive Compensation,” and
“Compensation Committee Interlocks and Insider Participation,” and is incorporated herein by reference. If the 2024 Proxy Statement is
not filed with the SEC within 120 days after the end of our most recent fiscal year, we will provide such information by means of an
amendment to this Annual Report on Form 10-K.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this Item 12 will be included in the 2024 Proxy Statement under “Security Ownership of Certain
Beneficial Owners and Management” and “Equity Compensation Plan Information” and is incorporated herein by reference. If the 2024
Proxy Statement is not filed with the SEC within 120 days after the end of our most recent fiscal year, we will provide such information
by means of an amendment to this Annual Report on Form 10-K.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item 13 will be included in the 2024 Proxy Statement under “Election of Directors” and “Approval
of Related Person Transactions and Transactions with Related Persons” and is incorporated herein by reference. If the 2024 Proxy
Statement is not filed with the SEC within 120 days after the end of our most recent fiscal year, we will provide such information by
means of an amendment to this Annual Report on Form 10-K.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item 14 will be included in the 2024 Proxy Statement under “Independent Registered Public
Accounting Firm” and is incorporated herein by reference. If the 2024 Proxy Statement is not filed with the SEC within 120 days after
the end of our most recent fiscal year, we will provide such information by means of an amendment to this Annual Report on Form 10-K.
96
Table of Contents
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(A)
The following documents are filed as part of this Form 10-K:
(1) Financial Statements:
The Financial Statements and Supplementary Data are included in Part II Item 8 of this report.
(2) Financial Statement Schedules:
Schedules are omitted since the required information is not applicable or is not present in amounts sufficient to require
submission of the schedule, or because the information required is included in the Financial Statements or Notes thereto.
(3) Exhibits:
No.
Description
Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
1.1
2.1
Sales Agreement, dated February 26, 2024, by and
between Celldex Therapeutics, Inc. and Cantor
Fitzgerald & Co.
Agreement and Plan of Merger, dated as of
November 1, 2016, by and among Kolltan
Pharmaceuticals, Inc., Celldex Therapeutics, Inc.,
Connemara Merger Sub 1 Inc. and Connemara
Merger Sub 2 LLC.
Articles of Incorporation and By-Laws
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
Third Restated Certificate of Incorporation
Certificate of Amendment of Third Restated
Certificate of Incorporation
Second Certificate of Amendment of Third
Restated Certificate of Incorporation
Third Certificate of Amendment of Third Restated
Certificate of Incorporation
Fourth Certificate of Amendment of Third Restated
Certificate of Incorporation
Fifth Certificate of Amendment of Third Restated
Certificate of Incorporation
Sixth Certificate of Amendment of Third Restated
Certificate of Incorporation
Seventh Certificate of Amendment of Third
Restated Certificate of Incorporation
Second Amended and Restated By-Laws of
Celldex Therapeutics, Inc., dated November 3,
2022
97
Incorporated by Reference to
Form and
SEC File No.
Exhibit
No.
SEC
Filing Date
Filed herewith
8-K
(000-15006)
S-4
(333-59215)
S-4
(333-59215)
S-4
(333-59215)
10-Q
(000-15006)
8-K
(000-15006)
8-K
(000-15006)
10-Q
(000-15006)
8-K
(000-15006)
10-Q
(000-15006)
2.1
11/1/16
3.1
3.1
3.2
3.1
3.1
3.2
3.7
3.1
3.1
7/16/98
7/16/98
7/16/98
5/10/02
3/11/08
3/11/08
11/10/08
2/8/19
11/9/22
Table of Contents
Instruments Defining the Rights of Security Holders
4.1
4.2
4.3
5.1
Specimen of Common Stock Certificate
Certificate of Designations, Preferences and Rights
of a Series of Preferred Stock classifying and
designating the Series C-1 Junior Participating
Cumulative Preferred Stock
Description of Securities
Opinion of Lowenstein Sandler LLP
8-K
(000-15006)
8-A
(000-15006)
10-K
(000-15006)
Filed herewith
Material Contracts-Leases
*10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
Lease Agreement, by and between the Company and
the Massachusetts Development Finance Agency,
dated as of December 22, 2003
First Amendment to Lease between Massachusetts
Development Finance Agency and the Company
dated March 17, 2005
Second Amendment to Lease by and between the
Company and the Massachusetts Development
Finance Agency dated as of November 4, 2005
Third Amendment to Lease between Massachusetts
Development Finance Agency and the Company
dated December 20, 2006
Fifth Amendment to Lease between Massachusetts
Development Finance Agency and the Company
dated October 3, 2008
Sixth Amendment to Lease between Massachusetts
Development Finance Agency and the Company
dated August 20, 2009
Seventh Amendment to Lease by and between the
Company and the Massachusetts Development
Finance Agency dated as of June 22, 2010
Eighth Amendment to Lease by and between the
Company and University of Massachusetts
Dartmouth dated as of November 1, 2015
Ninth Amendment to Lease by and between the
Company and University of Massachusetts
Dartmouth dated as of October 1, 2019
Tenth Amendment to Lease by and between the
Company and University of Massachusetts
Dartmouth dated as of August 1, 2022
Lease Agreement dated as of May 1, 2013 by and
between Crown Perryville, LLC and the Company.
First Amendment to Lease between Company and
Crown Perryville, LLC dated as of June 17, 2015
Second Amendment to Lease Agreement between
the Company and Crown Perryville, LLC dated as of
March 8, 2019
Third Amendment to Lease Agreement between the
Company and Perryville SPE LLC (successor-in-
interest) to Crown Perryville, LLC dated as of May
23, 2022
98
10-Q
(000-15006)
10-K/A
(000-15006)
10-K
(000-15006)
10-K/A
(000-15006)
10-K/A
(000-15006)
10-K/A
(000-15006)
10-Q
(000-15006)
10-K/A
(000-15006)
10-K
(000-15006)
10-Q
(000-15006)
10-Q
(000-15006)
10-Q
(000-15006)
10-Q
(000-15006)
10-Q
(000-15006)
4.1
3.1
4.3
10.1
10.6
2/8/19
11/8/04
2/28/23
4/30/04
12/23/10
10.41
3/16/06
10.7
10.8
10.9
10.1
12/23/10
12/23/10
12/23/10
8/5/10
10.12
2/25/16
10.13
3/26/20
10.2
10.1
10.2
10.1
10.3
11/9/22
5/03/13
8/10/15
5/7/19
8/8/22
Table of Contents
10.15
Extension of Lease Agreement between the Company
and University of Massachusetts Dartmouth dated as of
July 1, 2020
10-Q
(000-15006)
Material Contracts-License, Collaboration, Supply and Distribution Agreements
*10.16 Amended and Restated License Agreement by and
between the Company and Yale University dated as of
July 26, 2022
Material Contracts-Other
10.17 Confidential Settlement Agreement and Mutual
Release, dated July 15, 2022, by and between
Shareholder Representatives Services LLC, solely in its
capacity as Stockholders Representative, and Celldex
Therapeutics, Inc.
Material Contracts- Management Contracts and Compensatory Plans
†10.18 Celldex Therapeutics, Inc. 2021 Omnibus Equity
Incentive Plan (as amended June 15, 2023)
†10.19 Celldex Therapeutics, Inc. 2021 Omnibus Equity
Incentive Plan
†10.20 Celldex Therapeutics, Inc. Amended and Restated 2008
Stock Option and Incentive Plan (as amended, effective
June 18, 2020).
†10.21 Celldex Therapeutics, Inc. Amended and Restated 2004
Employee Stock Purchase Plan (effective as of June 19,
2019)
†10.22 Amended and Restated Employment Agreement, dated
as of July 1, 2021, by and between Celldex
Therapeutics, Inc. and Anthony S. Marucci
†10.23 Amended and Restated Employment Agreement, dated
as of July 1, 2021, by and between Celldex
Therapeutics, Inc. and Sam Martin
†10.24 Amended and Restated Employment Agreement, dated
as of July 1, 2021, by and between Celldex
Therapeutics, Inc. and Tibor Keler, Ph.D.
†10.25 Amended and Restated Employment Agreement, dated
as of July 1, 2021, by and between Celldex
Therapeutics, Inc. and Ronald Pepin, Ph.D.
†10.26 Amended and Restated Employment Agreement, dated
as of July 1, 2021, by and between Celldex
Therapeutics, Inc. and Sarah Cavanaugh
†10.27 Amended and Restated Employment Agreement, dated
as of July 1, 2021, by and between Celldex
Therapeutics, Inc. and Margo Heath-Chiozzi, M.D.
†10.28 Amended and Restated Employment Agreement, dated
as of July 1, 2021, by and between Celldex
Therapeutics, Inc. and Elizabeth Crowley
†10.29 Amended and Restated Employment Agreement, dated
as of July 1, 2021, by and between Celldex
Therapeutics, Inc. and Richard Wright, Ph.D.
†10.30 Amended and Restated Employment Agreement, dated
as of July 1, 2021, by and between Celldex
Therapeutics, Inc. and Diane Young, M.D.
†10.31 Amended and Restated Employment Agreement, dated
as of July 1, 2021, by and between Celldex
Therapeutics, Inc. and Freddy Jimenez
99
10-Q
(000-15006)
8-K
(000-15006)
8-K
(000-15006)
8-K
(000-15006)
8-K
(000-15006)
8-K
(000-15006)
8-K
(000-15006)
8-K
(000-15006)
8-K
(000-15006)
8-K
(000-15006)
8-K
(000-15006)
8-K
(000-15006)
8-K
(000-15006)
8-K
(000-15006)
8-K
(000-15006)
8-K
(000-15006)
10.1
8/6/20
10.1
11/9/22
10.1
7/18/22
10.1
10.1
10.1
10.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
6/15/23
6/17/21
6/18/20
6/19/19
7/1/21
7/1/21
7/1/21
7/1/21
7/1/21
7/1/21
7/1/21
7/1/21
7/1/21
10.10
7/1/21
10.2
10.3
10.4
10.5
10.1
10.42
6/17/21
6/17/21
6/17/21
6/17/21
8/08/18
3/12/10
Table of Contents
†10.32 Celldex Therapeutics, Inc. 2021 Plan Form of
Restricted Stock Award Agreement
†10.33 Celldex Therapeutics, Inc. 2021 Plan Form of Incentive
Stock Option Grant Agreement
†10.34 Celldex Therapeutics, Inc. 2021 Plan Form of
Nonqualified Stock Option Grant Agreement
†10.35 Celldex Therapeutics, Inc. 2021 Plan Form of
†10.36
Restricted Stock Unit Award Agreement
2008 Plan Form of Stock Option Agreement
†10.37
2008 Plan Form of Restricted Stock Award
21.1
Subsidiaries of Celldex Therapeutics, Inc.
23.1 Consent of PricewaterhouseCoopers LLP, an
Independent Registered Public Accounting Firm
8-K
(000-15006)
8-K
(000-15006)
8-K
(000-15006)
8-K
(000-15006)
10-Q
(000-15006)
10-K
(000-15006)
Filed herewith
Filed herewith
23.2 Consent of Lowenstein Sandler LLP (included in
Filed herewith
Exhibit 5.1)
31.1 Certification of President and Chief Executive Officer
31.2 Certification of Senior Vice President and Chief
Filed herewith
Filed herewith
Financial Officer
Section 1350 Certifications
32
Furnished herewith
†97 Celldex Therapeutics, Inc. Compensation Recovery
Filed herewith
101.INS
Policy
Inline XBRL Instance Document - the instance
document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline
XBRL document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL
101.DEF
Inline XBRL Taxonomy Extension Calculation
Linkbase Document
Inline XBRL Taxonomy Extension Definition Linkbase
Document
Filed herewith
Filed herewith
Filed herewith
Filed herewith
101.LAB Inline XBRL Taxonomy Extension Label Linkbase
Filed herewith
101.PRE
Document
Inline XBRL Taxonomy Extension Presentation
Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline
XBRL and contained in Exhibit 101)
Filed herewith
* Certain confidential portions of this exhibit were redacted. Celldex Therapeutics, Inc. agrees to furnish supplementally to the U.S.
Securities and Exchange Commission a copy of any omitted schedule and/or exhibit upon request. The confidential portions of this
exhibit were omitted by means of marking such portions with asterisks because the identified confidential portions (i) are not
material, (ii) would be competitively harmful if publicly disclosed and (iii) contain information that Celldex Therapeutics, Inc,
customarily and actually treats as private or confidential.
†
Indicates a management contract or compensation plan, contract or arrangement.
Item 16. FORM 10-K SUMMARY
None.
100
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date
February 26, 2024
CELLDEX THERAPEUTICS, INC.
By:
/s/ ANTHONY S. MARUCCI
Anthony S. Marucci
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Signature
Title
/s/ ANTHONY S. MARUCCI
Anthony S. Marucci
President, Chief Executive Officer, and Director
(Principal Executive Officer)
Date
February 26, 2024
February 26, 2024
/s/ SAM MARTIN
Sam Martin
/s/ KAREN L. SHOOS
Karen L. Shoos
/s/ KEITH L. BROWNLIE
Keith L. Brownlie
/s/ CHERYL L. COHEN
Cheryl L. Cohen
/s/ HERBERT J. CONRAD
Herbert J. Conrad
/s/ RITA I. JAIN, M.D,
Rita I. Jain, M.D.
/s/ JAMES J. MARINO
James J. Marino
/s/ GARRY A. NEIL, M.D.
Garry A. Neil, M.D.
/s/ HARRY H. PENNER, JR.
Harry H. Penner, Jr.
Senior Vice President,
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
Director, Chair of the Board of Directors
February 26, 2024
February 26, 2024
February 26, 2024
February 26, 2024
February 26, 2024
February 26, 2024
February 26, 2024
February 26, 2024
Director
Director
Director
Director
Director
Director
Director
101
CELLDEX THERAPEUTICS, INC.
Shares of Common Stock
(par value $0.001 per share)
Controlled Equity OfferingSM
Sales Agreement
Exhibit 1.1
February 26, 2024
Cantor Fitzgerald & Co.
110 East 59th Street
New York, NY 10022
Ladies and Gentlemen:
Celldex Therapeutics, Inc., a Delaware corporation (the “Company”), confirms its agreement (this
“Agreement”) with Cantor Fitzgerald & Co. (the “Agent”), as follows:
1.
Issuance and Sale of Shares. The Company agrees that, from time to time during the term of this
Agreement, on the terms and subject to the conditions set forth herein, it may issue and sell to or through
the Agent, as sales agent or principal, shares of common stock (the “Placement Shares”) of the Company,
par value $0.001 per share (the “Common Stock”); provided, however, that in no event shall the Company
issue or sell through the Agent such number or dollar amount of Placement Shares that would (a) exceed
the number or dollar amount of shares of Common Stock registered on the effective Registration
Statement (defined below) pursuant to which the offering is being made, (b) exceed the number of
authorized but unissued shares of Common Stock (less shares of Common Stock issuable upon exercise,
conversion or exchange of any outstanding securities of the Company or otherwise reserved from the
Company’s authorized capital stock), (c) exceed the number or dollar amount of shares of Common Stock
permitted to be sold under Form S-3 (including General Instruction I.B.6 thereof, if applicable) or (d)
exceed the number or dollar amount of shares of Common Stock for which the Company has filed a
Prospectus Supplement (defined below) (the lesser of (a), (b), (c) and (d), the “Maximum Amount”).
Notwithstanding anything to the contrary contained herein, the parties hereto agree that compliance with
the limitations set forth in this Section 1 on the amount of Placement Shares issued and sold under this
Agreement shall be the sole responsibility of the Company and that the Agent shall have no obligation in
connection with such compliance; provided that the Agent follows, in all material respects, the trading
instructions provided pursuant to any Placement Notice (as defined below). The offer and sale of
Placement Shares through the Agent will be effected pursuant to the Registration Statement (as defined
below) filed by the Company which automatic shelf registration statement became effective upon filing
with the Securities and Exchange Commission (the “Commission”) on November 3, 2023, although
nothing in this Agreement shall be construed as requiring the Company to use the Registration Statement
to issue Common Stock.
The Company has filed, in accordance with the provisions of the Securities Act of 1933, as
amended (the “Securities Act”), and the rules and regulations thereunder (the “Securities Act
Regulations”), with the Commission an automatic shelf registration statement on Form S-3 (File No. 333-
275300), including a base prospectus, relating to certain securities, including the
1
Placement Shares to be issued from time to time by the Company, and which incorporates by reference
documents that the Company has filed or will file in accordance with the provisions of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations thereunder. The
Company has prepared a prospectus or a prospectus supplement to the base prospectus included as part of
the registration statement, which prospectus or prospectus supplement relates to the Placement Shares to
be issued from time to time by the Company (the “Prospectus Supplement”). The Company will furnish
to the Agent, for use by the Agent, copies of the prospectus included as part of such registration statement,
as supplemented by the Prospectus Supplement, relating to the Placement Shares to be issued from time to
time by the Company. Except where the context otherwise requires, such registration statement(s),
including all documents filed as part thereof or incorporated by reference therein, and including any
information contained in a Prospectus (as defined below) subsequently filed with the Commission
pursuant to Rule 424(b) under the Securities Act Regulations or deemed to be a part of such registration
statement pursuant to Rule 430B of the Securities Act Regulations, and any one or more additional
effective registration statements on Form S-3 from time to time that will contain a base prospectus and
related prospectus or prospectus supplement, if applicable (which shall be a Prospectus Supplement), with
respect to the Placement Shares, is herein called the “Registration Statement.” The base prospectus or
base prospectuses, including all documents incorporated therein by reference, included in the Registration
Statement, as it may be supplemented, if necessary, by the Prospectus Supplement, in the form in which
such prospectus or prospectuses and/or Prospectus Supplement have most recently been filed by the
Company with the Commission pursuant to Rule 424(b) under the Securities Act Regulations, together
with the then issued Issuer Free Writing Prospectus(es) (as defined below), is herein called the
“Prospectus.”
Any reference herein to the Registration Statement, any Prospectus Supplement, the Prospectus or
any Issuer Free Writing Prospectus shall be deemed to refer to and include the documents, if any,
incorporated by reference therein (the “Incorporated Documents”), including, unless the context
otherwise requires, the documents, if any, filed as exhibits to such Incorporated Documents. Any reference
herein to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement,
any Prospectus Supplement, the Prospectus or any Issuer Free Writing Prospectus shall be deemed to refer
to and include the filing of any document under the Exchange Act on or after the most-recent effective
date of the Registration Statement, or the date of the Prospectus Supplement, Prospectus or such Issuer
Free Writing Prospectus, as the case may be, and incorporated therein by reference. For purposes of this
Agreement, all references to the Registration Statement, the Prospectus or to any amendment or
supplement thereto shall be deemed to include the most recent copy filed with the Commission pursuant to
its Electronic Data Gathering Analysis and Retrieval system, or if applicable, the Interactive Data
Electronic Application system when used by the Commission (collectively, “EDGAR”).
2.
Placements. Each time that the Company wishes to issue and sell Placement Shares hereunder (each, a
“Placement”), it will notify the Agent by email notice (or other method mutually agreed to by the parties)
of the number of Placement Shares to be issued, the time period during which sales are requested to be
made, any limitation on the number of Placement Shares that may be sold in any one day and any
minimum price below which sales may not be made (a “Placement Notice”), the form of which is
attached hereto as Schedule 1. The Placement Notice shall originate from any of the individuals from the
Company set forth on Schedule 3 (with a copy to each of the other individuals from the Company listed on
such schedule), and shall be addressed to each of
2
3.
4.
the individuals from the Agent set forth on Schedule 3, as such Schedule 3 may be amended from time to
time. The Placement Notice shall be effective unless and until (i) the Agent declines to accept the terms
contained therein for any reason, in its sole discretion, (ii) the entire amount of the Placement Shares
thereunder have been sold, (iii) the Company suspends or terminates the Placement Notice or (iv) this
Agreement has been terminated under the provisions of Section 12. The amount of any discount,
commission or other compensation to be paid by the Company to the Agent in connection with the sale of
the Placement Shares shall be calculated in accordance with the terms set forth in Schedule 2. It is
expressly acknowledged and agreed that neither the Company nor the Agent will have any obligation
whatsoever with respect to a Placement or any Placement Shares unless and until the Company delivers a
Placement Notice to the Agent and the Agent does not decline such Placement Notice pursuant to the
terms set forth above, and then only upon the terms specified therein and herein. In the event of a conflict
between the terms of this Agreement and the terms of a Placement Notice, the terms of the Placement
Notice will control.
Sale of Placement Shares by the Agent. Subject to the provisions of Section 5(a), the Agent, for the period
specified in the Placement Notice, will use its commercially reasonable efforts consistent with its normal
trading and sales practices and applicable state and federal laws, rules and regulations and the rules of the
Nasdaq Capital Market (the “Exchange”), to sell the Placement Shares up to the amount specified in, and
otherwise in accordance with the terms of, such Placement Notice. The Agent will provide written
confirmation to the Company no later than the opening of the Trading Day (as defined below) immediately
following the Trading Day on which it has made sales of Placement Shares hereunder setting forth the
number of Placement Shares sold on such day, the compensation payable by the Company to the Agent
pursuant to Section 2 with respect to such sales, and the Net Proceeds (as defined below) payable to the
Company, with an itemization of the deductions made by the Agent (as set forth in Section 5(b)) from the
gross proceeds that it receives from such sales. Subject to the terms of the Placement Notice, the Agent
may sell Placement Shares by any method permitted by law deemed to be an “at the market offering” as
defined in Rule 415(a)(4) of the Securities Act Regulations. “Trading Day” means any day on which
Common Stock is traded on the Exchange.
Suspension of Sales. The Company or the Agent may, upon notice to the other party in writing (including
by email correspondence to each of the individuals of the other party set forth on Schedule 3, if receipt of
such correspondence is actually acknowledged by any of the individuals to whom the notice is sent, other
than via auto-reply) or by telephone (confirmed immediately by verifiable facsimile transmission or email
correspondence to each of the individuals of the other party set forth on Schedule 3), suspend any sale of
Placement Shares (a “Suspension”); provided, however, that such Suspension shall not affect or impair
any party’s obligations with respect to any Placement Shares sold hereunder prior to the receipt of such
notice. While a Suspension is in effect any obligation under Sections 7(l), 7(m), and 7(n) with respect to
the delivery of certificates, opinions, or comfort letters to the Agent, shall be waived. Each of the parties
agrees that no such notice under this Section 4 shall be effective against any other party unless it is made
to one of the individuals named on Schedule 3 hereto, as such Schedule may be amended from time to
time. Notwithstanding any other provision of this Agreement, during any period in which the Company is
in possession of material non-public information, the Company and the Agent agree that (i) no sale of
Placement Shares will take place, (ii) the Company shall not request the sale of any Placement Shares, and
(iii) the Agent shall not be obligated to sell or offer to sell any Placement Shares.
3
5.
(a)
(b)
(c)
Sale and Delivery to the Agent; Settlement.
Sale of Placement Shares. On the basis of the representations and warranties herein contained and subject
to the terms and conditions herein set forth, upon the Agent’s acceptance of the terms of a Placement
Notice, and unless the sale of the Placement Shares described therein has been declined, suspended, or
otherwise terminated in accordance with the terms of this Agreement, the Agent, for the period specified in
the Placement Notice, will use its commercially reasonable efforts consistent with its normal trading and
sales practices and applicable law and regulations to sell such Placement Shares up to the amount
specified, and otherwise in accordance with the terms of such Placement Notice. The Company
acknowledges and agrees that (i) there can be no assurance that the Agent will be successful in selling
Placement Shares, (ii) the Agent will incur no liability or obligation to the Company or any other person or
entity if it does not sell Placement Shares for any reason other than a failure by the Agent to use its
commercially reasonable efforts consistent with its normal trading and sales practices and applicable law
and regulations to sell such Placement Shares as required under this Agreement and (iii) the Agent shall be
under no obligation to purchase Placement Shares on a principal basis pursuant to this Agreement, except
as otherwise agreed by the Agent and the Company.
Settlement of Placement Shares. Unless otherwise specified in the applicable Placement Notice, settlement
for sales of Placement Shares will occur on the second (2nd) Trading Day (and on and after May 28, 2024
(or such later date on which the Commission’s final rule with respect to the shortening of the securities
transaction settlement cycle becomes effective), on the first (1st) Trading Day, or any such other settlement
cycle as may be in effect pursuant to Rule 15c6-1 under the Exchange Act from time to time)) following
the date on which such sales are made (each, a “Settlement Date”). The Agent shall notify the Company
of each sale of Placement Shares no later than the opening of the Trading Day immediately following the
Trading Day on which it has made sales of Placement Shares hereunder. The amount of proceeds to be
delivered to the Company on a Settlement Date against receipt of the Placement Shares sold (the “Net
Proceeds”) will be equal to the aggregate sales price received by the Agent, after deduction for (i) the
Agent’s commission, discount or other compensation for such sales payable by the Company pursuant to
Section 2 hereof, and (ii) any transaction fees imposed by any Governmental Authority (as defined below)
in respect of such sales.
Delivery of Placement Shares. On or before each Settlement Date, the Company will, or will cause its
transfer agent to, electronically transfer the Placement Shares being sold by crediting the Agent’s or its
designee’s account (provided the Agent shall have given the Company written notice of such designee at
least one Trading Day prior to the Settlement Date) at The Depository Trust Company through its Deposit
and Withdrawal at Custodian System or by such other means of delivery as may be mutually agreed upon
by the parties hereto which in all cases shall be freely tradable, transferable, registered shares in good
deliverable form. On each Settlement Date, the Agent will deliver the related Net Proceeds in same day
funds to an account designated by the Company on, or prior to, the Settlement Date. The Company agrees
that if the Company, or its transfer agent (if applicable), defaults in its obligation to deliver Placement
Shares on a Settlement Date through no fault of the Agent, the Company agrees that in addition to and in
no way limiting the rights and obligations set forth in Section 10(a) hereto, it will (i) hold the Agent
harmless against any loss, claim, damage, or expense (including reasonable and documented legal fees and
expenses), as incurred, arising out of or in connection with such default by the Company or its
4
(d)
(e)
6.
(a)
transfer agent (if applicable) and (ii) pay to the Agent any commission, discount, or other compensation to
which it would otherwise have been entitled absent such default.
Denominations; Registration. Certificates for the Placement Shares, if any, shall be in such denominations
and registered in such names as the Agent may request in writing at least one full Business Day (as defined
below) before the applicable Settlement Date. The certificates for the Placement Shares, if any, will be
made available by the Company for examination and packaging by the Agent in The City of New York not
later than noon (New York time) on the Business Day prior to the applicable Settlement Date.
Limitations on Offering Size. Under no circumstances shall the Company cause or request the offer or sale
of any Placement Shares if, after giving effect to the sale of such Placement Shares, the aggregate gross
sales proceeds of Placement Shares sold pursuant to this Agreement would exceed the lesser of
(A) together with all sales of Placement Shares under this Agreement, the Maximum Amount and (B) the
amount authorized from time to time to be issued and sold under this Agreement by the Company’s board
of directors, a duly authorized committee thereof or a duly authorized executive committee, and notified to
the Agent in writing. Under no circumstances shall the Company cause or request the offer or sale of any
Placement Shares pursuant to this Agreement at a price lower than the minimum price authorized from
time to time by the Company’s board of directors, a duly authorized committee thereof or a duly
authorized executive committee, and notified to the Agent in writing. Further, under no circumstances
shall the Company cause or permit the aggregate offering amount of Placement Shares sold pursuant to
this Agreement to exceed the Maximum Amount.
Representations and Warranties of the Company. The Company represents and warrants to, and agrees
with the Agent that as of the date of this Agreement and as of each Applicable Time (as defined below),
unless such representation, warranty or agreement speaks as of a different time:
Registration Statement and Prospectus. The Company and the transactions contemplated by this
Agreement meet the requirements for and comply with the applicable conditions set forth in Form S-3
(including General Instructions I.A and I.B) under the Securities Act. The Registration Statement has been
filed with the Commission and became effective upon filing with the Commission on November 3, 2023
under the Securities Act. The Registration Statement is an “automatic shelf registration statement” (as
defined in Rule 405) and the Placement Shares have been and remain eligible for registration by the
Company on such automatic shelf registration statement. The Prospectus Supplement will name the Agent
as the agent in the section entitled “Plan of Distribution.” The Company has not received, and has no
notice of, any order of the Commission preventing or suspending the use of the Registration Statement, or
threatening or instituting proceedings for that purpose. The Registration Statement and the offer and sale
of Placement Shares as contemplated hereby meet the requirements of Rule 415 under the Securities Act
and comply in all material respects with said Rule. Any statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement have been so described or filed. Copies of the Registration Statement, the
Prospectus, and any such amendments or supplements and all documents incorporated by reference therein
that were filed with the Commission on or prior to the date of this Agreement have been delivered, or are
available through EDGAR, to the Agent and its counsel. The Company has not distributed and, prior to the
later to occur of each Settlement Date and completion of the distribution of the Placement Shares, will not
distribute any offering
5
material in connection with the offering or sale of the Placement Shares other than the Registration
Statement and the Prospectus and any Issuer Free Writing Prospectus to which the Agent has consented
(any such consent shall not be unreasonably withheld, conditioned or delayed). The Common Stock is
registered pursuant to Section 12(b) of the Exchange Act and is currently listed on the Exchange under the
trading symbol “CLDX.” The Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act, delisting the Common Stock
from the Exchange, nor has the Company received any notification that the Commission or the Exchange
is contemplating terminating such registration or listing. To the Company’s knowledge, it is in compliance
with all applicable listing requirements of the Exchange.
No Misstatement or Omission. The Registration Statement, when it became or becomes effective, did not,
and will not, contain an untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. The Prospectus and any
amendment and supplement thereto, on the date thereof and at each Applicable Time (defined below), did
not or will not include an untrue statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were made, not misleading.
The documents incorporated by reference in the Prospectus or any Prospectus Supplement did not, and any
further documents filed and incorporated by reference therein will not, when filed with the Commission,
contain an untrue statement of a material fact or omit to state a material fact required to be stated in such
document or necessary to make the statements in such document, in light of the circumstances under
which they were made, not misleading. The foregoing shall not apply to statements in, or omissions from,
any such document made in reliance upon, and in conformity with, information furnished to the Company
by the Agent in writing specifically for use in the preparation thereof, it being understood and agreed that
the only such information furnished by the Agent to the Company consists of “Agent Information” as
defined below.
Conformity with the Securities Act and Exchange Act. The Registration Statement, the Prospectus, any
Issuer Free Writing Prospectus or any amendment or supplement thereto, and the documents incorporated
by reference in the Registration Statement, the Prospectus or any amendment or supplement thereto, when
such documents were or are filed with the Commission under the Securities Act or the Exchange Act or
became or become effective under the Securities Act, as the case may be, conformed or will conform in all
material respects with the requirements of the Securities Act and the Exchange Act, as applicable. At each
Settlement Date, the Registration Statement and the Prospectus, as of such date, will conform in all
material respects with the requirements of the Securities Act.
Financial Information. The consolidated financial statements of the Company included or incorporated by
reference in the Registration Statement, the Prospectus and the Issuer Free Writing Prospectuses, if any,
together with the related notes and schedules, present fairly, in all material respects, the consolidated
financial position of the Company and the Subsidiaries (as defined below) as of the dates indicated and the
consolidated results of operations, cash flows and changes in stockholders’ equity of the Company for the
periods specified (subject to normal year-end audit adjustments for interim financial statements) and have
been prepared in compliance with the requirements of the Securities Act and Exchange Act and in
conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) applied on a consistent basis
during the periods
(b)
(c)
(d)
6
involved; the other financial and statistical data with respect to the Company and the Subsidiaries (as
defined below) contained or incorporated by reference in the Registration Statement, the Prospectus and
the Issuer Free Writing Prospectuses, if any, are accurately and fairly presented and prepared on a basis
consistent with the financial statements and books and records of the Company; there are no financial
statements (historical or pro forma) that are required to be included or incorporated by reference in the
Registration Statement, or the Prospectus that are not included or incorporated by reference as required;
the Company and the Subsidiaries (as defined below) do not have any material liabilities or obligations,
direct or contingent (including any off-balance sheet obligations), not described in the Registration
Statement (excluding the exhibits thereto), and the Prospectus; and all disclosures contained or
incorporated by reference in the Registration Statement, the Prospectus and the Issuer Free Writing
Prospectuses, if any, regarding “non-GAAP financial measures” (as such term is defined by the rules and
regulations of the Commission) comply in all material respects with Regulation G of the Exchange Act
and Item 10 of Regulation S-K under the Securities Act, to the extent applicable. The interactive data in
eXtensible Business Reporting Language included or incorporated by reference in the Registration
Statement and the Prospectus fairly presents the information called for in all material respects and has been
prepared in accordance with the Commission’s rules and guidelines applicable thereto.
Conformity with EDGAR Filing. The Prospectus delivered to the Agent for use in connection with the sale
of the Placement Shares pursuant to this Agreement will be identical to the versions of the Prospectus
created to be transmitted to the Commission for filing via EDGAR, except to the extent permitted by
Regulation S-T.
Organization. The Company and each of its Subsidiaries are duly organized, validly existing as a
corporation and in good standing under the laws of their respective jurisdictions of organization. The
Company and each of its Subsidiaries are duly licensed or qualified as a foreign corporation for 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 Registration Statement and the
Prospectus, 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 consummation of
the transactions contemplated hereby (a “Material Adverse Effect”).
Subsidiaries. The subsidiaries set forth on Schedule 4 (collectively, the “Subsidiaries”), are the
Company’s only significant subsidiaries (as such term is defined in Rule 1-02 of Regulation S-X
promulgated by the Commission). Except as set forth in the Registration Statement and in the Prospectus,
the Company owns, directly or indirectly, all of the equity interests of the Subsidiaries free and clear of
any lien, charge, security interest, encumbrance, right of first refusal or other restriction, and all the equity
interests of the Subsidiaries are validly issued and are fully paid, nonassessable and free of preemptive and
similar rights. No Subsidiary is currently prohibited, directly or indirectly, from paying any dividends to
the Company, from making any other distribution on such Subsidiary’s capital stock, from repaying to the
Company any loans or
(e)
(f)
(g)
7
(h)
(i)
(j)
advances to such Subsidiary from the Company or from transferring any of such Subsidiary’s property or
assets to the Company or any other Subsidiary of the Company.
No Violation or Default. Neither the Company nor any of its Subsidiaries is (i) in violation of its charter or
by-laws or similar organizational documents; (ii) 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 or condition contained in any indenture, mortgage, deed of trust, loan agreement 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 are subject; or (iii) in violation of any law or statute or any judgment, order, rule or
regulation of any Governmental Authority, except, in the case of each of clauses (ii) and (iii) above, for
any such violation or default that would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. To the Company’s knowledge, no other party under any material contract
or other agreement to which it or any of its Subsidiaries is a party is in default in any respect thereunder
where such default would reasonably be expected to have a Material Adverse Effect.
No Material Adverse Change. Subsequent to the respective dates as of which information is given in the
Registration Statement, the Prospectus and the Free Writing Prospectuses, if any (including any document
deemed incorporated by reference therein), there has not been (i) any Material Adverse Effect or the
occurrence of any development that the Company reasonably expects will result in a Material Adverse
Effect, (ii) any transaction which is material to the Company and the Subsidiaries taken as a whole, (iii)
any obligation or liability, direct or contingent (including any off-balance sheet obligations), incurred by
the Company or any Subsidiary, which is material to the Company and the Subsidiaries taken as a whole,
(iv) any material change in the capital stock or outstanding long-term indebtedness of the Company or any
of its Subsidiaries or (v) any dividend or distribution of any kind declared, paid or made on the capital
stock of the Company or any Subsidiary, other than in each case above in the ordinary course of business
or as otherwise disclosed in the Registration Statement or Prospectus (including any document deemed
incorporated by reference therein).
Capitalization. The issued and outstanding shares of capital stock of the Company have been validly
issued, are fully paid and nonassessable and, other than as disclosed in the Registration Statement or the
Prospectus, are not subject to any preemptive rights, rights of first refusal or similar rights. The Company
has an authorized, issued and outstanding capitalization as set forth in the Registration Statement and the
Prospectus as of the dates referred to therein (other than the grant of additional options under the
Company’s existing stock option plans, or changes in the number of outstanding shares of Common Stock
of the Company due to the issuance of shares upon the exercise or conversion of securities exercisable for,
or convertible into, Common Stock outstanding on the date hereof) and such authorized capital stock
conforms in all material respects to the description thereof set forth in the Registration Statement and the
Prospectus (including any document deemed incorporated by reference therein). The description of the
securities of the Company in the Registration Statement and the Prospectus is complete and accurate in all
material respects. Except as disclosed in or contemplated by the Registration Statement or the Prospectus,
as of the date referred to therein, the Company does not have outstanding any options to purchase, or any
rights or warrants to subscribe for, or any securities or obligations convertible into, or
8
(k)
(l)
(m)
(n)
exchangeable for, or any contracts or commitments to issue or sell, any shares of capital stock or other
securities.
Authorization; Enforceability. The Company has full legal right, power and authority to enter into this
Agreement and perform the transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by the Company and is a legal, valid and binding agreement of the Company
enforceable in accordance with its terms, except to the extent rights to indemnification or contribution
hereunder may be limited by federal or state securities laws and public policy considerations in respect
thereof and except to the extent that enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally and by general equitable
principles.
Authorization of Placement Shares. The Placement Shares, when issued and delivered pursuant to the
terms contained in the Placement Notice which has been approved by the board of directors of the
Company or a duly authorized committee thereof, or a duly authorized executive committee, against
payment therefor as provided herein, will be duly and validly authorized and issued and fully paid and
nonassessable, free and clear of any pledge, lien, encumbrance, security interest or other claim (other than
any pledge, lien, encumbrance, security interest or other claim arising from an act or omission of the Agent
or the purchaser), including any statutory or contractual preemptive rights, resale rights, rights of first
refusal or other similar rights, and will be registered pursuant to Section 12 of the Exchange Act. The
Placement Shares, when issued, will conform in all material respects to the description thereof set forth in
or incorporated into the Prospectus.
No Consents Required. No consent, approval, authorization, order, registration or qualification of or with
any Governmental Authority is required for the execution, delivery and performance by the Company of
this Agreement, the issuance and sale by the Company of the Placement Shares, except for such consents,
approvals, authorizations, orders and registrations or qualifications as may be required under applicable
state securities laws or by the by-laws and rules of the Financial Industry Regulatory Authority
(“FINRA”) or the Exchange in connection with the sale of the Placement Shares by the Agent.
No Preferential Rights. Except as set forth in the Registration Statement and the Prospectus, (i) no person,
as such term is defined in Rule 1-02 of Regulation S-X promulgated under the Securities Act (each, a
“Person”), has the right, contractual or otherwise, to cause the Company to issue or sell to such Person
any Common Stock or shares of any other capital stock or other securities of the Company, (ii) no Person
has any preemptive rights, resale rights, rights of first refusal, rights of co-sale, or any other rights
(whether pursuant to a “poison pill” provision or otherwise) to purchase any Common Stock or shares of
any other capital stock or other securities of the Company (other than upon the exercise of options or
warrants to purchase Common Stock or upon the exercise or vesting of options or other equity awards that
may be granted from time to time under the Company’s equity compensation plans), (iii) no Person has the
right to act as an underwriter or as a financial advisor to the Company in connection with the offer and sale
of the Common Stock, and (iv) no Person has the right, contractual or otherwise, to require the Company
to register under the Securities Act any Common Stock or shares of any other capital stock or other
securities of the Company, or to include any such shares or other securities in the Registration Statement or
the offering contemplated thereby, whether as a result of the filing or effectiveness of the Registration
Statement or the sale of the Placement Shares as contemplated thereby or otherwise.
9
(o)
(p)
(q)
(r)
Independent Public Accounting Firm. PricewaterhouseCoopers LLP (the “Accountant”), whose report on
the consolidated financial statements of the Company is filed with the Commission as part of the
Company’s most recent Annual Report on Form 10-K filed with the Commission and incorporated by
reference into the Registration Statement and the Prospectus, are and, during the periods covered by their
report, were an independent registered public accounting firm within the meaning of the Securities Act and
the Public Company Accounting Oversight Board (United States). To the Company’s knowledge, the
Accountant is not in violation of the auditor independence requirements of the Sarbanes-Oxley Act of
2002 (the “Sarbanes-Oxley Act”) with respect to the Company.
Enforceability of Agreements. All agreements between the Company and third parties expressly
referenced in the Prospectus, other than such agreements that have expired by their terms or the
termination of which is disclosed in documents filed by the Company via EDGAR, are legal, valid and
binding obligations of the Company enforceable in accordance with their respective terms, except to the
extent that (i) enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ rights generally and by general equitable principles and (ii) the
indemnification provisions of certain agreements may be limited by federal or state securities laws or
public policy considerations in respect thereof, except for any unenforceability that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
No Litigation. Except as set forth in the Registration Statement or the Prospectus, there are no actions,
suits or proceedings by or before any Governmental Authority pending, nor any audits or investigations by
or before any Governmental Authority to which the Company or a Subsidiary is a party or to which any
property of the Company or any of its Subsidiaries is the subject that, individually or in the aggregate, if
determined adversely to the Company would reasonably be expected to have a Material Adverse Effect
and, to the Company’s knowledge, no such actions, suits, proceedings, audits or investigations are
threatened or contemplated by any Governmental Authority or threatened by others; and (i) there are no
current or pending audits or investigations, actions, suits or proceedings by or before any Governmental
Authority that are required under the Securities Act to be described in the Prospectus that are not so
described; and (ii) there are no contracts or other documents that are required under the Securities Act to
be filed as exhibits to the Registration Statement that are not so filed.
Consents and Permits. Except as disclosed in the Registration Statement and the Prospectus, the Company
and its Subsidiaries have made all filings, applications and submissions required by, possesses and is
operating in compliance with, all approvals, licenses, certificates, certifications, clearances, consents,
grants, exemptions, marks, notifications, orders, permits and other authorizations issued by, the appropriate
federal, state or foreign Governmental Authority (including, without limitation, the United States Food and
Drug Administration (the “FDA”), the United States Drug Enforcement Administration or any other
foreign, federal, state, provincial, court or local government or regulatory authorities including self-
regulatory organizations engaged in the regulation of clinical trials, pharmaceuticals, biologics or
biohazardous substances or materials) necessary for the ownership or lease of their respective properties or
to conduct its businesses as described in the Registration Statement and the Prospectus (collectively,
“Permits”), except for such Permits the failure of which to possess, obtain or make the same would not
reasonably be expected to have a Material Adverse Effect; the Company and its Subsidiaries are
10
in compliance with the terms and conditions of all such Permits, except where the failure to be in
compliance would not reasonably be expected to have a Material Adverse Effect; all of the Permits are
valid and in full force and effect, except where any invalidity, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect; and neither the Company nor any of its
Subsidiaries has received any written notice of proceedings relating to the limitation, revocation,
cancellation, suspension, modification or non-renewal of any such Permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to
have a Material Adverse Effect, or has any reason to believe that any such license, certificate, permit or
authorization will not be renewed in the ordinary course. To the extent required by applicable laws and
regulations of the FDA, the Company or the applicable Subsidiary has submitted to the FDA an
Investigational New Drug Application or amendment or supplement thereto for each clinical trial it has
conducted or sponsored or is conducting or sponsoring; all such submissions were in material compliance
with applicable laws and rules and regulations when submitted and no material deficiencies have been
asserted by the FDA with respect to any such submissions.
Regulatory Filings. Except as disclosed in the Registration Statement and the Prospectus, neither the
Company nor any of its Subsidiaries has failed to file with the applicable Governmental Authorities
(including, without limitation, the FDA, or any foreign, federal, state, provincial or local Governmental
Authority performing functions similar to those performed by the FDA) any required filing, declaration,
listing, registration, report or submission, except for such failures that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect; except as disclosed in the
Registration Statement and the Prospectus, all such filings, declarations, listings, registrations, reports or
submissions were in compliance with applicable laws when filed and no deficiencies have been asserted
by any applicable regulatory authority with respect to any such filings, declarations, listings, registrations,
reports or submissions, except for any deficiencies that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. The Company has operated and currently is, in
all material respects, in compliance with the United States Federal Food, Drug, and Cosmetic Act, all
applicable rules and regulations of the FDA and other federal, state, local and foreign Governmental
Authority exercising comparable authority. The Company has no knowledge of any studies, tests or trials
not described in the Prospectus the results of which reasonably call into question in any material respect
the results of the studies, tests and trials described in the Prospectus.
Intellectual Property. Except as disclosed in the Registration Statement and the Prospectus, the Company
and its Subsidiaries own, possess, license or have other rights to use all foreign and domestic patents,
patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights,
licenses, inventions, trade secrets, technology, Internet domain names, know-how and other intellectual
property (collectively, the “Intellectual Property”), necessary for the conduct of their respective
businesses as now conducted except to the extent that the failure to own, possess, license or otherwise hold
adequate rights to use such Intellectual Property would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Except as disclosed in the Registration Statement and the
Prospectus (i) to the Company’s knowledge there are no rights of third parties to any such Intellectual
Property owned by the Company and its Subsidiaries; (ii) to the Company’s knowledge, there is no
infringement by third parties of any such Intellectual Property; (iii) there is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the Company’s
and its
(s)
(t)
11
Subsidiaries’ rights in or to any such Intellectual Property, and the Company is unaware of any facts which
could form a reasonable basis for any such action, suit, proceeding or claim; (iv) there is no pending or, to
the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity
or scope of any such Intellectual Property; (v) there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others that the Company and its Subsidiaries infringe or
otherwise violate any patent, trademark, copyright, trade secret or other proprietary rights of others; (vi) to
the Company’s knowledge, there is no third-party U.S. patent or published U.S. patent application which
contains claims for which an Interference Proceeding (as defined in 35 U.S.C. § 135) has been commenced
against any patent or patent application described in the Registration Statement and the Prospectus as
being owned by or licensed to the Company; and (vii) the Company and its Subsidiaries have complied
with the terms of each agreement pursuant to which Intellectual Property has been licensed to the
Company or such Subsidiary, and all such agreements are in full force and effect, except, in the case of any
of clauses (i)-(vii) above, for any such infringement by third parties or any such pending or threatened suit,
action, proceeding or claim as would not, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
Clinical Studies. The preclinical studies and tests and clinical trials described in the Prospectus were, and,
if still pending, are being conducted in all material respects in accordance with the experimental protocols,
procedures and controls pursuant to, where applicable, accepted professional and scientific standards for
products or product candidates comparable to those being developed by the Company; the descriptions of
such studies, tests and trials, and the results thereof, contained in the Prospectus are accurate and complete
in all material respects; the Company is not aware of any tests, studies or trials not described in the
Prospectus, the results of which reasonably call into question the results of the tests, studies and trials
described in the Prospectus; and the Company has not received any written notice or correspondence from
the FDA or any foreign, state or local Governmental Authority exercising comparable authority or any
institutional review board or comparable authority requiring the termination, suspension, clinical hold or
material modification of any tests, studies or trials.
Market Capitalization. At the time the Registration Statement became effective, and at the time the
Company’s most recent Annual Report on Form 10-K was filed with the Commission, the Company met
the then applicable requirements for the use of Form S-3 under the Securities Act, including, but not
limited to, General Instruction I.B.1 of Form S-3. The Company is not a shell company (as defined in Rule
405 under the Securities Act) and has not been a shell company for at least 12 calendar months previously
and if it has been a shell company at any time previously, has filed current Form 10 information (as
defined in Instruction I.B.6 of Form S-3) with the Commission at least 12 calendar months previously
reflecting its status as an entity that is not a shell company. (A) At the original effectiveness of the
Registration Statement and (B) at the time of the most recent amendment thereto for the purposes of
complying with Section 10(a)(3) of the Securities Act (whether such amendment was by post-effective
amendment or incorporated report filed pursuant to Section 13 or 15(d) of the Exchange Act or in the form
of a prospectus), the Company was a “well-known seasoned issuer” (as defined in Rule 405 under the
Securities Act). The Company has not received from the Commission any notice pursuant to Rule 401(g)
(2) under the Securities Act objecting to the Company’s use of the automatic shelf registration form.
(u)
(v)
12
(w)
(x)
(y)
(z)
(aa)
(bb)
No Material Defaults. Neither the Company nor any of the Subsidiaries has defaulted on any installment
on indebtedness for borrowed money or on any rental on one or more long-term leases, which defaults,
individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. The
Company has not filed a report pursuant to Section 13(a) or 15(d) of the Exchange Act since the filing of
its last Annual Report on Form 10-K, indicating that it (i) has failed to pay any dividend or sinking fund
installment on preferred stock or (ii) has defaulted on any installment on indebtedness for borrowed money
or on any rental on one or more long-term leases, which defaults, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
Certain Market Activities. Neither the Company, nor any of the Subsidiaries, nor, to the Company’s
knowledge, any of their respective directors, officers or controlling persons has taken, directly or
indirectly, any action designed, or that has constituted or might reasonably be expected to cause or result
in, under the Exchange Act or otherwise, the stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Placement Shares.
Broker/Dealer Relationships. Neither the Company nor any of the Subsidiaries (i) is required to register as
a “broker” or “dealer” in accordance with the provisions of the Exchange Act or (ii) directly or indirectly
through one or more intermediaries, controls or is a “person associated with a member” or “associated
person of a member” (within the meaning set forth in the FINRA Manual).
No Reliance. The Company has not relied upon the Agent or legal counsel for the Agent for any legal, tax
or accounting advice in connection with the offering and sale of the Placement Shares.
Taxes. The Company and each of its Subsidiaries have filed all federal, state, local and foreign tax returns
which have been required to be filed and paid all taxes shown thereon through the date hereof, to the
extent that such taxes have become due and are not being contested in good faith, except where the failure
to so file or pay would not reasonably be expected to have a Material Adverse Effect. Except as otherwise
disclosed in or contemplated by the Registration Statement or the Prospectus, no tax deficiency has been
determined adversely to the Company or any of its Subsidiaries which has had, or would have,
individually or in the aggregate, a Material Adverse Effect. The Company has no knowledge of any
federal, state or other governmental tax deficiency, penalty or assessment which has been or might be
asserted or threatened against it which would have a Material Adverse Effect.
Title to Real and Personal Property. Except as set forth in the Registration Statement or the Prospectus, the
Company and its Subsidiaries have good and marketable title in fee simple to all items of real property
owned by them, good and valid title to all personal property described in the Registration Statement or
Prospectus as being owned by them that are material to the business of the Company or such Subsidiary, in
each case free and clear of all liens, encumbrances and claims, except those matters that (i) do not
materially interfere with the use made and proposed to be made of such property by the Company and any
of its Subsidiaries or (ii) would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Any real or personal property described in the Registration Statement or
Prospectus as being leased by the Company and any of its Subsidiaries is held by them under valid,
existing and enforceable leases, except those that (A) do not materially interfere with the use made or
proposed to be made of such property by the Company or any of its Subsidiaries or (B) would not
reasonably be
13
expected, individually or in the aggregate, to have a Material Adverse Effect. Each of the properties owned
by the Company and its Subsidiaries complies with all applicable codes, laws and regulations (including,
without limitation, building and zoning codes, laws and regulations and laws relating to access to such
properties), except if and to the extent disclosed in the Registration Statement or Prospectus or except for
such failures to comply that would not, individually or in the aggregate, reasonably be expected to
interfere in any material respect with the use made and proposed to be made of such property by the
Company and its Subsidiaries or otherwise have a Material Adverse Effect. None of the Company or its
subsidiaries has received from any Governmental Authorities any notice of any condemnation of, or
zoning change affecting, the properties of the Company and its Subsidiaries, and the Company knows of
no such condemnation or zoning change which is threatened, except for such that would not reasonably be
expected to interfere in any material respect with the use made and proposed to be made of such property
by the Company and its Subsidiaries or otherwise have a Material Adverse Effect, individually or in the
aggregate.
(cc)
Environmental Laws. Except as set forth in the Registration Statement or the Prospectus, the Company and
its Subsidiaries (i) are in compliance with any and all applicable federal, state, local and foreign laws,
rules, regulations, decisions and orders relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or contaminants (collectively,
“Environmental Laws”); (ii) have received and are in compliance with all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their respective businesses as
described in the Registration Statement and the Prospectus; and (iii) have not received notice of any actual
or potential liability for the investigation or remediation of any disposal or release of hazardous or toxic
substances or wastes, pollutants or contaminants, except, in the case of any of clauses (i), (ii) or (iii) above,
for any such failure to comply or failure to receive required permits, licenses, other approvals or liability
as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(dd) Disclosure Controls. The Company and each of its Subsidiaries maintain systems of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with management’s general or specific authorization;
and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences. The Company’s internal control over
financial reporting is effective and the Company is not aware of any material weaknesses in its internal
control over financial reporting (other than as set forth in the Prospectus). Since the date of the latest
audited financial statements of the Company included in the Prospectus, there has been no change in the
Company’s internal control over financial reporting that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting (other than as set forth in the
Prospectus). The Company has established disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15 and 15d-15) for the Company and designed such disclosure controls and procedures to
ensure that material information relating to the Company and each of its Subsidiaries is made known to the
certifying officers by others within those entities, particularly during the period in which the Company’s
Annual Report on Form 10-K or Quarterly Report on
14
Form 10-Q, as the case may be, is being prepared. The Company’s certifying officers have evaluated the
effectiveness of the Company’s disclosure controls and procedures as of a date within 90 days prior to the
filing date of the Form 10-K for the fiscal year most recently ended (such date, the “Evaluation Date”).
The Company presented in its Form 10-K for the fiscal year most recently ended the conclusions of the
certifying officers about the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date and the disclosure controls and procedures are effective. Since the
Evaluation Date, there have been no significant changes in the Company’s internal controls (as such term
is defined in Item 307(b) of Regulation S-K under the Securities Act) or, to the Company’s knowledge, in
other factors that could significantly affect the Company’s internal controls.
Sarbanes-Oxley. There is and has been no failure on the part of the Company or any of the Company’s
directors or officers, in their capacities as such, to comply in all material respects with any applicable
provisions of the Sarbanes-Oxley Act and the rules and regulations promulgated thereunder. Each of the
principal executive officer and the principal financial officer of the Company (or each former principal
executive officer of the Company and each former principal financial officer of the Company as
applicable) has made all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with
respect to all reports, schedules, forms, statements and other documents required to be filed by it or
furnished by it to the Commission. For purposes of the preceding sentence, “principal executive officer”
and “principal financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley Act.
Finder’s Fees. Neither the Company nor any of the Subsidiaries has incurred any liability for any finder’s
fees, brokerage commissions or similar payments in connection with the transactions herein contemplated,
except as may otherwise exist with respect to the Agent pursuant to this Agreement.
Labor Disputes. No labor disturbance by or dispute with employees of the Company or any of its
Subsidiaries exists or, to the knowledge of the Company, is threatened which would reasonably be
expected to result in a Material Adverse Effect.
Investment Company Act. Neither the Company nor any of the Subsidiaries is or, after giving effect to the
offering and sale of the Placement Shares, will be an “investment company” or an entity “controlled” by
an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended
(the “Investment Company Act”).
Operations. The operations of the Company and its Subsidiaries are and have been conducted at all times
in compliance with applicable financial record keeping and reporting requirements of the Currency and
Foreign Transactions Reporting Act of 1970, as amended, the applicable money laundering statutes of all
jurisdictions to which the Company or its Subsidiaries are subject, the applicable rules and regulations
thereunder and any applicable related or similar rules, regulations or guidelines, issued, administered or
enforced by any Governmental Authority (collectively, the “Money Laundering Laws”), except as would
not reasonably be expected to result in a Material Adverse Effect; and no action, suit or proceeding by or
before any Governmental Authority 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.
(ee)
(ff)
(gg)
(hh)
(ii)
15
(jj)
Off-Balance Sheet Arrangements. There are no transactions, arrangements and 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 structured finance, special purpose or limited
purpose entity (each, an “Off-Balance Sheet Transaction”) that could reasonably be expected to affect
materially 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), required to be described in the Prospectus which have not been described as required.
(kk) Underwriter Agreements. The Company is not a party to any agreement with an agent or underwriter for
any other “at the market” or continuous equity transaction.
(ll)
ERISA. To the knowledge of the Company, each material employee benefit plan, within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), that is
maintained, administered or contributed to by the Company or any of its affiliates for employees or former
employees of the Company and any of its Subsidiaries has been maintained in material compliance with its
terms and the requirements of any applicable statutes, orders, rules and regulations, including but not
limited to ERISA and the Internal Revenue Code of 1986, as amended (the “Code”); no prohibited
transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred which
would result in a material liability to the Company with respect to any such plan excluding transactions
effected pursuant to a statutory or administrative exemption; and for each such plan that is subject to the
funding rules of Section 412 of the Code or Section 302 of ERISA, no “accumulated funding deficiency”
as defined in Section 412 of the Code has been incurred, whether or not waived, and the fair market value
of the assets of each such plan (excluding for these purposes accrued but unpaid contributions) exceeds the
present value of all benefits accrued under such plan determined using reasonable actuarial assumptions.
(mm) Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act) (a “Forward-Looking Statement”) contained in the
Registration Statement and the Prospectus has been made or reaffirmed without a reasonable basis or has
been disclosed other than in good faith.
(nn) Agent Purchases. The Company acknowledges and agrees that the Agent has informed the Company that
the Agent may, to the extent permitted under the Securities Act and the Exchange Act, purchase and sell
Common Stock for its own account while this Agreement is in effect, provided, that the Company shall not
be deemed to have authorized or consented to any such purchases or sales by the Agent.
(oo) Margin Rules. Neither the issuance, sale and delivery of the Placement Shares nor the application of the
proceeds thereof by the Company as described in the Registration Statement and the Prospectus will
violate Regulation T, U or X of the Board of Governors of the Federal Reserve System or any other
regulation of such Board of Governors.
(pp)
Insurance. The Company and each of its Subsidiaries carry, or are covered by, insurance in such amounts
and covering such risks as the Company and each of its Subsidiaries
16
reasonably believe are adequate for the conduct of their properties and as is customary for companies
engaged in similar businesses in similar industries.
(qq) No Improper Practices. (i) Neither the Company nor the Subsidiaries, nor to the Company’s knowledge,
any director, officer or employee of the Company or any Subsidiary or any agent, affiliate or other person
acting on behalf of the Company or any Subsidiary has, in the past five years, made any unlawful
contributions to any candidate for any political office (or failed fully to disclose any contribution in
violation of applicable law) or made any contribution or other payment to any official of, or candidate for,
any federal, state, municipal, or foreign office or other person charged with similar public or quasi-public
duty in violation of any applicable law or of the character required to be disclosed in the Prospectus; (ii) no
relationship, direct or indirect, exists between or among the Company or any Subsidiary or, to the
Company’s knowledge, any affiliate of any of them, on the one hand, and the directors, officers and
stockholders of the Company or any Subsidiary, on the other hand, that is required by the Securities Act to
be described in the Registration Statement and the Prospectus that is not so described; (iii) no relationship,
direct or indirect, exists between or among the Company or any Subsidiary or any affiliate of them, on the
one hand, and the directors, officers, or stockholders of the Company or any Subsidiary, on the other hand,
that is required by the rules of FINRA to be described in the Registration Statement and the Prospectus
that is not so described; (iv) except as described in the Registration Statement and the Prospectus, there are
no material outstanding loans or advances or material guarantees of indebtedness by the Company or any
Subsidiary to or for the benefit of any of their respective officers or directors or any of the members of the
families of any of them; and (v) the Company has not offered, or caused any placement agent to offer,
Common Stock to any person with the intent to influence unlawfully (A) a customer or supplier of the
Company or any Subsidiary to alter the customer’s or supplier’s level or type of business with the
Company or any Subsidiary or (B) a trade journalist or publication to write or publish favorable
information about the Company or any Subsidiary or any of their respective products or services, and, (vi)
neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer or
employee of the Company or any Subsidiary or any agent, affiliate or other person acting on behalf of the
Company or any Subsidiary has (A) violated or is in violation of any applicable provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or any other applicable anti-bribery or anti-corruption
law (collectively, “Anti-Corruption Laws”), (B) promised, offered, provided, attempted to provide or
authorized the provision of anything of value, directly or indirectly, to any person for the purpose of
obtaining or retaining business, influencing any act or decision of the recipient, or securing any improper
advantage in violation of any Anti-Corruption Laws; or (C) made any payment of funds of the Company
or any Subsidiary or received or retained any funds in violation of any Anti-Corruption Laws.
(rr)
(ss)
Status Under the Securities Act. The Company was not and is not an ineligible issuer as defined in Rule
405 under the Securities Act at the times specified in Rules 164 and 433 under the Securities Act in
connection with the offering of the Placement Shares.
No Misstatement or Omission in an Issuer Free Writing Prospectus. Each Issuer Free Writing Prospectus,
as of its issue date and as of each Applicable Time (as defined in Section 23 below), did not, does not and
will not include any information that conflicted, conflicts or will conflict with the information contained in
the Registration Statement or the Prospectus, including any incorporated document deemed to be a part
thereof that has not been superseded or modified. The
17
foregoing sentence does not apply to statements in or omissions from any Issuer Free Writing Prospectus
based upon and in conformity with written information furnished to the Company by the Agent
specifically for use therein.
(tt)
No Conflicts. Neither the execution of this Agreement, nor the issuance, offering or sale of the Placement
Shares, nor the consummation of any of the transactions contemplated herein and therein, nor the
compliance by the Company with the terms and provisions hereof and thereof will conflict with, or will
result in a breach of, any of the terms and provisions of, or has constituted or will constitute a default
under, or has resulted in or will result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company pursuant to the terms of any contract or other agreement to
which the Company may be bound or to which any of the property or assets of the Company is subject,
except (i) such conflicts, breaches or defaults as may have been waived and (ii) such conflicts, breaches
and defaults that would not reasonably be expected to have a Material Adverse Effect; nor will such action
result (x) in any material violation of the provisions of the organizational or governing documents of the
Company, or (y) in any material violation of the provisions of any statute or any order, rule or regulation
applicable to the Company or of any Governmental Authority having jurisdiction over the Company,
except with respect to this clause (y) only, where such violation would not reasonably be expected to have
a Material Adverse Effect.
(uu)
Sanctions. (i) The Company represents that, neither the Company nor any of its Subsidiaries (collectively,
the “Entity”) or, to the Company’s knowledge any director, officer, employee, agent, affiliate or
representative of the Entity, is a government, individual, or entity (in this paragraph (uu), “Person”) that
is, or is owned or controlled by a Person that is:
(A) the subject of any sanctions administered or enforced by the U.S. Department of Treasury’s
Office of Foreign Assets Control (“OFAC”), the United Nations Security Council, the European
Union, Her Majesty’s Treasury, or other relevant sanctions authorities, including, without limitation,
designation on OFAC’s Specially Designated Nationals and Blocked Persons List or OFAC’s Foreign
Sanctions Evaders List (as amended, collectively, “Sanctions”), nor
(B) located, organized or resident in a country or territory that is the subject of Sanctions that
broadly prohibit dealings with that country or territory (including, without limitation, Cuba, Iran, North
Korea, Syria, the so-called Donetsk People’s Republic, the so-called Luhansk People’s Republic and
the Crimea Region of the Ukraine) (the “Sanctioned Countries”).
(ii) The Entity represents and covenants that it will not, directly or indirectly, use the proceeds of the
offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture
partner or other Person:
(A) to fund or facilitate any activities or business of or with any Person or in any country or
territory that, at the time of such funding or facilitation, is the subject of Sanctions or is a Sanctioned
Country in violation of applicable law; or
18
(B) in any other manner that will result in a violation of Sanctions by any Person (including any
Person participating in the offering, whether as underwriter, advisor, investor or otherwise).
(iii) The Entity represents and covenants that, except as detailed in the Registration Statement and the
Prospectus, for the past 5 years, it has not knowingly engaged in, is not now knowingly engaging in, and
will not engage in, any dealings or transactions with any Person, or in any country or territory, that at the
time of the dealing or transaction is or was the subject of Sanctions or is or was a Sanctioned Country in
violation of applicable law.
(vv)
Stock Transfer Taxes. On each Settlement Date, all stock transfer or other taxes (other than income taxes)
which are required to be paid in connection with the sale and transfer of the Placement Shares to be sold
hereunder will be, or will have been, fully paid or provided for by the Company and all laws imposing
such taxes will be or will have been fully complied with.
(ww) Compliance with Laws. Each of the Company and its Subsidiaries: (A) is and at all times has been in
compliance with all statutes, rules, or regulations applicable to the ownership, testing, development,
manufacture, packaging, processing, use, distribution, marketing, labeling, promotion, sale, offer for sale,
storage, import, export or disposal of any product manufactured or distributed by the Company or its
Subsidiaries (“Applicable Laws”), except as could not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect; (B) has not received any FDA Form 483, notice of adverse
finding, warning letter, untitled letter or other correspondence or notice from the FDA or any other
Governmental Authority alleging or asserting noncompliance with any Applicable Laws or any licenses,
certificates, approvals, clearances, authorizations, permits and supplements or amendments thereto
required by any such Applicable Laws (“Authorizations”); (C) possesses all material Authorizations and
such Authorizations are valid and in full force and effect and are not in material violation of any term of
any such Authorizations; (D) has not received notice of any claim, action, suit, proceeding, hearing,
enforcement, investigation, arbitration or other action from any Governmental Authority or third party
alleging that any product operation or activity is in violation of any Applicable Laws or Authorizations
and has no knowledge that any such Governmental Authority or third party is considering any such claim,
litigation, arbitration, action, suit, investigation or proceeding; (E) has not received notice that any
Governmental Authority has taken, is taking or intends to take action to limit, suspend, modify or revoke
any Authorizations and has no knowledge that any such Governmental Authority is considering such
action; (F) has 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 correct in all material respects on the
date filed (or were corrected or supplemented by a subsequent submission); and (G) has not, either
voluntarily or involuntarily, initiated, conducted, or issued or caused to be initiated, conducted or issued,
any recall, market withdrawal or replacement, safety alert, post sale warning, “dear healthcare provider”
letter, or other notice or action relating to the alleged lack of safety or efficacy of any product or any
alleged product defect or violation and, to the Company’s knowledge, no third party has initiated,
conducted or intends to initiate any such notice or action.
(xx)
Statistical and Market-Related Data. The statistical, demographic and market-related data included in the
Registration Statement and Prospectus are based on or derived from sources
19
(yy)
that the Company believes to be reliable and accurate or represent the Company’s good faith estimates that
are made on the basis of data derived from such sources.
Cybersecurity. The Company and its subsidiaries’ information technology assets and equipment,
computers, systems, networks, hardware, software, websites, applications, and databases (collectively, “IT
Systems”) are adequate for, and operate and perform in all material respects as required in connection with
the operation of the business of the Company as currently conducted, to the Company’s knowledge, free
and clear of all material bugs, errors, defects, Trojan horses, time bombs, malware and other corruptants.
The Company and its subsidiaries have implemented and maintained commercially reasonable physical,
technical and administrative controls, policies, procedures, and safeguards to maintain and protect their
material confidential information and the integrity, continuous operation, redundancy and security of all IT
Systems and data, including all “Personal Data” (defined below) and all sensitive, confidential or regulated
data (“Confidential Data”) used in connection with their businesses. “Personal Data” means (i) a natural
person’s name, street address, telephone number, e-mail address, photograph, social security number,
national insurance number, or tax identification number, driver’s license number, passport number, credit
card number, bank information, or customer or account number; (ii) any information which would qualify
as “personally identifying information” under the Federal Trade Commission Act, as amended; (iii)
“personal data” as defined by GDPR; (iv) any information which would qualify as “protected health
information” under the Health Insurance Portability and Accountability Act of 1996, as amended by the
Health Information Technology for Economic and Clinical Health Act (collectively, “HIPAA”); (v) any
“personal information” as defined by the California Consumer Privacy Act (“CCPA”); and (vi) any other
piece of information that allows the identification of such natural person, or household, or permits the
collection or analysis of any data related to an identified person’s health or sexual orientation. There have
been no breaches, violations, outages or unauthorized uses of or accesses to same, except for those that
have been remedied without material cost or liability or the duty to notify any other person, nor any
incidents under internal review or investigations relating to the same that, in each case, would reasonably
be likely to result in a Material Adverse Effect. The Company and its subsidiaries are presently in material
compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any
court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations
relating to the privacy and security of IT Systems, Confidential Data, and Personal Data and to the
protection of such IT Systems, Confidential Data, and Personal Data from unauthorized use, access,
misappropriation or modification.
(zz)
Compliance with Data Privacy Laws. The Company and its subsidiaries are, and during the previous five-
year period as of the date of this Agreement were, in material compliance with all applicable state and
federal data privacy and security laws and regulations, including without limitation HIPAA, CCPA, and
the European Union General Data Protection Regulation (“GDPR”) (EU 2016/679) (collectively, the
“Privacy Laws”). To ensure compliance with the Privacy Laws, the Company has in place, complies with,
and takes appropriate steps reasonably designed to ensure compliance in all material respects with their
policies and procedures relating to data privacy and security and the collection, storage, use, processing,
disclosure, handling, and analysis of Personal Data and Confidential Data (the “Policies”). The Company
has, during the previous five-year period as of the date of this Agreement, made its applicable disclosures
to users or customers required by applicable laws and regulatory rules or requirements, and none of such
disclosures made or contained in any Policy have been in violation of any applicable laws and
20
regulatory rules or requirements in any material respect. The Company further certifies that neither it nor
any subsidiary: (i) has received notice of any actual or potential liability under or relating to, or actual or
potential violation of, any of the Privacy Laws, and has no knowledge of any event or condition that would
reasonably be expected to result in any such notice; (ii) is currently conducting or paying for, in whole or
in part, any investigation, remediation, or other corrective action pursuant to any Privacy Law; or (iii) is a
party to any order, decree, or agreement that imposes any legal or regulatory obligation or liability under
any Privacy Law.
Any certificate signed by an officer of the Company and delivered to the Agent or to counsel for
the Agent pursuant to or in connection with this Agreement shall be deemed to be a representation and
warranty by the Company, as applicable, to the Agent as to the matters set forth therein.
7.
Covenants of the Company. The Company covenants and agrees with the Agent that:
(a) Registration Statement Amendments. After the date of this Agreement and during any
period in which a Prospectus relating to any Placement Shares is required to be delivered by the Agent
under the Securities Act (including in circumstances where such requirement may be satisfied pursuant to
Rule 172 under the Securities Act or similar rule), (i) the Company will notify the Agent promptly of the
time when any subsequent amendment to the Registration Statement, other than documents incorporated
by reference, has been filed with the Commission and/or has become effective or any subsequent
supplement to the Prospectus has been filed and of any request by the Commission for any amendment or
supplement to the Registration Statement or Prospectus or for additional information, (ii) the Company
will prepare and file with the Commission, promptly upon the Agent’s request, any amendments or
supplements to the Registration Statement or Prospectus that, in the Agent’s reasonable opinion, may be
necessary or advisable in connection with the distribution of the Placement Shares by the Agent (provided,
however, that the failure of the Agent to make such request shall not relieve the Company of any
obligation or liability hereunder, or affect the Agent’s right to rely on the representations and warranties
made by the Company in this Agreement and provided, further, that the only remedy the Agent shall have
with respect to the failure to make such filing shall be to cease making sales under this Agreement until
such amendment or supplement is filed); (iii) the Company will not file any amendment or supplement to
the Registration Statement or Prospectus relating to the Placement Shares or a security convertible into the
Placement Shares unless a copy thereof has been submitted to Agent within a reasonable period of time
before the filing and the Agent has not reasonably objected in writing (provided, however, that (A) the
failure of the Agent to make such objection shall not relieve the Company of any obligation or liability
hereunder, or affect the Agent’s right to rely on the representations and warranties made by the Company
in this Agreement and (B) the Company has no obligation to provide the Agent any advance copy of such
filing or to provide the Agent an opportunity to object to such filing if the filing does not name the Agent
or does not relate to the transaction described herein; provided, further, that the only remedy the Agent
shall have with respect to the failure by the Company to obtain such consent shall be to cease making sales
under this Agreement) and the Company will furnish to the Agent at the time of filing thereof a copy of
any document that upon filing is deemed to be incorporated by reference into the Registration Statement or
Prospectus, except for those documents available via EDGAR; and (iv) the Company will cause each
amendment or supplement to the Prospectus relating to the Placement Shares to be filed with the
Commission as required pursuant to the applicable paragraph
21
of Rule 424(b) of the Securities Act or, in the case of any document to be incorporated therein by
reference, to be filed with the Commission as required pursuant to the Exchange Act, within the time
period prescribed (the determination to file or not file any amendment or supplement with the Commission
under this Section 7(a), based on the Company’s reasonable opinion or reasonable objections, shall be
made exclusively by the Company).
Notice of Commission Stop Orders. The Company will advise the Agent, promptly after it receives notice
or obtains knowledge thereof, of the issuance or threatened issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement, of the suspension of the qualification of the
Placement Shares for offering or sale in any jurisdiction, or of the initiation or threatening of any
proceeding for any such purpose; and it will promptly use its commercially reasonable efforts to prevent
the issuance of any stop order or to obtain its withdrawal if such a stop order should be issued. The
Company will advise the Agent promptly after it receives any request by the Commission for any
amendments to the Registration Statement or any amendment or supplements to the Prospectus or any
Issuer Free Writing Prospectus or for additional information related to the offering of the Placement Shares
or for additional information related to the Registration Statement, the Prospectus or any Issuer Free
Writing Prospectus.
Delivery of Prospectus; Subsequent Changes. During any period in which a Prospectus relating to the
Placement Shares is required to be delivered by the Agent under the Securities Act with respect to the offer
and sale of the Placement Shares, (including in circumstances where such requirement may be satisfied
pursuant to Rule 172 under the Securities Act or similar rule), the Company will comply with all
requirements imposed upon it by the Securities Act, as from time to time in force, and to file on or before
their respective due dates all reports and any definitive proxy or information statements required to be filed
by the Company with the Commission pursuant to Sections 13(a), 13(c), 14, 15(d) or any other provision
of or under the Exchange Act. If the Company has omitted any information from the Registration
Statement pursuant to Rule 430B under the Securities Act, it will use its reasonable best efforts to comply
with the provisions of and make all requisite filings with the Commission pursuant to said Rule 430B and
to notify the Agent promptly of all such filings. If during such period any event occurs as a result of which
the Prospectus as then amended or supplemented would include an untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in the light of the circumstances then
existing, not misleading, or if during such period it is necessary to amend or supplement the Registration
Statement or Prospectus to comply with the Securities Act, the Company will promptly notify the Agent to
suspend the offering of Placement Shares during such period and the Company will promptly amend or
supplement the Registration Statement or Prospectus (at the expense of the Company) so as to correct such
statement or omission or effect such compliance; provided, however, that the Company may delay any
such amendment or supplement, if, in the reasonable judgement of the Company, it is in the best interests
of the Company to do so.
Listing of Placement Shares. Prior to the date of the first Placement Notice, the Company will use its
reasonable best efforts to cause the Placement Shares to be listed on the Exchange.
Delivery of Registration Statement and Prospectus. The Company will furnish to the Agent and its counsel
(at the expense of the Company) copies of the Registration Statement, the Prospectus (including all
documents incorporated by reference therein) and all amendments and supplements to the Registration
Statement or Prospectus that are filed with the Commission during any period
(b)
(c)
(d)
(e)
22
(f)
(g)
(h)
in which a Prospectus relating to the Placement Shares is required to be delivered under the Securities Act
(including all documents filed with the Commission during such period that are deemed to be incorporated
by reference therein), in each case as soon as reasonably practicable and in such quantities as the Agent
may from time to time reasonably request and, at the Agent’s request, will also furnish copies of the
Prospectus to each exchange or market on which sales of the Placement Shares may be made; provided,
however, that the Company shall not be required to furnish any document (other than the Prospectus) to
the Agent to the extent such document is available on EDGAR.
Earnings Statement. To the extent not otherwise available on EDGAR, the Company will make generally
available to its security holders as soon as practicable, but in any event not later than 15 months after the
end of the Company’s current fiscal quarter, an earnings statement covering a 12-month period that
satisfies the provisions of Section 11(a) and Rule 158 of the Securities Act.
Use of Proceeds. The Company will use the Net Proceeds as described in the Prospectus in the section
entitled “Use of Proceeds.”
Notice of Other Sales. Without the prior written consent of the Agent, the Company will not, directly or
indirectly, offer to sell, sell, contract to sell, grant any option to sell or otherwise dispose of any Common
Stock (other than the Placement Shares offered pursuant to this Agreement) or securities convertible into
or exchangeable for Common Stock, warrants or any rights to purchase or acquire, Common Stock during
the period beginning on the fifth (5th) Trading Day immediately prior to the date on which any Placement
Notice is delivered to Agent hereunder and ending on the fifth (5th) Trading Day immediately following
the final Settlement Date with respect to Placement Shares sold pursuant to such Placement Notice (or, if
the Placement Notice has been terminated or suspended prior to the sale of all Placement Shares covered
by a Placement Notice, the date of such suspension or termination); and will not directly or indirectly in
any other “at the market” or continuous equity transaction offer to sell, sell, contract to sell, grant any
option to sell or otherwise dispose of any Common Stock (other than the Placement Shares offered
pursuant to this Agreement) or securities convertible into or exchangeable for Common Stock, warrants or
any rights to purchase or acquire, Common Stock prior to the later of the termination of this Agreement
and the sixtieth (60th) day immediately following the final Settlement Date with respect to Placement
Shares sold pursuant to such Placement Notice; provided, however, that such restrictions will not be
required in connection with the Company’s issuance or sale of (i) Common Stock, options to purchase
Common Stock or Common Stock issuable upon the exercise of options or any other type of stock-based
award, pursuant to any employee or director stock option or benefits plan, stock ownership plan or
dividend reinvestment plan (but not Common Stock subject to a waiver to exceed plan limits in its
dividend reinvestment plan) of the Company whether now in effect or hereafter implemented,
(ii) Common Stock issuable upon conversion of securities or the exercise of warrants, options or other
rights in effect or outstanding, and disclosed in filings by the Company available on EDGAR or otherwise
in writing to the Agent, (iii) a bona fide, firm commitment underwritten public offering, provided that the
Company has suspended sales of Placement Shares at the time of such offering, and (iv) Common Stock or
securities convertible into or exchangeable for shares of Common Stock as consideration for mergers,
acquisitions, other business combinations, licensing agreements or strategic alliances occurring after the
date of this Agreement which are not issued for capital raising purposes.
23
(i)
(j)
Change of Circumstances. The Company will, at any time during the pendency of a Placement Notice,
advise the Agent promptly after it shall have received notice or obtained knowledge thereof, of any
information or fact that would alter or affect in any material respect any opinion, certificate, letter or other
document required to be provided to the Agent pursuant to this Agreement.
Due Diligence Cooperation. During the Term of this Agreement, the Company will cooperate with any
reasonable due diligence review conducted by the Agent or its representatives in connection with the
transactions contemplated hereby, including, without limitation, providing information and making
available documents and senior corporate officers, during regular business hours and at the Company’s
principal offices, as the Agent may reasonably request.
(k) Required Filings Relating to Placement of Placement Shares. The Company shall
disclose, in its quarterly reports on Form 10-Q and in its annual report on Form 10-K to be filed by the
Company with the Commission from time to time, the number of the Placement Shares sold through the
Agent under this Agreement, and the net proceeds to the Company from the sale of the Placement Shares
pursuant to this Agreement during the relevant quarter or, in the case of an Annual Report on Form 10-K,
during the fiscal year covered by such Annual Report and the fourth quarter of such fiscal year. The
Company agrees that on such dates as the Securities Act shall require with respect to the Placement
Shares, the Company will (i) file a prospectus supplement with the Commission under the applicable
paragraph of Rule 424(b) under the Securities Act (each and every filing date under Rule 424(b), a “Filing
Date”), which prospectus supplement will set forth, within the relevant period, the amount of Placement
Shares sold through the Agent, the Net Proceeds to the Company and the compensation payable by the
Company to the Agent with respect to such Placement Shares, and (ii) deliver such number of copies of
each such prospectus supplement to each exchange or market on which such sales were effected as may be
required by the rules or regulations of such exchange or market; provided, that, unless a prospectus
supplement containing such information is required to be filed under the Securities Act, the requirement of
this Section 7(k) may be satisfied by Company’s inclusion in the Company’s Form 10-K or Form 10-Q, as
applicable, of the number or amount of Placement Shares sold through the Agent, the Net Proceeds to the
Company and the compensation payable by the Company to the Agent with respect to such Placement
Shares during the relevant period.
(l)
Representation Dates; Certificate. (1) Prior to the date of the first Placement Notice and (2) each time the
Company:
(i) files the Prospectus relating to the Placement Shares or amends or supplements (other than a
prospectus supplement relating solely to an offering of securities other than the Placement Shares)
the Registration Statement or the Prospectus relating to the Placement Shares by means of a post-
effective amendment, sticker, or supplement but not by means of incorporation of documents by
reference into the Registration Statement or the Prospectus relating to the Placement Shares;
(ii) files an annual report on Form 10-K under the Exchange Act (including any Form 10-K/A
containing amended financial information or a material amendment to the previously filed Form
10-K);
(iii) files its quarterly reports on Form 10-Q under the Exchange Act; or
24
(iv) files a current report on Form 8-K containing amended financial information (other than
information “furnished” pursuant to Items 2.02 or 7.01 of Form 8-K or to provide disclosure
pursuant to Item 8.01 of Form 8-K relating to the reclassification of certain properties as
discontinued operations in accordance with Statement of Financial Accounting Standards No. 144)
under the Exchange Act (each date of filing of one or more of the documents referred to in clauses
(i) through (iv) shall be a “Representation Date”);
the Company shall furnish the Agent (but in the case of clause (iv) above only if the Agent reasonably
determines that the information contained in such Form 8-K is material) with a certificate dated the
Representation Date, in the form and substance satisfactory to the Agent and its counsel, substantially
similar to the form previously provided to the Agent and its counsel, modified, as necessary, to relate to
the Registration Statement and the Prospectus as amended or supplemented. The requirement to provide a
certificate under this Section 7(l) shall be waived for any Representation Date occurring at a time a
Suspension is in effect, which waiver shall continue until the earlier to occur of the date the Company
delivers instructions for the sale of Placement Shares hereunder (which for such calendar quarter shall be
considered a Representation Date) and the next occurring Representation Date. Notwithstanding the
foregoing, if the Company subsequently decides to sell Placement Shares following a Representation Date
when a Suspension was in effect and did not provide the Agent with a certificate under this Section 7(l),
then before the Company delivers the instructions for the sale of Placement Shares or the Agent sells any
Placement Shares pursuant to such instructions, the Company shall provide the Agent with a certificate in
conformity with this Section 7(l) dated as of the date that the instructions for the sale of Placement Shares
are issued.
Legal Opinion. (1) On or prior to the date of the first Placement Notice and (2) within five (5) Trading
Days of each Representation Date with respect to which the Company is obligated to deliver a certificate
pursuant to Section 7(l) for which no waiver is applicable and excluding the date of this Agreement, the
Company shall cause to be furnished to the Agent a written opinion and negative assurance letter of
Lowenstein Sandler LLP (“Company Counsel”), of the Company’s in-house counsel relating to the
intellectual property of the Company and its subsidiaries (“IP Counsel”), and of the Company’s in-house
counsel relating to the regulatory matters of the Company and its subsidiaries (“Regulatory Counsel”), or
other counsel reasonably satisfactory to the Agent, in form and substance reasonably satisfactory to the
Agent and its counsel, substantially similar to the form previously provided to the Agent and its counsel,
modified, as necessary, to relate to the Registration Statement and the Prospectus as then amended or
supplemented; provided, however, the Company shall be required to furnish to Agent no more than one
opinion from each of Company Counsel, IP Counsel and Regulatory Counsel hereunder per calendar
quarter; provided, further, that in lieu of such opinions for subsequent periodic filings under the Exchange
Act, counsel may furnish the Agent with a letter (a “Reliance Letter”) to the effect that the Agent may
rely on a prior opinion delivered under this Section 7(m) to the same extent as if it were dated the date of
such letter (except that statements in such prior opinion shall be deemed to relate to the Registration
Statement and the Prospectus as amended or supplemented as of the date of the Reliance Letter).
(m)
(n)
Comfort Letter. (1) On or prior to the date of the first Placement Notice and (2) within five (5) Trading
Days of each Representation Date with respect to which the Company is obligated to deliver a certificate
pursuant to Section 7(l) for which no waiver is applicable and excluding the
25
date of this Agreement, the Company shall cause its independent registered public accounting firm to
furnish the Agent letters (the “Comfort Letters”), dated the date the Comfort Letter is delivered, which
shall meet the requirements set forth in this Section 7(n); provided, that if requested by the Agent, the
Company shall cause a Comfort Letter to be furnished to the Agent within ten (10) Trading Days of the
date of occurrence of any material transaction or event requiring the filing of a Current Report on Form 8-
K containing financial information (including the restatement of the Company’s financial statements). The
Comfort Letter from the Company’s independent registered public accounting firm shall be in a form and
substance reasonably satisfactory to the Agent, (i) confirming that they are an independent registered
public accounting firm within the meaning of the Securities Act and the Public Company Accounting
Oversight Board (“PCAOB”), (ii) stating, as of such date, the conclusions and findings of such firm with
respect to the financial information and other matters ordinarily covered by accountants’ “comfort letters”
to underwriters in connection with registered public offerings (the first such letter, the “Initial Comfort
Letter”) and (iii) updating the Initial Comfort Letter with any information that would have been included
in the Initial Comfort Letter had it been given on such date and modified as necessary to relate to the
Registration Statement and the Prospectus, as amended and supplemented to the date of such letter.
Market Activities; Compliance with Regulation M. The Company will not, directly or indirectly, (i) take
any action designed to cause or result in, or that constitutes or might reasonably be expected to constitute,
the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale
of Common Stock or (ii) sell, bid for, or purchase Common Stock in violation of Regulation M, or pay
anyone any compensation for soliciting purchases of the Placement Shares other than the Agent.
Investment Company Act. The Company will conduct its affairs in such a manner so as to reasonably
ensure that neither it nor any of its Subsidiaries will be or become, at any time prior to the termination of
this Agreement, required to register as an “investment company,” as such term is defined in the Investment
Company Act.
No Offer to Sell. Other than an Issuer Free Writing Prospectus approved in advance by the Company and
the Agent in its capacity as agent hereunder, neither the Agent nor the Company (including its agents and
representatives, other than the Agent in its capacity as such) will make, use, prepare, authorize, approve or
refer to any written communication (as defined in Rule 405 under the Securities Act), required to be filed
with the Commission, that constitutes an offer to sell or solicitation of an offer to buy Placement Shares
hereunder.
Blue Sky and Other Qualifications. The Company will use its commercially reasonable efforts, in
cooperation with the Agent, to qualify the Placement Shares for offering and sale, or to obtain an
exemption for the Placement Shares to be offered and sold, under the applicable securities laws of such
states and other jurisdictions (domestic or foreign) as the Agent may designate and to maintain such
qualifications and exemptions in effect for so long as required for the distribution of the Placement Shares
(but in no event for less than one year from the date of this Agreement); provided, however, that the
Company shall not be obligated to file any general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself
to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Placement Shares have been so qualified or exempt, the Company will file such
statements and reports as
(o)
(p)
(q)
(r)
26
(s)
(t)
may be required by the laws of such jurisdiction to continue such qualification or exemption, as the case
may be, in effect for so long as required for the distribution of the Placement Shares (but in no event for
less than one year from the date of this Agreement).
Sarbanes-Oxley Act. The Company and the Subsidiaries will maintain and keep accurate books and
records reflecting their assets and maintain internal accounting controls in a manner designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with GAAP and including 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 the assets of the Company, (ii) provide reasonable assurance that
transactions are recorded as necessary to permit the preparation of the Company’s consolidated financial
statements in accordance with GAAP, (iii) that receipts and expenditures of the Company are being made
only in accordance with management’s and the Company’s directors’ authorization, and (iv) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a material effect on its financial statements. The
Company and the Subsidiaries will maintain such controls and other procedures, including, without
limitation, those required by Sections 302 and 906 of the Sarbanes-Oxley Act, and the applicable
regulations thereunder that are designed to ensure that information required to be disclosed by the
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 Commission’s rules and forms, including, without
limitation, controls and procedures designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act is accumulated and communicated
to the Company’s management, including its principal executive officer and principal financial officer, or
persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure and to ensure that material information relating to the Company or the Subsidiaries is made
known to them by others within those entities, particularly during the period in which such periodic reports
are being prepared.
Secretary’s Certificate; Further Documentation. On or prior to the date of the first Placement Notice, the
Company shall deliver to the Agent a certificate of the Secretary of the Company and attested to by an
executive officer of the Company, dated as of such date, certifying as to (i) the Third Restated Certificate
of Incorporation of the Company, as amended, (ii) the Second Amended and Restated By-Laws of the
Company, (iii) the resolutions of the Board of Directors of the Company authorizing the execution,
delivery and performance of this Agreement and the issuance of the Placement Shares and (iv) the
incumbency of the officers duly authorized to execute this Agreement and the other documents
contemplated by this Agreement. Within five (5) Trading Days of each Representation Date, the Company
shall have furnished to the Agent such further information, certificates and documents as the Agent may
reasonably request.
(u)
Reserved.
8. Payment of Expenses. The Company will pay all expenses incident to the performance of its
obligations under this Agreement, including (i) the preparation and filing of the Registration Statement,
including any fees required by the Commission, and the printing or electronic delivery of the Prospectus as
originally filed and of each amendment and supplement thereto, in such number as the Agent shall
reasonably deem necessary, (ii) the printing and delivery to the Agent of this Agreement and such other
documents as may be required in connection with the offering,
27
purchase, sale, issuance or delivery of the Placement Shares, (iii) the preparation, issuance and delivery of
the certificates, if any, for the Placement Shares to the Agent, including any stock or other transfer taxes
and any capital duties, stamp duties or other duties or taxes payable upon the sale, issuance or delivery of
the Placement Shares to the Agent, (iv) the fees and disbursements of the counsel, accountants and other
advisors to the Company, (v) the fees and expenses of Agent including but not limited to the fees and
expenses of the counsel to the Agent, payable upon the execution of this Agreement, (a) in an amount not
to exceed $75,000 in connection with the execution of this Agreement, (b) in an amount not to exceed
$25,000 per calendar quarter thereafter payable in connection with each Representation Date with respect
to which the Company is obligated to deliver a certificate pursuant to Section 7(l) for which no waiver is
applicable and excluding the date of this Agreement, and (c) in an amount not to exceed $50,000 for each
program “refresh” (filing of a new registration statement, prospectus or prospectus supplement relating to
the Placement Shares and/or an amendment of this Agreement) executed pursuant to this Agreement,
(vi) the qualification or exemption of the Placement Shares under state securities laws in accordance with
the provisions of Section 7(r) hereof, including filing fees, but excluding fees of the Agent’s counsel,
(vii) the printing and delivery to the Agent of copies of any Permitted Issuer Free Writing Prospectus and
the Prospectus and any amendments or supplements thereto in such number as the Agent shall reasonably
deem necessary, (viii) the preparation, printing and delivery to the Agent of copies of the blue sky survey,
(ix) the fees and expenses of the transfer agent and registrar for the Common Stock, (x) the filing and other
fees incident to any review by FINRA of the terms of the sale of the Placement Shares including the fees
of the Agent’s counsel (subject to the cap, set forth in clause (v) above), and (xi) the fees and expenses
incurred in connection with the listing of the Placement Shares on the Exchange. The Company agrees to
pay the fees and expenses of counsel to the Agent set forth in clause (v) above by check directly to such
counsel within 30 days of presentation to the attention of Sam Martin, Senior Vice President and Chief
Financial Officer of the Company (via email to smartin@celldex.com and ap@celldex.com) of an invoice
containing the requisite payment information prepared by such counsel.
9.
(a)
(b)
Conditions to Agent’s Obligations. The obligations of the Agent hereunder with respect to a Placement
will be subject to the continuing accuracy and completeness of the representations and warranties made by
the Company herein, to the due performance by the Company of its obligations hereunder, to the
completion by the Agent of a due diligence review satisfactory to it in its reasonable judgment, and to the
continuing satisfaction (or waiver by the Agent in its sole discretion) of the following additional
conditions:
Registration Statement Effective. The Registration Statement shall have become effective and shall be
available for the (i) resale of all Placement Shares issued to the Agent and not yet sold by the Agent and
(ii) sale of all Placement Shares contemplated to be issued by any Placement Notice.
No Material Notices. None of the following events shall have occurred and be continuing: (i) receipt by
the Company of any request for additional information from the Commission or any other federal or state
Governmental Authority during the period of effectiveness of the Registration Statement, the response to
which would require any post-effective amendments or supplements to the Registration Statement or the
Prospectus; (ii) the issuance by the Commission or any other federal or state Governmental Authority of
any stop order suspending the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt by the
28
Company of any notification with respect to the suspension of the qualification or exemption from
qualification of any of the Placement Shares for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; or (iv) the occurrence of any event that makes any statement of a
material fact made in the Registration Statement or the Prospectus or any material document incorporated
or deemed to be incorporated therein by reference untrue in any material respect or that requires the
making of any changes in the Registration Statement, the Prospectus or documents so that, in the case of
the Registration Statement, it will not contain any materially untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the statements therein not
misleading and, that in the case of the Prospectus, it will not contain any materially untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were made, not misleading.
No Misstatement or Material Omission. Agent shall not have advised the Company that the Registration
Statement or Prospectus, or any amendment or supplement thereto, contains an untrue statement of fact
that in the Agent’s reasonable opinion is material, or omits to state a fact that in the Agent’s reasonable
opinion is material and is required to be stated therein or is necessary to make the statements therein not
misleading.
Material Changes. Except as contemplated in the Prospectus, or disclosed in the Company’s reports filed
with the Commission, there shall not have been any material adverse change in the authorized capital stock
of the Company or any Material Adverse Effect or any development that could be reasonably expected to
cause a Material Adverse Effect, or a downgrading in or withdrawal of the rating assigned to any of the
Company’s securities (other than asset backed securities) by any rating organization or a public
announcement by any rating organization that it has under surveillance or review its rating of any of the
Company’s securities (other than asset backed securities), the effect of which, in the case of any such
action by a rating organization described above, in the reasonable judgment of the Agent (without
relieving the Company of any obligation or liability it may otherwise have), is so material as to make it
impracticable or inadvisable to proceed with the offering of the Placement Shares on the terms and in the
manner contemplated in the Prospectus.
Legal Opinions. The Agent shall have received the opinions and negative assurance letter of Company
Counsel, IP Counsel and Regulatory Counsel required to be delivered pursuant to Section 7(m) on or
before the date on which such delivery of such opinions is required pursuant to Section 7(m).
Comfort Letter. The Agent shall have received the Comfort Letter required to be delivered pursuant to
Section 7(n) on or before the date on which such delivery of such Comfort Letter is required pursuant to
Section 7(n).
Representation Certificate. The Agent shall have received the certificate required to be delivered pursuant
to Section 7(l) on or before the date on which delivery of such certificate is required pursuant to Section
7(l).
No Suspension. Trading in the Common Stock shall not have been suspended on the Exchange and the
Common Stock shall not have been delisted from the Exchange.
(c)
(d)
(e)
(f)
(g)
(h)
29
(i)
(j)
(k)
(l)
(m)
Other Materials. On each date on which the Company is required to deliver a certificate pursuant to
Section 7(l), the Company shall have furnished to the Agent such appropriate further information,
opinions, certificates, letters and other documents as the Agent may reasonably request and which are
customarily furnished by an issuer of securities in connection with a securities offering. All such opinions,
certificates, letters and other documents will be in compliance with the provisions hereof.
Securities Act Filings Made. All filings with the Commission with respect to the Placement Shares
required by Rule 424 under the Securities Act to have been filed prior to the issuance of any Placement
Notice hereunder shall have been made within the applicable time period prescribed for such filing by
Rule 424.
Approval for Listing. The Placement Shares shall either have been (i) approved for listing on the
Exchange, subject only to notice of issuance, or (ii) the Company shall have filed an application for listing
of the Placement Shares on the Exchange at, or prior to, the issuance of any Placement Notice and the
Exchange shall have reviewed such application and not provided any objections thereto.
FINRA. If applicable, FINRA shall have raised no objection to the terms of this offering and the amount of
compensation allowable or payable to the Agent as described in the Prospectus.
No Termination Event. There shall not have occurred any event that would permit the Agent to terminate
this Agreement pursuant to Section 12(a).
10.
Indemnification and Contribution.
(a) Company Indemnification. The Company agrees to indemnify and hold harmless the
Agent, its affiliates and their respective partners, members, directors, officers, employees and agents and
each person, if any, who controls the Agent or any affiliate within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act as follows:
(i) against any and all loss, liability, claim, damage and expense whatsoever, as
incurred, joint or several, arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement (or any amendment thereto), or the omission or
alleged omission therefrom of a material fact required to be stated therein or necessary to make the
statements therein not misleading, or arising out of any untrue statement or alleged untrue statement of a
material fact included in any related Issuer Free Writing Prospectus or the Prospectus (or any amendment
or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order
to make the statements therein, in the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and expense whatsoever, as
incurred, joint or several, to the extent of the aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any Governmental Authority, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 10(d) below) any such settlement is effected with the written
consent of the Company, which consent shall not unreasonably be delayed or withheld; and
30
(iii)
against any and all expense whatsoever, as incurred (including the reasonable
and documented fees and disbursements of counsel), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any Governmental Authority,
commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission (whether or not a party), to the extent that any such expense
is not paid under (i) or (ii) above,
provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or
expense to the extent arising out of any untrue statement or omission or alleged untrue statement or
omission made solely in reliance upon and in conformity with the Agent Information (as defined below).
(b) Agent Indemnification. Agent agrees to indemnify and hold harmless the Company and
its directors and each officer of the Company who signed the Registration Statement, and each person, if
any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act against any and all loss, liability, claim, damage and expense described in the indemnity
contained in Section 10(a), as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any amendments thereto), the
Prospectus (or any amendment or supplement thereto) or any Issuer Free Writing Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with information relating to the
Agent and furnished to the Company in writing by the Agent expressly for use therein. The Company
hereby acknowledges that the only information that the Agent has furnished to the Company expressly for
use in the Registration Statement, the Prospectus (or any amendment or supplement thereto) or any Issuer
Free Writing Prospectus (or any amendment or supplement thereto) are the statements set forth in the
seventh and eighth paragraphs under the caption “Plan of Distribution” in the Prospectus (the “Agent
Information”).
(c) Procedure. Any party that proposes to assert the right to be indemnified under this
Section 10 will, promptly after receipt of notice of commencement of any action against such party in
respect of which a claim is to be made against an indemnifying party or parties under this Section 10,
notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers
served, but the omission so to notify such indemnifying party will not relieve the indemnifying party from
(i) any liability that it might have to any indemnified party otherwise than under this Section 10 and
(ii) any liability that it may have to any indemnified party under the foregoing provision of this Section 10
unless, and only to the extent that, such omission results in the forfeiture of substantive rights or defenses
by the indemnifying party. If any such action is brought against any indemnified party and it notifies the
indemnifying party of its commencement, the indemnifying party will be entitled to participate in and, to
the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice
of the commencement of the action from the indemnified party, jointly with any other indemnifying party
similarly notified, to assume the defense of the action, with counsel reasonably satisfactory to the
indemnified party, and after notice from the indemnifying party to the indemnified party of its election to
assume the defense, the indemnifying party will not be liable to the indemnified party for any legal or
other expenses except as provided below and except for the reasonable and documented costs of
investigation subsequently incurred by the indemnified party in connection with the defense. The
indemnified party will have the right to employ its own counsel in any such
31
action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified
party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the
indemnifying party, (2) the indemnified party has reasonably concluded (based on advice of counsel) that
there may be legal defenses available to it or other indemnified parties that are different from or in addition
to those available to the indemnifying party, (3) a conflict or potential conflict exists (based on advice of
counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case
the indemnifying party will not have the right to direct the defense of such action on behalf of the
indemnified party) or (4) the indemnifying party has not in fact employed counsel to assume the defense of
such action or counsel reasonably satisfactory to the indemnified party, in each case, within a reasonable
time after receiving notice of the commencement of the action; in each of which cases the reasonable and
documented fees, disbursements and other charges of counsel will be at the expense of the indemnifying
party or parties. It is understood that the indemnifying party or parties shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the reasonable and documented
fees, disbursements and other charges of more than one separate firm (plus local counsel) admitted to
practice in such jurisdiction at any one time for all such indemnified party or parties. All such fees,
disbursements and other charges will be reimbursed by the indemnifying party promptly after the
indemnifying party receives a written invoice relating to fees, disbursements and other charges in
reasonable detail. An indemnifying party will not, in any event, be liable for any settlement of any action
or claim effected without its written consent. No indemnifying party shall, without the prior written
consent of each indemnified party, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding relating to the matters contemplated by this Section 10
(whether or not any indemnified party is a party thereto), unless such settlement, compromise or consent
(1) includes an express and unconditional release of each indemnified party, in form and substance
reasonably satisfactory to such indemnified party, from all liability arising out of such litigation,
investigation, proceeding or claim and (2) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) Settlement Without Consent if Failure to Reimburse. If an indemnified party shall have
requested an indemnifying party to reimburse the indemnified party for reasonable fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature
contemplated by Section 10(a)(ii) effected without its written consent if (1) such settlement is entered into
more than 45 days after receipt by such indemnifying party of the aforesaid request, (2) such indemnifying
party shall have received notice of the terms of such settlement at least 30 days prior to such settlement
being entered into and (3) such indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(e) Contribution. In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in the foregoing paragraphs of this Section 10 is applicable in
accordance with its terms but for any reason is held to be unavailable or insufficient from the Company or
the Agent, the Company and the Agent will contribute to the total losses, claims, liabilities, expenses and
damages (including any investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, but after
deducting any contribution received by the Company from persons other than the Agent, such as persons
who control the Company within the
32
meaning of the Securities Act, officers of the Company who signed the Registration Statement and
directors of the Company, who may also be liable for contribution) to which the Company and the Agent
may be subject in such proportion as shall be appropriate to reflect the relative benefits received by the
Company on the one hand and the Agent on the other hand. The relative benefits received by the Company
on the one hand and the Agent on the other hand shall be deemed to be in the same proportion as the total
net proceeds from the sale of the Placement Shares (before deducting expenses) received by the Company
bear to the total compensation received by the Agent (before deducting expenses) from the sale of
Placement Shares on behalf of the Company. If, but only if, the allocation provided by the foregoing
sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion
as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence but also the
relative fault of the Company, on the one hand, and the Agent, on the other hand, with respect to the
statements or omission that resulted in such loss, claim, liability, expense or damage, or action in respect
thereof, as well as any other relevant equitable considerations with respect to such offering. Such relative
fault shall be determined by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material fact relates to information
supplied by the Company or the Agent, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission. The Company and the Agent
agree that it would not be just and equitable if contributions pursuant to this Section 10(e) were to be
determined by pro rata allocation or by any other method of allocation that does not take into account the
equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result
of the loss, claim, liability, expense, or damage, or action in respect thereof, referred to above in this
Section 10(e) shall be deemed to include, for the purpose of this Section 10(e), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating or defending any such
action or claim to the extent consistent with Section 10(c) hereof. Notwithstanding the foregoing
provisions of this Section 10(e), the Agent shall not be required to contribute any amount in excess of the
commissions actually received by it under this Agreement and no person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 10(e), any person who controls a party to this Agreement within the meaning of the Securities
Act any affiliates of the Agent and any officers, directors, partners, employees or agents of the Agent or
any of its affiliates, will have the same rights to contribution as that party, and each director of the
Company and each officer of the Company who signed the Registration Statement will have the same
rights to contribution as the Company, subject in each case to the provisions hereof. Any party entitled to
contribution, promptly after receipt of notice of commencement of any action against such party in respect
of which a claim for contribution may be made under this Section 10(e), will notify any such party or
parties from whom contribution may be sought, but the omission to so notify will not relieve that party or
parties from whom contribution may be sought from any other obligation it or they may have under this
Section 10(e) except to the extent that the failure to so notify such other party materially prejudiced the
substantive rights or defenses of the party from whom contribution is sought. Except for a settlement
entered into pursuant to the last sentence of Section 10(c) hereof, no party will be liable for contribution
with respect to any action or claim settled without its written consent if such consent is required pursuant
to Section 10(c) hereof.
33
11.
12.
(a)
(b)
(c)
Representations and Agreements to Survive Delivery. The indemnity and contribution agreements
contained in Section 10 of this Agreement and all representations and warranties of the Company herein or
in certificates delivered pursuant hereto shall survive, as of their respective dates, regardless of (i) any
investigation made by or on behalf of the Agent, any controlling persons, or the Company (or any of their
respective officers, directors or controlling persons), (ii) delivery and acceptance of the Placement Shares
and payment therefor or (iii) any termination of this Agreement.
Termination.
The Agent may terminate this Agreement, by notice to the Company, as hereinafter specified at any time
(1) if there has been, since the time of execution of this Agreement or since the date as of which
information is given in the Prospectus, any change, or any development or event involving a prospective
change, in the condition, financial or otherwise, or in the business, properties, earnings, results of
operations or prospects of the Company and its Subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, which individually or in the aggregate, in the sole judgment of
the Agent is material and adverse and makes it impractical or inadvisable to market the Placement Shares
or to enforce contracts for the sale of the Placement Shares, (2) if there has occurred any material adverse
change in the financial markets in the United States or the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Agent, impracticable or inadvisable to market
the Placement Shares or to enforce contracts for the sale of the Placement Shares, (3) if trading in the
Common Stock has been suspended or limited by the Commission or the Exchange, or if trading generally
on the Exchange has been suspended or limited, or minimum prices for trading have been fixed on the
Exchange, (4) if any suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market shall have occurred and be continuing, (5) if a major disruption of securities
settlements or clearance services in the United States shall have occurred and be continuing, or (6) if a
banking moratorium has been declared by either U.S. Federal or New York authorities. Any such
termination shall be without liability of any party to any other party except that the provisions of Section 8
(Payment of Expenses), Section 10 (Indemnification and Contribution), Section 11 (Representations and
Agreements to Survive Delivery), Section 17 (Governing Law and Time; Waiver of Jury Trial) and Section
18 (Consent to Jurisdiction) hereof shall remain in full force and effect notwithstanding such termination.
If the Agent elects to terminate this Agreement as provided in this Section 12(a), the Agent shall provide
the required notice as specified in Section 13 (Notices).
The Company shall have the right, by giving ten (10) days’ notice as hereinafter specified to terminate this
Agreement in its sole discretion at any time after the date of this Agreement. Any such termination shall be
without liability of any party to any other party except that the provisions of Section 8, Section 10, Section
11, Section 17 and Section 18 hereof shall remain in full force and effect notwithstanding such
termination.
The Agent shall have the right, by giving ten (10) days’ notice as hereinafter specified to terminate this
Agreement in its sole discretion at any time after the date of this Agreement. Any such termination shall be
without liability of any party to any other party except that the provisions of
34
(d)
(e)
13.
Section 8, Section 10, Section 11, Section 17 and Section 18 hereof shall remain in full force and effect
notwithstanding such termination.
This Agreement shall remain in full force and effect unless terminated pursuant to Sections 12(a), (b), or
(c) above or otherwise by mutual agreement of the parties; provided, however, that any such termination
by mutual agreement shall in all cases be deemed to provide that Section 8, Section 10, Section 11, Section
17 and Section 18 shall remain in full force and effect. Upon termination of this Agreement, the Company
shall not have any liability to the Agent for any discount, commission, or other compensation with respect
to any Placement Shares not previously or otherwise sold by the Agent under this Agreement.
Any termination of this Agreement shall be effective on the date specified in such notice of termination;
provided, however, that such termination shall not be effective until the close of business on the date of
receipt of such notice by the Agent or the Company, as the case may be. If such termination shall occur
prior to the Settlement Date for any sale of Placement Shares, such Placement Shares shall settle in
accordance with the provisions of this Agreement.
Notices. All notices or other communications required or permitted to be given by any party to any other
party pursuant to the terms of this Agreement shall be in writing, unless otherwise specified, and if sent to
the Agent, shall be delivered to:
Cantor Fitzgerald & Co.
110 East 59th Street
New York, NY 10022
Attention:
Email:
Capital Markets
CFCEO@cantor.com
Cantor Fitzgerald & Co.
110 East 59th Street
New York, NY 10022
Attention:
Email:
General Counsel
legal-IBD@cantor.com
and:
with a copy to:
Wilmer Cutler Pickering Hale and Dorr LLP
250 Greenwich Street
New York, NY 10007
Attention:
E-mail:
Lisa Firenze
Lisa.Firenze@wilmerhale.com
and if to the Company, shall be delivered to:
Celldex Therapeutics, Inc.
Perryville III Building
53 Frontage Road, Suite 220
35
Hampton, NJ 08827
Attention:
Anthony Marucci, President and Chief Executive Officer, and
Freddy A. Jimenez, Esq., Senior Vice President and General
Counsel
AMarucci@celldex.com
fjimenez@celldex.com
E-mail:
with a copy to:
Lowenstein Sandler LLP 1251 Avenue of
Americas
New York, NY 10020
Attention:
E-mail:
Anthony O. Pergola, Esq.
APergola@lowenstein.com
the
Each party to this Agreement may change such address for notices by sending to the parties to this
Agreement written notice of a new address for such purpose. Each such notice or other communication
shall be deemed given (i) when delivered personally or by verifiable facsimile transmission (with an
original to follow) on or before 4:30 p.m., New York City time, on a Business Day or, if such day is not a
Business Day, on the next succeeding Business Day, (ii) by Electronic Notice, as set forth below, (iii) on
the next Business Day after timely delivery to a nationally-recognized overnight courier and (iv) on the
Business Day actually received if deposited in the U.S. mail (certified or registered mail, return receipt
requested, postage prepaid). For purposes of this Agreement, “Business Day” shall mean any day on
which the Exchange and commercial banks in the City of New York are open for business.
An electronic communication (“Electronic Notice”) shall be deemed written notice for purposes of
this Section 13 if sent to the electronic mail address specified by the receiving party under separate cover.
Electronic Notice shall be deemed received at the time the party sending Electronic Notice receives
verification of receipt by the receiving party. Any party receiving Electronic Notice may request and shall
be entitled to receive the notice on paper, in a nonelectronic form (“Nonelectronic Notice”) which shall be
sent to the requesting party within ten (10) days of receipt of the written request for Nonelectronic Notice.
14.
Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Company
and the Agent and their respective successors and the parties referred to in Section 10 hereof. References
to any of the parties contained in this Agreement shall be deemed to include the successors and permitted
assigns of such party. Nothing in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as expressly provided in this
Agreement. Neither party may assign its rights or obligations under this Agreement without the prior
written consent of the other party; provided, however, that the Agent may assign its rights and obligations
hereunder to an affiliate thereof without obtaining the Company’s consent.
15.
Adjustments for Stock Splits. The parties acknowledge and agree that all share-related numbers contained
in this Agreement shall be adjusted to take into account any stock split, stock dividend or similar event
effected with respect to the Placement Shares.
36
16.
17.
18.
Entire Agreement; Amendment; Severability; Waiver. This Agreement (including all schedules and
exhibits attached hereto and Placement Notices issued pursuant hereto) constitutes the entire agreement
and supersedes all other prior and contemporaneous agreements and undertakings, both written and oral,
among the parties hereto with regard to the subject matter hereof. Neither this Agreement nor any term
hereof may be amended except pursuant to a written instrument executed by the Company and the Agent.
In the event that any one or more of the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable as written by a court of competent jurisdiction, then
such provision shall be given full force and effect to the fullest possible extent that it is valid, legal and
enforceable, and the remainder of the terms and provisions herein shall be construed as if such invalid,
illegal or unenforceable term or provision was not contained herein, but only to the extent that giving
effect to such provision and the remainder of the terms and provisions hereof shall be in accordance with
the intent of the parties as reflected in this Agreement. No implied waiver by a party shall arise in the
absence of a waiver in writing signed by such party. No failure or delay in exercising any right, power, or
privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any right, power, or privilege hereunder.
GOVERNING LAW AND TIME; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME. EACH PARTY 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.
CONSENT TO JURISDICTION. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE
CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR
IN CONNECTION WITH ANY TRANSACTION
CONTEMPLATED HEREBY, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT
TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH
SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT
THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY
HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO
PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A
COPY THEREOF (CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED)
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.
37
19.
20.
21.
22.
(a)
Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same instrument. Delivery of an
executed Agreement by one party to the other may be made by facsimile, electronic mail (including any
electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act,
the Electronic Signatures and Records Act or other applicable law, e.g., www.docusign.com) or other
transmission method and any counterpart so delivered shall be deemed to have been duly and validly
delivered and be valid and effective for all purposes.
Construction. The section and exhibit headings herein are for convenience only and shall not affect the
construction hereof. References herein to any law, statute, ordinance, code, regulation, rule or other
requirement of any Governmental Authority shall be deemed to refer to such law, statute, ordinance, code,
regulation, rule or other requirement of any Governmental Authority as amended, reenacted, supplemented
or superseded in whole or in part and in effect from time to time and also to all rules and regulations
promulgated thereunder.
Permitted Free Writing Prospectuses. The Company represents, warrants and agrees that, unless it obtains
the prior written consent of the Agent, which shall not be unreasonably withheld, conditioned or delayed,
and the Agent represents, warrants and agrees that, unless it obtains the prior written consent of the
Company, which shall not be unreasonably withheld, conditioned, or delayed, it has not made and will not
make any offer relating to the Placement Shares that would constitute an Issuer Free Writing Prospectus,
or that would otherwise constitute a “free writing prospectus,” as defined in Rule 405, required to be filed
with the Commission. Any such free writing prospectus consented to by the Agent or by the Company, as
the case may be, is hereinafter referred to as a “Permitted Free Writing Prospectus.” The Company
represents and warrants that it has treated and agrees that it will treat each Permitted Free Writing
Prospectus as an “issuer free writing prospectus,” as defined in Rule 433, and has complied and will
comply with the requirements of Rule 433 applicable to any Permitted Free Writing Prospectus, including
timely filing with the Commission where required, legending and record keeping. For the purposes of
clarity, the parties hereto agree that all free writing prospectuses, if any, listed in Exhibit 21 hereto are
Permitted Free Writing Prospectuses.
Absence of Fiduciary Relationship. The Company acknowledges and agrees that:
the Agent is acting solely as agent in connection with the public offering of the Placement Shares and in
connection with each transaction contemplated by this Agreement and the process leading to such
transactions, and no fiduciary or advisory relationship between the Company or any of its respective
affiliates, stockholders (or other equity holders), creditors or employees or any other party, on the one
hand, and the Agent, on the other hand, has been or will be created in respect of any of the transactions
contemplated by this Agreement, irrespective of whether or not the Agent has advised or is advising the
Company on other matters, and the Agent has no obligation to the Company with respect to the
transactions contemplated by this Agreement except the obligations expressly set forth in this Agreement;
(b)
it is capable of evaluating and understanding, and understands and accepts, the terms, risks and conditions
of the transactions contemplated by this Agreement;
38
(c)
(d)
(e)
neither the Agent nor its affiliates have provided any legal, accounting, regulatory or tax advice with
respect to the transactions contemplated by this Agreement and it has consulted its own legal, accounting,
regulatory and tax advisors to the extent it has deemed appropriate;
it is aware that the Agent and its affiliates are engaged in a broad range of transactions which may involve
interests that differ from those of the Company and the Agent and its affiliates have no obligation to
disclose such interests and transactions to the Company by virtue of any fiduciary, advisory or agency
relationship or otherwise; and
it waives, to the fullest extent permitted by law, any claims it may have against the Agent or its affiliates
for breach of fiduciary duty or alleged breach of fiduciary duty in connection with the sale of Placement
Shares under this Agreement and agrees that the Agent and its affiliates shall not have any liability
(whether direct or indirect, in contract, tort or otherwise) to it in respect of such a fiduciary duty claim or
to any person asserting a fiduciary duty claim on its behalf or in right of it or the Company, employees or
creditors of Company.
23.
Definitions. As used in this Agreement, the following terms have the respective meanings set forth below:
“Applicable Time” means (i) each Representation Date, (ii) the time of each sale of any Placement
Shares pursuant to this Agreement and (iii) each Settlement Date.
“Governmental Authority” means (i) any federal, provincial, state, local, municipal, national or
international government or governmental authority, regulatory or administrative agency, governmental
commission, department, board, bureau, agency or instrumentality, court, tribunal, arbitrator or arbitral
body (public or private); (ii) any self-regulatory organization; or (iii) any political subdivision of any of the
foregoing.
“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in
Rule 433, relating to the Placement Shares that (1) is required to be filed with the Commission by the
Company, (2) is a “road show” that is a “written communication” within the meaning of Rule 433(d)(8)(i)
whether or not required to be filed with the Commission, or (3) is exempt from filing pursuant to
Rule 433(d)(5)(i) because it contains a description of the Placement Shares or of the offering that does not
reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not
required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g) under the
Securities Act Regulations.
“Rule 172,” “Rule 401,” “Rule 405,” “Rule 415,” “Rule 424,” “Rule 424(b),” “Rule 430B,” and
“Rule 433” refer to such rules under the Securities Act Regulations.
All references in this Agreement to financial statements and schedules and other information that is
“contained,” “included” or “stated” in the Registration Statement or the Prospectus (and all other
references of like import) shall be deemed to mean and include all such financial statements and schedules
and other information that is incorporated by reference in the Registration Statement or the Prospectus, as
the case may be.
All references in this Agreement to the Registration Statement, the Prospectus or any amendment
or supplement to any of the foregoing shall be deemed to include the copy filed with
39
the Commission pursuant to EDGAR; all references in this Agreement to any Issuer Free Writing
Prospectus (other than any Issuer Free Writing Prospectuses that, pursuant to Rule 433, are not required to
be filed with the Commission) shall be deemed to include the copy thereof filed with the Commission
pursuant to EDGAR; and all references in this Agreement to “supplements” to the Prospectus shall
include, without limitation, any supplements, “wrappers” or similar materials prepared in connection with
any offering, sale or private placement of any Placement Shares by the Agent outside of the United States.
[Signature Page Follows]
40
If the foregoing correctly sets forth the understanding between the Company and the Agent, please
so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding
agreement between the Company and the Agent.
Very truly yours,
CELLDEX THERAPEUTICS, INC.
By: /s/ Anthony S. Marucci
Name:Anthony S. Marucci
Title: President and Chief Executive Officer
ACCEPTED as of the date first-above written:
CANTOR FITZGERALD & CO.
By: /s/ Sage Kelly
Name:Sage Kelly
Title: Global Head of Investment Banking
[Signature Page to Sales Agreement]
SCHEDULE 1
__________________________
Form of Placement Notice
__________________________
From:
Celldex Therapeutics, Inc.
To:
Cantor Fitzgerald & Co.
Attention: [·]
Subject:
Placement Notice
Date:
[·], 202[4]
Ladies and Gentlemen:
Pursuant to the terms and subject to the conditions contained in the Sales Agreement between
Celldex Therapeutics, Inc., a Delaware corporation (the “Company”), and Cantor Fitzgerald & Co.
(“Agent”), dated February 26, 2024, the Company hereby requests that the Agent sell up to [·] of the
Company’s common stock, par value $0.001 per share, at a minimum market price of $[·] per share, during
the time period beginning [month, day, time] and ending [month, day, time].
SCHEDULE 2
__________________________
Compensation
__________________________
The Company shall pay to the Agent in cash, upon each sale of Placement Shares pursuant to this
Agreement, an amount up to 3.0% of the aggregate gross proceeds from each sale of Placement Shares.
SCHEDULE 3
__________________________
Notice Parties
__________________________
The Company
Anthony Marucci (AMarucci@celldex.com)
Sam Martin (smartin@celldex.com)
Jennifer DeFerrari (jdeferrari@celldex.com)
The Agent
Sameer Vasudev (svasudev@cantor.com)
With copies to:
CFCEO@cantor.com
SCHEDULE 4
__________________________
Subsidiaries
__________________________
Incorporated by reference to Exhibit 21.1 of the Company’s most recently filed Form 10-K, as applicable.
Exhibit 21
Permitted Free Writing Prospectus
None.
Exhibit 5.1
February 26, 2024
Celldex Therapeutics, Inc.
Perryville III Building
53 Frontage Road, Suite 220
Hampton, NJ 08827
Re: Sale of Common Stock registered pursuant to Shelf Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to Celldex Therapeutics, Inc., a Delaware corporation (the “Company”), in connection with the offer and sale
by the Company of up to an aggregate of $300,000,000 of shares of its common stock, par value $0.001 per share (the “Shares”),
pursuant to a Controlled Equity OfferingSM Sales Agreement (the “Sales Agreement”), dated February 26, 2024, by and between the
Company and Cantor Fitzgerald & Co., as sales agent. The Shares are being offered for sale pursuant to the Company’s registration
statement on Form S-3 (File No. 333-275300) (the “Registration Statement”) filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations promulgated thereunder, the base
prospectus dated November 3, 2023 included in the Registration Statement (the “Base Prospectus”) and the Prospectus Supplement that
will be filed pursuant to Rule 424(b) under the Securities Act, dated February 26, 2024 (the “Prospectus Supplement” and, collectively,
with the Base Prospectus, the “Prospectus”).
We understand that the Shares are to be issued by the Company and sold by Cantor Fitzgerald & Co. pursuant to the Sales Agreement, as
described in the Registration Statement and the Prospectus.
In connection with this opinion, we have examined the Sales Agreement, the Registration Statement, and the Prospectus. In addition, we
have (i) investigated such questions of law, (ii) examined originals or certified, conformed or reproduction copies of such agreements,
instruments, documents and records of the Company, such certificates of public officials and such other documents and (iii) received
such information from officers and representatives of the Company as we have deemed necessary or appropriate for the purposes of this
opinion.
In all such examinations, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of
original and certified documents and the conformity to original or certified documents of all copies submitted to us as conformed or
reproduction copies. As to various questions of fact relevant to the opinion expressed herein, we have relied upon, and assume the
accuracy of, the representations and warranties set forth in the Sales Agreement, and certificates and oral or written statements and other
information of or from public officials and officers and representatives of the Company.
Based upon the foregoing and subject to the limitations, qualifications and assumptions set forth herein, we are of the opinion that the
Shares have been duly authorized for issuance, and when issued and paid for in accordance with the terms and conditions of the Sales
Agreement, the Shares will be validly issued, fully paid and non-assessable.
The opinion expressed herein is limited to the applicable provisions of the General Corporation Law of the State of Delaware (the
“DGCL”), as currently in effect, and reported judicial decisions interpreting such provisions of the DGCL.
The opinion expressed herein is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters
expressly stated herein. We undertake no obligation to supplement this letter if any applicable laws change after the date hereof or if we
become aware of any facts that might change the opinion expressed herein after that date or for any other reason.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the Annual Report on Form 10-K filed by the Company on the date
hereof and which is incorporated by reference into the Prospectus and to the references to this firm under the caption “Legal Matters” in
the Prospectus Supplement. In giving these consents, we do not admit that we are “experts” within the meaning of Section 11 of the
Securities Act or within the category of persons whose consent is required by Section 7 of the Securities Act.
Very truly yours,
/s/ Lowenstein Sandler
Lowenstein Sandler LLP
SUBSIDIARIES OF CELLDEX THERAPEUTICS, INC.
Exhibit 21.1
Name
Celldex Therapeutics Switzerland GmbH
Jurisdiction of
Organization
Switzerland
Ownership
Percentage
100%
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-272804, 333-257137,
333-239463, 333-232253, 333-232255, 333-219867, 333-219869, 333-205694, 333-189336, 333-182142, 333-151728 and 333-117602)
and on Form S-3 (Nos. 333-275300, and 333-215747) of Celldex Therapeutics, Inc. of our report dated February 26, 2024 relating to the
financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
Exhibit 23.1
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 26, 2024
Exhibit 31.1
I, Anthony S. Marucci, certify that:
CERTIFICATION
1.
I have reviewed this annual report on Form 10-K of Celldex Therapeutics, 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 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 the 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 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: February 26, 2024
By /s/ ANTHONY S. MARUCCI
Name: Anthony S. Marucci
Title: President and Chief Executive Officer
Exhibit 31.2
I, Sam Martin, certify that:
1.
I have reviewed this annual report on Form 10-K of Celldex Therapeutics, Inc.;
CERTIFICATION
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 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 the 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 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: February 26, 2024
By /s/ SAM MARTIN
Name: Sam Martin
Title: Senior Vice President and Chief Financial Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32
Each of the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, in his capacity as an officer of Celldex Therapeutics, Inc. (the “Company”), that, to his knowledge, the Annual
Report of the Company on Form 10-K for the period ended December 31, 2023 (the “Form 10-K”), fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §78m or 78o(d)) and that the information contained in such
report fairly presents, in all material respects, the financial condition and results of operations of the Company. This written statement is
being furnished to the Securities and Exchange Commission as an exhibit to the Form 10-K. A signed original of this statement 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.
Date: February 26, 2024
Date: February 26, 2024
By:/s/ ANTHONY S. MARUCCI
Name: Anthony S. Marucci
Title: President and Chief Executive Officer
By:/s/ SAM MARTIN
Name: Sam Martin
Title: Senior Vice President and Chief Financial Officer
This certification shall not be deemed “filed” for any purpose, nor shall it be deemed to be incorporated by reference into any filing
under the Securities Act of 1933 or the Exchange Act.
CELLDEX THERAPEUTICS, INC.
COMPENSATION RECOVERY POLICY
(Adopted and approved on September 14, 2023, and effective as of December 1, 2023)
Exhibit 97
1. Purpose
Celldex Therapeutics, Inc. (collectively with its subsidiaries, the “Company”) is committed to promoting high standards of honest and
ethical business conduct and compliance with applicable laws, rules and regulations. As part of this commitment, the Company has
adopted this Compensation Recovery Policy (this “Policy”). This Policy is designed to comply with the requirements of Section 10D of
the Securities Exchange Act of 1934, as amended (the ”Exchange Act”), Rule 10D-1 promulgated thereunder and the rules of the
national securities exchange on which the Company’s securities are traded and explains when the Company will pursue recovery of
Incentive Compensation awarded or paid to a Covered Person. Please refer to Exhibit A attached hereto (the “Definitions Exhibit”) for
the definitions of capitalized terms used throughout this Policy.
2. Recovery of Recoverable Incentive Compensation
In the event of a Restatement, the Company will pursue, reasonably promptly, recovery of all Recoverable Incentive Compensation from
a Covered Person without regard to such Covered Person’s individual knowledge or responsibility related to the Restatement.
Notwithstanding the foregoing, if the Company is otherwise required by this Policy to undertake a Restatement, the Company will not be
required to recover the Recoverable Incentive Compensation if the Compensation Committee determines, after exercising a normal due
process review of all the relevant facts and circumstances, that (a) a Recovery Exception exists and (b) it would be impracticable to seek
such recovery under such facts and circumstances.
If such Recoverable Incentive Compensation was not awarded or paid on a formulaic basis, the Company will pursue recovery of the
amount that the Compensation Committee determines in good faith should be recovered.
3. Other Actions
The Compensation Committee may, subject to applicable law, pursue recovery of Recoverable Incentive Compensation in the manner it
chooses, including by pursuing reimbursement from the Covered Person of all or part of the compensation awarded or paid, by electing
to withhold unpaid compensation, by set-off, or by rescinding or canceling unvested stock or option awards.
In the reasonable exercise of its business judgment under this Policy, the Compensation Committee may in its sole discretion determine
whether and to what extent additional action is appropriate to address the circumstances surrounding a Restatement to minimize the
likelihood of any recurrence and to impose such other discipline as it deems appropriate.
4. No Indemnification or Reimbursement
As required by applicable law, notwithstanding the terms of any other policy, program, agreement or arrangement, in no event will the
Company or any of its affiliates indemnify or reimburse a Covered Person for any loss of Recoverable Incentive Compensation under
this Policy and, to the extent prohibited by law, neither the Company nor any of its affiliates will pay premiums on any insurance policy
that would cover a Covered Person’s potential obligations with respect to Recoverable Incentive Compensation under this Policy.
5. Administration of Policy
The Compensation Committee will have full authority to administer this Policy. The Compensation Committee will, subject to the
provisions of this Policy and Rule 10D-1 of the Exchange Act, and the Company’s applicable exchange listing standards, make such
determinations and interpretations and take such actions in connection with this Policy as it deems necessary, appropriate or advisable. It
is intended that this Policy be interpreted in a manner that is consistent with the requirements of Section 10D of the Exchange Act, Rule
10D-1 thereunder and any applicable rules or standards adopted by the Securities and Exchange Commission or any national securities
exchange on which the Company’s securities are listed. All determinations and interpretations made by the Compensation Committee
will be final, binding and conclusive.
6. Other Claims and Rights
The requirements of this Policy are in addition to, and not in lieu of, any legal and equitable claims the Company or any of its affiliates
may have or any actions that may be imposed by law enforcement agencies, regulators, administrative bodies, or other authorities.
Further, the exercise by the Compensation Committee of any rights pursuant to this Policy will not impact any other rights that the
Company or any of its affiliates may have with respect to any Covered Person subject to this Policy.
7. Acknowledgement by Covered Persons; Condition to Eligibility for Incentive Compensation
The Company will provide notice and seek acknowledgement of this Policy from each Covered Person, provided that the failure to
provide such notice or obtain such acknowledgement will have no impact on the applicability or enforceability of this Policy. After the
Effective Date (and also with respect to any Incentive Compensation Received on or after October 2, 2023 pursuant to a preexisting
contract or arrangement), any grant of Incentive Compensation to a Covered Person will be deemed to have been made subject to the
terms of this Policy, whether or not such Policy is specifically referenced in the documentation relating to such grant and this Policy shall
be deemed to constitute an integral part of the terms of any such grant. All Incentive Compensation subject to this Policy will remain
subject to this policy, even if already paid, until the Policy ceases to apply to such Incentive Compensation and any other vesting
conditions applicable to such Incentive Compensation are satisfied.
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8. Amendment; Termination
The Board or the Compensation Committee may amend or terminate this Policy at any time. In the event that Section 10D of the
Exchange Act, Rule 10D-1 thereunder or the rules of the national securities exchange on which the Company’s securities are traded are
modified or supplemented, whether by law, regulation or legal interpretation, such modification or supplement shall be deemed to modify
or supplement this Policy to the maximum extent permitted by applicable law.
9. Effectiveness
Except as otherwise determined in writing by the Compensation Committee, this Policy will apply to any Incentive Compensation that is
Received by a Covered Person on or after the Effective Date. This Policy will survive and continue notwithstanding any termination of a
Covered Person’s employment with the Company and its affiliates.
10. Successors
This Policy shall be binding and enforceable against all Covered Persons and their successors, beneficiaries, heirs, executors,
administrators, or other legal representatives.
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Exhibit A
DEFINITIONS EXHIBIT
“Applicable Period” means the three completed fiscal years of the Company immediately preceding the earlier of (i) the date the Board,
a committee of the Board, or the officer or officers of the Company authorized to take such action if Board action is not required,
concludes (or reasonably should have concluded) that a Restatement is required or (ii) the date a court, regulator, or other legally
authorized body directs the Company to prepare a Restatement. The “Applicable Period” also includes any transition period (that results
from a change in the Company’s fiscal year) within or immediately following the three completed fiscal years identified in the preceding
sentence.
“Board” means the Board of Directors of the Company.
“Compensation Committee” means the Company’s committee of independent directors responsible for executive compensation
decisions, or in the absence of such a committee, a majority of the independent directors serving on the Board.
“Covered Person” means any person who is, or was at any time, during the Applicable Period, an Executive Officer of the Company.
For the avoidance of doubt, a Covered Person may include a former Executive Officer that left the Company, retired, or transitioned to an
employee role (including after serving as an Executive Officer in an interim capacity) during the Applicable Period.
"Effective Date" means December 1, 2023.
“Executive Officer” means the Company’s president, principal executive officer, principal financial officer, principal accounting officer
(or if there is no such accounting officer, the controller), any vice-president in charge of a principal business unit, division, or function
(such as sales, administration, or finance), any other officer who performs a policy-making function, or any other person (including an
officer of the Company’s parent(s) or subsidiaries) who performs similar policy-making functions for the Company.
“Financial Reporting Measure” means a measure that is determined and presented in accordance with the accounting principles used in
preparing the Company’s financial statements, and any measure that is derived wholly or in part from such measure (including but not
limited to, “non-GAAP” financial measures, such as those appearing in the Company’s earnings releases or Management Discussion and
Analysis). Stock price and total shareholder return (and any measures derived wholly or in part therefrom) shall be considered Financial
Reporting Measures.
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“Recovery Exception:” A recovery of Recoverable Incentive Compensation shall be subject to a “Recovery Exception” if the
Compensation Committee determines in good faith that: (i) pursuing such recovery would violate home country law of the jurisdiction of
incorporation of the Company where that law was adopted prior to November 28, 2022 and the Company provides an opinion of home
country counsel to that effect acceptable to the Company’s applicable listing exchange; (ii) the direct expense paid to a third party to
assist in enforcing this Policy would exceed the Recoverable Incentive Compensation and the Company has (A) made a reasonable
attempt to recover such amounts and (B) provided documentation of such attempts to recover to the Company’s applicable listing
exchange; or (iii) recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to
employees of the Company, to fail to meet the requirements of Section 401(a)(13) or Section 411(a) of the Internal Revenue Code of
1986, as amended, and regulations thereunder.
“Incentive Compensation” means any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a
Financial Reporting Measure. Incentive Compensation does not include any base salaries (except with respect to any salary increases
earned wholly or in part based on the attainment of a Financial Reporting Measure performance goal); bonuses paid solely at the
discretion of the Compensation Committee or Board that are not paid from a “bonus pool” that is determined by satisfying a Financial
Reporting Measure performance goal; bonuses paid solely upon satisfying one or more subjective standards and/or completion of a
specified employment period; non-equity incentive plan awards earned solely upon satisfying one or more strategic measures or
operational measures; and equity awards that vest solely based on the passage of time and/or attaining one or more non-Financial
Reporting Measures. Incentive Compensation includes any Incentive Compensation Received on or after October 2, 2023 pursuant to a
preexisting contract or arrangement.
“Received:” Incentive Compensation is deemed “Received” in the Company’s fiscal period during which the Financial Reporting
Measure specified in the Incentive Compensation award is attained, even if the payment or grant of the Incentive Compensation occurs
after the end of that period.
“Recoverable Incentive Compensation” means the amount of any Incentive Compensation (calculated on a pre-tax basis) Received by
a Covered Person during the Applicable Period that is in excess of the amount that otherwise would have been Received if the
calculation were based on the Restatement. For Incentive Compensation based on (or derived from) stock price or total shareholder
return where the amount of Recoverable Incentive Compensation is not subject to mathematical recalculation directly from the
information in the applicable Restatement, the amount will be determined by the Compensation Committee based on a reasonable
estimate of the effect of the Restatement on the stock price or total shareholder return upon which the Incentive Compensation was
Received (in which case, the Company will maintain documentation of such determination of that reasonable estimate and provide such
documentation to the Company’s applicable listing exchange).
“Restatement” means an accounting restatement of any of the Company’s financial statements filed with the Securities and Exchange
Commission under the Exchange Act, or the Securities Act of 1933, as amended, due to the Company’s material noncompliance with any
financial reporting requirement under U.S. securities laws, regardless of whether the Company or Covered Person misconduct was the
cause for such restatement. “Restatement” includes any required accounting restatement to correct an
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error in previously issued financial statements that is material to the previously issued financial statements (commonly referred to as “Big
R” restatements), or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the
current period (commonly referred to as “little r” restatements).
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